Soon after taking control of Twitter, Elon Musk announced that he was going to allow anyone to have a verified Twitter account, for a monthly fee of $20. He knew he was never going to charge that much. He was simply using a very powerful marketing tactic known as price anchoring, which I am about to share with you.
Here’s how price anchoring works
Price anchoring is where an initial, high price is attached to a product or service. This becomes the anchor price. Then, a subsequent and much lower price is given as the actual price. Having focused on the $20 price Musk originally announced, the actual $8 price, in contrast, looked more attractive.
As is often the case, the late Steve Jobs provides us with a perfect example.
Jobs used price anchoring when he launched the first Apple iPad. As he gave his presentation, he said that the pundits suggested a retail price of $999. Jobs went on to say that his team had managed to produce it for a retail price of just $499. The rest is history. Note: You can watch the price anchor segment of Jobs’ presentation here. It runs for just over a minute and a half and is a masterful example.
Just about any product or service can be marketed using this tactic. The key is to determine your anchor price correctly. It needs to be high enough to seem realistically expensive. That’s what makes your actual price feel like such amazing value in comparison.
Price anchoring works equally well for products or services, and it’s equally effective when used in marketing or as part of a sales presentation. If you’re not currently using this tactic as part of your marketing / sales mix, I recommend giving it a try. It can significantly improve your sales conversion rates and increase the profitability of each new sale you make.