![]() Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Divergent Thinking Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. This is achieved through perception, suggestion, and avoiding extremes.Ĭonvergent vs. The anchoring effect allows businesses to direct consumers to a target product.Businesses can use the anchoring effect to influence consumer buying behavior through exploiting cognitive biases and tendencies.Price anchoring is therefore the process of using an initial price to influence consumer purchasing decisions. The anchoring effect is a basic human tendency to rely on initial information (the “anchor”) to make future decisions.Instead, the consumer is directed to the product that the business wants them to purchase. Regardless of industry, businesses that offer a complete range of products can take advantage of this tendency to avoid extremities. Here, the company effectively uses the price of the basic and professional level packages as an anchor to push consumers to the premium level. This tendency to sit in the middle is something that businesses exploit through price anchoring.Ĭonsider the example of a hosting company that offers three levels of hosting – basic, premium, and professional. Most will order a medium coffee in a cafe instead of a small or large one. A tendency to avoid extremesĪs a general rule, consumers like to avoid extremes. This in turn reduces decision-anxiety because the consumer assures themselves that the $20 price anchor is a good one. But since many other consumers are buying books at this price, it must represent value for money. Here, the anchor price provides a frame of reference for the consumer who may have only wanted to spend $15. For example, a bookstore may feature a bestseller section with popular books and an anchor price of $20. Their decision anxiety is such that they might walk away from the purchase altogether.īusinesses can use the bandwagon effect and price anchoring to relieve this anxiety. With such variety, some consumers have difficulty making decisions on what to buy. Price anchoring is also effective when there are a large variety of products. ![]() In this scenario, it is a win-win for both parties. The business, on the other hand, deliberately created the premium plan to make the standard plan look more attractive in comparison. Because of the $1,000 price anchor, they’ll also believe they are saving $800 a month. Most consumers will sign up for the standard plan because they don’t need unlimited storage. ![]() Since consumers tend to desire the highest reward for the least amount of money or effort, marketers can use this to their advantage.įor example, a cloud storage company could offer a premium plan of $1,000 per month with unlimited storage and a standard plan of $200 per month offering 750 gigabytes of storage. In other words, price is always relative and judged after comparison to similar products. Within reason, the definition of a “cheap” or “expensive” product is open to interpretation. More importantly, it leads them to believe that they are receiving a good deal. ![]() It allows the consumer to deduce that the shoes have been discounted by 25%. In a $100 pair of shoes that is discounted to $75, the original asking price of $100 is the anchor point. When a price anchor is established, it gives the consumer a frame of reference for valuing the product. Indeed, the anchoring effect is a powerful strategy that businesses can and do use to influence consumer behavior. Dubbed neuroeconomics, the field is a mixture of economics, psychology, and neuroscience and how these disciplines play a role in human decision making. The anchoring effect is part of an entire field of study researching how the brain determines value.
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