Once upon a time, I wrote a piece describing the last time I entered an oriental carpet store with the intention of buying a rug. I bring it up again because it clearly animates how anchor points control our perceptions – and perceptions control what we think and do, which makes them worth understanding.
Before you walk into a high end carpet boutique to consider purchasing hand knotted rugs, you always start with your anchor point firmly set. For me, it was $2,000. I walked in, met the standard Central Casting character you’d expect, and gave him my price ceiling. He smiled and shrugged, knowing he was defeated, and showed me a beautiful rug that cost approximately $15,000. It really was beautiful. Go ahead. Feel it. I loved it. But it was too much money. After all, my absolute ceiling was a firm $4,000.
He knew this of course, but felt it his responsibility to show me the rest of his meager offerings. He then showed me a gorgeous rug – gorgeous – that cost about $20,000. I wept at its beauty. I tore my hair (this story was a while ago) and wailed at its magnificence. But no, I couldn’t. Because $20,000 is over my absolutely firm ceiling of $5,000.
He quietly wept with me for a moment and then, almost as an afterthought, showed me a great rug that cost $7,800. Clearly a cut above the average oriental carpet. Rich, saturated colors, representing the tree of life, don’t you know. I appreciated him showing it to me, particularly because it just came in under my unwavering price ceiling of $8,000.
Anyway, you get the picture. Anchor points control our perception of what is expensive, or fast, or appropriate. Anchor points determine our frame of reference. The lesson for marketers – and salespeople, of course – is that we can control how anyone perceives anything, just so long as we control what they see immediately preceding our offer.
Case in point: look at TaxLifeboat. My friend and client, Tom Evans, has just launched his SaaS offering that automates tax defense – the discipline that you turn to when the IRS has already fingered you for an audit. At $199, is TaxLifeboat expensive or cheap? Talk to a personal finance influencer and it’s a toss-up: doesn’t Turbo Tax cost about $29? Yes, but Turbo Tax doesn’t solve your tax problem. They just prepare your taxes. The real competition is the retainer you’re going to pay to a tax attorney, which runs about $8,000. TaxLifeboat, by comparison, is cheap – as cheap as one hour of a tax attorney’s time.
Case in point: look at custom electronics installation. While the average Russian billionaire is perfectly fine putting a $500,000 theater system on their 200’ yacht, the rest of us just want to watch movies in our living room. A moderate home theater system, installed, will cost between $20,000 and $50,000. Is this a lot of money? Compare it to going to Best Buy and cobbling the boxes together and the answer is “wow, that’s too much money.” But we’ve gone past hanging our speakers out of our dorm rooms while we play Ultimate in the quad, haven’t we? The comparison is a kitchen remodel. Do you spend more time in your living room or your kitchen? How often do you use that Viking Range? Once a year at Thanksgiving? You’re going to watch movies every night with your family on the couch. Spending $20,000 is cheap compared to the kitchen remodel, isn’t it?
This concept holds true even when it isn’t your money. Case in point: how do you justify videoconferencing? When you’re offered a videoconferencing solution of several thousand dollars, do you really compare it to business travel? Sure, it costs your company money to go from here to there, but you need to travel. Face to face is simply more impactful than phoning it in. So trying to convince someone that they don’t have to meet their customers face to face anymore becomes a shoving match and one you probably won’t win. But is videoconferencing more powerful than a telephone call? Yes. Is it faster than travel? Yes again. The anchor point is therefore time, not travel. Videoconferencing gives you the immediacy of a conference call, but with the face to face nature of a meeting. Time. Because nobody cares about the T&E budget – it isn’t vivid enough. But they care about not having to go to Chicago next week. (Or LA, if you’re reading this from Chicago). My son, who is now the size of a small bull standing on his hind hooves, used to get so upset with me as a baby when he saw my suitcase that he’d throw up, usually on me, often just as I’m heading off to the airport. So this is vivid and doesn’t require you to win an argument to move your pitch forward.
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. Anchor points need contrast: we can control how anyone perceives anything if we can set the stage for our offering. Left to chance, your target will substitute their own anchor point for the one you want, often to your detriment.
. Anchor points need vividness: your anchor point needs to be vivid or else it is wasted. We all have too many messages hitting us and our attention span for beige messaging is non-existent. Further, if we don’t accurately discern our target’s “hole card” needs, we miss the opportunity.
. Anchor points require discipline: you don’t think of this on the fly, or toss it in after the conversation has begun. You start with an anchor point in the planning stage and ruthlessly communicate it no matter what question you’ve been asked, because the question you’ve been asked is specifically designed to strip away your advantage.
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We need to think carefully about our anchor points – on purpose, actively – before we communicate the value of our offerings. When we control what our target hears first, we control how they perceive what they hear next. This is too important to be left to chance.
Photo courtesy of Flickr.
Interesting post – I am in the middle of listening to Dan Ariely’s “Predictably Irrational” on CDs. He has some theories about anchoring, tested with empirical methods; the message you deliver above provides additional depth to the conversation.
Joy: glad it resonated! Haven’t read Predictably Irrational, but the idea of setting anchor points in your customers’ heads before they do it for you is a critical step for any sales or marketing professional. Too often, this is left to chance. Thanks!
Nice post Stephen. I found it amusing to replace carpet salesmen with real estate agent…
The anchor point that they set in your head is your monthly mortgage payment…”10k extra? You won’t even notice that amount in your monthly payment”.
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