Tuesday, April 30, 2019

How Prices Anchor our Estimates of Value

The following commercial contains an excellent example of the Anchoring Heuristic. The anchoring heuristic is when an individual relies too heavily on an initial piece of information (the anchor) when making a decision or judgment. In this commercial they exploit our use of this heuristic by throwing out a price. This fixes in our mind a sense of the value of this product. When the actual cost of the product is revealed it sounds like a fantastic price because we are anchored to the initial price that was suggested.

At 00:58, we see the pitchman throw out the price of $20. By the end of the commercial we are being offered two of the product plus two mini-rollers all for the low, low price of only $10. This then sounds like an amazing deal because we are anchored to that initial $20 price and use that as our comparison in determining the value of this product. This is a basic practice in modern advertising, and I am sure readers can think of examples of many other commercials they have seen which use exactly the same techniques and exploit the same cognitive process. This is why critical thinking and an awareness of how our minds work is so important as it helps us become aware of and thus avoid getting taken in by these advertising tricks.