If you’re not a neuro-marketer, you think cellphone prices are out of hand and “losing touch with reality” of what people will pay. Polls and journalists who don’t like to pay a lot for a phone agree. USA Today says that the majority of people don’t want to pay more than $750 for a phone. Hmm, how did they come up with $750? That seems a lot compared with a few years ago, but that is the new target.
Market researchers will tell you another story about pricing. “Brainfluence” calls it anchoring. We store a price in our brain and then use that number anchor to judge all other prices. How that anchor is set is where marketing comes into play.
There are drifting anchors (like gas prices), infomercial anchors (everything is $19.99), expectation anchors (expensive wine always tastes better than cheaper wines when you know the price). Then there are irrational anchors. Sometimes anchors are set by a high number you might hear right before your purchase. For example, if you think of the last two digits of your Social Security number, they will impact the price you are willing to pay for an item. “Brainfluence” calls that a “foible of human brains.”
So to cellphones: You can see how setting a high anchor price for smartphones would be advantageous, because as you lower it or offer incentives, they seem much more like a bargain.
“Brainfluence” also warns that you must work the demand curve. You “demand a high price from the portion of the market willing to pay that much before dropping the price to reach a larger number of customers.”
So if you know most people will pay $750 for a phone, then you would price the phone over $1,000 to take advantage of early adopters. Then lower to the range where most people will buy. They now think they are getting a real bargain.
Early adopters are happy because for a little while they have the prestige of owning the new phone, and you make the price-conscious adopters happy because they got a deal. And you make the cell company happy because they made a boatload of money on both.
Anchors away, my friend. Anchor your prices today.