So let’s just say you have an ecommerce platform. You’re selling products online, either your own or you act as a marketplace. You want to attract new business by investing in advertising and building brand awareness using other than the ‘classic’ SEM tactics (which are great for demand generation and buying clicks, but let’s face it, competition is so high you have to go the extra mile) but you’re not really sure about your market fit.
How can you know for sure you are telling the correct story for your products so that the audience is more than happy to part with their hard earned income to integrate that thing you’re selling in their lives?
Salvador Assael, the ‘Pearl King’, became mesmerised in the 60s by black pearls after a trip to Tahiti. He started cultivating them until he reached perfection, but his gemstones didn’t have the success he hoped they would. Others did not see in them that beauty that captivated him. It was only when Assael persuaded Harry Winston, the famous jeweller, to display his black pearls along other very expensive gemstones in his Fifth Avenue store that they rose to fame.
Did the black pearls suddenly seem more beautiful just because they were now in a famous store? No, but what changed was their perceived value; the very expensive jewellery they were surrounded by acted as an anchor. Their price was now set by the other gemstones. You could use the conditional statement ‘if-then’ from programming language to understand what’s going on here. “If the other items in the vicinity are very valuable and expensive, then this item must be the same’.
Or, in short, the other gemstones acted as an anchor for the black pearls.
What are anchors? In behavioural sciences, an anchor is a type of bias that we all suffer from that makes us all too dependent on the initial piece of info when trying to make decisions — in this case, about purchasing an item.
So for example, if a respectable member of your profession who you share similar values with can’t stop raving about a book or movie, you’re much more inclined to like that book or movie, too.
Sharing similar values is great, but anchoring works wonders when we’re talking about price range (see the above example with the black pearls). For example, when testing these hypotheses in labs, scientists saw that people could have anything as an anchor, including their social security number.
Anchoring in the fashion industry
I wanted a more pragmatic approach to anchoring and basically tested the theory myself with the MOYO brand. I wanted to see what type of content should be used in marketing materials to gain new business and make shoppers confident of their purchase, and not classify the clothes as ‘too expensive’. I also wanted to see people’s perception on pricing — if MOYO items are on par with the audience’s expectations (too cheap, too expensive or just the right price), using a high and a low anchor.
MOYO is a sustainable brand, operating under the of the slow fashion principles, which means higher retail prices since workers’ wages are higher and fabrics have a better quality. On the other hand, fast fashion principles mean high turnover, extremely low wages for workers (as low as 30 EUR/month in Bangladesh, for example) and low consumer prices — but high environmental impact, as most of the unsold apparel are just discarded.
The goal of the experiment is to understand if people’s perceived value of an item is influenced by a low or high anchor. For this experiment, the respondents were chosen randomly from online forums and were divided into two separate groups that had to point out how much they are willing to pay for a sustainable, ethically made dress.
Both of the groups had to read an article about the fashion industry, answer one quick question that was set to make sure the article was indeed read and estimate on the price of a dress pictured beneath the article. Both groups were presented with the same picture.
The group anchored with the low price read about the implications of fast fashion, where dresses costs as low as 5 EUR, while the high price anchor group was presented with an article about medium-high apparel industry selling items at around 100 EUR.
The assumption of the experiment was that those presented with a low price anchor would value the MOYO dress at a lower price, even though they were presented with a wide range of consequences of fast fashion. As a direct implication, the assumption was that the high anchor group would value the dress more close to its real retail price.
The average dress price indicated by the respondents in the low anchor group was 54 EUR, while the ones in the high anchor group valued the dress at 66 EUR, a 22% increase. With the photo of the dress, the demographics and the type of audience being the same, it was really interesting to see first hand the anchor effect in action.
So what’s the Marketing 101 lesson from here? If you have a fashion company, for example, don’t buy ads in Glamour because they have a more cost effective CPM when you want to sell to Vogue customers.
Also, when it comes to partnership, you can use the anchoring approach to decide who you want to go hand in hand with. For example, I recently purchased some skincare products. Now, if you’re not familiar with the market, segmentation in the industry is a little more than just price. Along with the products, I got flyers with discounts to other different stores, mostly fashion and makeup (complementary to my order). Because I ordered from a cruelty free skincare brand, which I used as an anchor, I was more inclined to check out the apparel brand and assume that belonged to the sustainable business as well.
Every choice has an opportunity cost linked to it. So when you’re trying to convince people to buy something, make sure yours is the best story out there. And make sure your story comes with the biggest regret attached, in case people decide to go with another brand.
Anchor your customers by creating partnerships with brands that have the same values you want them to attribute to yours.