Aug 31, 2018
Today’s behavioral economics podcast is another foundational
episode focusing on anchoring and adjustment. My last foundational
Episode 9 - Behavioral Economics Foundations: Loss Aversion and
even though it has only been out about a week, it has been one of
my most popular episodes to date. You listeners know one of my all
time favorite studies features anchoring and adjustment, and it is
also one of the main concepts in my signature talk Consumers
In business, anchoring and adjustment can be used to help
influence the subconscious brain to lean toward a certain number.
Skillfully using this concept to persuade someone to agree to a
higher or lower number or quantity can close sales, increase
conversions, and help in all kinds of negotiations. In today’s
episode, I give business examples in several scenarios including a
jewelry store, furniture store, real estate, car sales, multi-level
marketing, service companies, non profits, and more.
- [05:58] This is the second behavioral economics foundation's
episode. The first one was about LOSS AVERSION, and it was super
- [07:14] Today's foundational topic is ANCHORING AND
- [10:21] One of my all-time favorite studies is on anchoring and
adjustment. This is one of the main concepts in my signature talk
Consumers Are Weird.
- [11:06] When your subconscious brain doesn't know the answer to
something that takes a guess.
- [11:24] As our brain processes at 11 million bits per second,
it is using these judgement calls a LOT to guide you through your
day and life.
- [11:50] Our brains are all about shortcuts.When we are given an
anchor number, it will influence our guesses.
- [15:00] I share a story of having listeners at a presentation I
was giving think about the last two digits of their social security
number and then estimate the value of my necklace. The results
demonstrate how anchoring and adjustment work.
- [16:56] These anchors only work if they are entered into your
mind right before the question is asked. This is called priming (a
focus for a future foundations episode).
- [17:14] My favorite study selling Snickers bars. The sales were
increased by 38% when the number 18 was used instead of the word
them. This was anchoring and adjustment at work.
- [19:46] Limits also affect the amount purchased. A limit of 12
doubled the amount purchased.
- [21:11] I was featured in a back to school shopping article on
highya.com and warned about watching out for quantity
- [21:28] Seeing an expensive item when you walk into a store can
anchor your brain to think that the same items for less money, even
though they are still expensive, are a good deal.
- [23:09] How to apply anchoring and adjustment in your business
- [23:29] JEWELRY STORE In a jewelry store. Using too low of an
anchor can be a mistake. If you give a low starting number, it will
become the anchor.
- [25:26] Instead, start with the most expensive item, then what
the average customer spends and then say there are many options
under a certain number.
- [26:37] REAL ESTATE With big-ticket items like homes, you're
already working with a number that is unrealistic and often too
low. This is what someone wants to spend.
- [27:08] The buyer needs to disconnect from that number in their
mind to be realistic with the current prices.
- [27:15] When comparison shopping, start with the most expensive
house on the list.
- [28:17] If you are driving with the client, drive through the
most expensive neighborhoods. What you show them (or what their
subconscious sees and notices) and what you say matters.
- [29:13] FURNITURE OR OTHER STORE You can use the same tactics
if you work in a store. Be mindful what you walk the customers
- [30:34] CAR SALES Selling something with a lot of options and
features. You can 1) present a baseline model and all of the
additional options to choose from or 2) present them with the top
of the line vehicle and let them add or delete features. People
will buy more expensive vehicles and packages when presented with
the second option.
- [32:14] MULTI-LEVEL MARKETING Present the most expensive item
first and work your way down. Incorporate bundles and give people
the option to remove what they don't want.
- [33:37] SERVICE-BASED BUSINESSES I had two different people in
service-based businesses recently implement my advice and have
- [34:32] Using anchoring and adjustment changed Dawn's business.
She created a $20,000 bundle (at no cost to her) and now her
$10,000 products are flying out the door.
- [35:58] These simple brain tricks can help women entrepreneurs
(and everyone else) make more money without really doing any
- [37:45] INSIDE A COMPANY Big numbers being thrown out can
impact you. Mentioning an anchor number even if it is not the
number that is going to be used will influence the value of the
final decided upon number.
- [42:33] LOW ANCHOR These low anchors can be helpful, but you
need to be absolutely sure the claim is true. And I mean, all the
time. Because if it isn’t, you are at a huge risk of the “bait and
switch” brain reaction.
- [43:31] An example of promising how long it takes to learn a
language. Be careful with low anchors because brains don't like
being lied to.
- [43:54] NON PROFIT I have served on several boards, and we
would discuss what numbers to suggest during fundraising. We
thought a number that was too high would turn people off. This was
before my extensive research and work in behavioral economics. If I
was having that conversation now, I would know exactly what to say:
- [46:37] With anchoring start with the highest number and work
your way down for live auctions.
- [50:47] I will be in Little Rock, Arkansas in September and
Portland, Maine in October for speaking engagements. If you are in
those areas, or close enough to get there, send an email to
to talk about scheduling an in person session without the travel
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