Why That 'Best Deal' Isn’t Always The Best Deal’

Whether you're shopping for a car, a phone, or a software or a service subscription, you may have noticed that some options seem to stand out as better deals. Do you know that this isn't a coincidence—companies often use a strategy called ‘Anchoring’ to help guide your decision. But what exactly is ‘Anchoring’, and how can you make smart choices as a consumer? Let’s explore this in simple terms.

What is Anchoring?

Anchoring is a strategy where the first price or option you see becomes a reference point in your mind. After that, every decision you make is compared to this initial anchor/price that you have seen.

e.g. if you first see a high price, anything lower might seem like a good deal, even if it's still above your budget.

Anchoring in Action: The Car-Buying Experience

 Let’s take a look at how anchoring works when buying a car. Suppose you’re interested in a particular model—let’s call it the “Zia Meltos”. When you visit the dealership, they show you three versions of the car:

1. Basic Model: ₹7 Lacs

2. Mid-Range Model: ₹8 Lacs

3. Premium Model: ₹9 Lacs

 Here’s how anchoring comes into play. The dealership might want you to buy the Mid-Range model, which could be the most profitable for them. To influence your decision, they use the Premium Model as an anchor.

• Anchor (Premium Model - ₹9 Lacs): By showing you the Premium Model first, they set your expectations at a higher price. Now, when you look at the Mid-Range model for ₹8 Lacs, it seems like a great deal because it’s ₹1 Lac less, even though it’s still more expensive than the Basic Model.
• Basic Model (₹7 Lacs): On the other hand, the Basic Model may seem too bare-bones compared to the Mid-Range model, making it less appealing.

This strategy is used to guide you towards a decision that feels like it offers better value while still meeting the company's goals.

Why Does This Work?

Anchoring works because our brains are wired to make comparisons. When we see a higher price first (the anchor), anything lower can feel like a bargain. Companies understand this psychological bias and use it to nudge us towards certain options.

How Can Consumers Make Smart Choices?

Being aware of anchoring can help us make more informed decisions. Here are a few tips:

1. Recognize Anchors: Be aware when an anchor is being used. Ask yourself if the price seems reasonable on its own or just in comparison to a higher-priced option.

2. Stick to the Priorities: Before we start shopping, decide what features we really need and what our budget is. This will help us avoid being swayed by a more expensive option that may not be necessary for us.

3. Compare Across Options: Don’t rely solely on what you see at the dealership or from a single company. Look at other brands or check prices online to ensure we’re getting the best deal.

4. Take Your Time: Anchoring is most effective when you feel rushed to make a decision. Don’t let pressure push you into a purchase—give yourself time to think things over.

Conclusion

Anchoring is a common and effective strategy that companies use to guide consumer decisions, especially for big purchases like cars. By showing you a higher-priced option first, they create a reference point that makes other options seem like better deals. Understanding this tactic allows you to make smarter, more informed choices that are right for you.

This isn’t to say that anchoring is a bad thing—it’s simply a business strategy. But as a consumer, being aware of how it works helps ensure that we’re choosing based on our own needs, not just what the company wants us to buy.

 So next time you're shopping for a car, or anything else, take a step back, think about your priorities, and make the decision that truly benefits you.

Funny how price tags seem to play mind trick, right ? 😊