The Product Engagement Blueprint

Anchoring Effect

We rely heavily on the first piece of information introduced. It acts as an ‘anchor’ that influences our subsequent judgments and decision-making.

Imagine you’re out shopping for a gift. You find a pair of sunglasses that you know they’d love. But they cost $100—way more than your $60 budget. Right beside it, you see this necklace for $80 - still over your budget - but hey, it’s cheaper than the sunglasses. You buy the necklace instead, right?

The “Anchoring Effect” influences our thinking and behavior by:

• making it difficult for us to consider other options or alternatives
• limiting the range of information that we consider when making a decision

The reason why our brain uses this mental shortcut is to save time and cognitive effort. Rather than evaluating every piece of information we receive and considering all the possible options and alternatives, our brain uses the initial information as a starting point and focuses on the options and alternatives that are most relevant, or related, to the ‘anchor’. It helps us make decisions faster, but also leads to errors.

Examples

1. Amazon

Amazon shows a high starting price, called the “List Price”, causing customers to perceive the real price as an amazing deal. It doesn’t matter that the list price is outrageously high. It just matters that customers see it.

2. Tinder

When the first photo is the best one from a series, the chances for a match on Tinder increase exponentially. It happens because the viewer’s judgement intensity drops with every other photo that follows the ‘anchor’. To take advantage of this effect, Tinder displays the photo gallery in a carousel format with full-width images. Additionally, it uses performance data to automatically change the order of the photos in the series.

3. Twitter

Last month, Elon Musk announced a monthly subscription for Twitter Blue at $20. By starting with a high price, he aimed to generate buzz and set the ‘anchor’ for people’s perceptions. Soon after, he pitched a lowered price of $8. Let’s break it down:

1. He creates the opportunity for buzz
2. He sets the anchor high, people reject the price
3. He makes space for them to contribute and give feedback
4. He lowers the price by 60%
5. People accept the new price as fair value because they have ownership in the ‘final’ decision—Musk uses another bias here called “Endowment Effect”

Product experiences

• A search engine that always shows the same results first anchors the user's decision and influence their choices. If the search engine consistently shows the most popular or relevant results first, leads users to believe that those are the best or only options, even if there are other relevant and useful results available.
• Smartphones come with a set of default settings that are automatically applied when the product is first used. These default settings anchor the user's decision-making and behavior, making it difficult for them to consider alternative settings or configurations.
• A fitness app that provides users with a default daily step goal anchors their behavior and influence their activity levels. If the default goal is too high or too low, it leads users to either over or underestimate their ability, and potentially leads to frustration or disappointment.
• An online shopping platform that always shows the same product first, or that always recommends the most expensive option first, anchors the user's decision and influences their choices. Leads users to believe that the recommended option is the best or only option, even if there are cheaper and equally good alternatives available.

Takeaways

Start today and get the takeaways 👇