Anchoring effect

The anchoring effect (Kahneman and Tversky) is that when people are estimating a value - price, quantity, probability - the first number they encounter heavily influences their estimate, even when it’s arbitrary or obviously irrelevant. The anchor pulls subsequent estimates toward itself.

In pricing it’s the engine behind every “was £199, now £99” display. The first number sets the reference. The second feels like a discount even if the first was inflated or never really charged. The same £99 product feels expensive next to £49 alternatives and cheap next to £299 ones.

Anchoring is a System 1 effect. The first number is processed before deliberation kicks in, which is why even visitors who “know” the trick are still influenced by it.

Where it shows up in CRO

• Price displays - showing a crossed-out higher price next to the actual one. The crossed-out price is the anchor.
• Tiered pricing - the middle tier feels reasonable because the top tier anchors high. SaaS pricing pages live on this trick.
• Decoy pricing - adding a third option specifically to make another look better. The Economist’s three-tier subscription where the print-only option exists to make print+digital look like a steal is the textbook example.
• Bundles - “£120 worth of products for £49” anchors against the bundle’s stated value rather than the products’ individual prices.
• First product shown - the price of the first product on a category page anchors expectations for the whole category.

Why it’s hard to test cleanly

Anchoring effects are heavily context-dependent. The same anchor that works on cold traffic might not work on warm traffic who already have their own internal reference price. Repeat customers anchor on what they’ve paid before, not on whatever you display today.

Most “winning” pricing tests are anchoring tests in disguise. The conversion lift isn’t because the new price is fundamentally better, it’s because the new price display set a different anchor. This matters because lifts from anchoring don’t always replicate cleanly when traffic mix changes.

Things people get wrong

• Using anchors that are obviously fake. A “was £999” that no human ever paid feels insulting once noticed. Better to anchor against a real reference (competitor price, premium product, RRP).
• Forgetting anchoring interacts with loss aversion. The anchor sets the “loss” you’re avoiding. Combined they’re stronger than either alone.
• Assuming higher anchors always win. Past a certain point, an absurdly high anchor breaks credibility and the visitor mistrusts the comparison.
• Only anchoring on price. Anchoring works on quantity (“buy 12 and save 30%”), on time (“4-week programme”), on social (“join 10,000 members”). Any first number sets a reference.