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Anchoring or why we all get influenced by comparisons

iCraft Admin

Posts: 1695

« on: July 17, 2011, 03:33:44 am »

In his book "The Paradox of Choice" psychologist Barry Schwartz talks about how we make choices in life and what is influencing our decisions.

There are a few chapters in this book providing insights on how we evaluate information and make purchasing decisions, that I found quite interesting.

One particular aspect that author is mentioning in this book is Anchoring effect.

When we are presented with the situation, where we have to make a decision on a product, we base our decisions on comparisons of similar products. That's why department stores almost always have sales items on display. The original price becomes an anchor against the sales price, giving people an impression of a bargain. Sometimes stores on purpose bring much more expensive products to use them as anchors and to push sales of less expensive products. However, those products are not all that inexpensive. They only look inexpensive, when they are placed right next to very expensive products. For example, an $800 suite looks like a bargain in a store, where most suites cost over $2000. However, the same $800 suite would not look like a bargain in a store, where most suites cost less than $500. So in this kind of evaluation, $800 suite is at the mercy of the context in which it is found.

Retailers often use sales prices to create anchors. By creating more attractive options (similar products, with reduced price etc.) they are guiding our decision process into purchasing the product they want us to buy.

So when it comes to setting your prices for your products on iCraft, consider how each of your products will be anchored to the surrounding products. We offer a function on iCraft that allows you to place your products on sale (to place multiple items on sale - select them on this page https://icraftgifts.com/member_products.php  and specify the discount and the expiry date at the bottom of the product table), however, not many of you are using this function. Just check our Sales page - https://icraftgifts.com/handmade/on-sale/ I was wondering why is that... Having a few items on sale at all times might help you to push sales of certain products, so don't ignore this function completely. It might turn out to be very useful.

I really enjoyed reading this book, so I highly recommend it to anyone who is interested in understanding how we make choices. Here is Ted's talk where Barry Schwartz talks about his book. http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html Enjoy!  Smiley
Fairy Cardmaker

Posts: 1115

« Reply #1 on: July 17, 2011, 12:33:01 pm »

I don't use the sale function because I don't want to attract dealseekers.  I want to attract people who know the real value of handmade.  I only use the sale when I actually need to dump product.  However, when the sale expires, I delete the product and send it off to charity thrift shops or card drives for children in hospitals because *I* feel better about it.  Constant sales would mess up my target market.

Posts: 442

« Reply #2 on: July 17, 2011, 03:27:52 pm »

That is very interesting psychological thought process for buyers. Thanks for sharing that - I find our buying psyche so interesting and will look up that book.

I understand what FairyCardmaker is saying and I agree in the big picture. I have had very few sale events for the same reason of perception of premium expectation from handmade, not bargains.

However, I was thinking about having a "Deal of the Week" or "Deal of the Month," whereby one or two items only would be discounted for a very short timeframe - maybe hours on a day or only 1 day. Who buys it first gets it because most of my items are one-of-a-kind. Of course, I would need to promote it frantically and maybe one a week is too frequent. Still kicking it around because it all depends upon my ability to promote it well each time.

I have used the sale feature and think it is awesome. It is easy to use, you can set your end date then forget it. I like too that it shows the retail value and then the sale price and it is in red, so those browsing can easily see the sale items.

The key to having a few items on sale ongoing is to keep traffic coming. It does not matter what is on sale if it is not seen. So, blogging, social media, advertising, word-of-mouth, local promos, etc... are all necessary anyway but especially important if you want to get results from sale items.

Back to the buying theory - that is really something to think about - very useful info!

Northern Girl Jewelry

Posts: 199

« Reply #3 on: July 24, 2011, 08:56:51 am »

I think it's great that icraft created the sale feature and made it easy for those that want to put items on sale to do so.

However, I'm with FairyCardmaker in not putting my items on sale because I don't want to devalue them and I'm targeting buyers of handmade, not seekers of bargains.  Handmade is more expensive than mass-produced because of the labour involved.  I'm targeting buyers who are interested in pieces that are made by hand, one at a time and that are one of a kind or limited in production.  They appreciate that not everyone else has the same necklace or set of earrings, that the materials I use are not the materials found in mass-produced pieces and they are willing to pay for it.

So I think that sales don't work the same way in the world of handmade as they do in the world of mass-produced retail.  

That said, I think that the anchoring idea can still apply in handmade.  People are still influenced by comparaisons, which means that it's probably a good idea to have various price points in a shop.  

« Last Edit: July 24, 2011, 12:01:18 pm by iCraft Admin »
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