Imagine your boss just surprised you with a $10,000 bonus. Would you be happy? Probably so. What if you now found out your boss gave your co-workers a $20,000 bonus. Still happy? Probably not.
Next, imagine you’re at an electronics store ready to buy a new high-end computer for $1,995. You use your phone to do a quick price check online and find the same computer at a competing store down the street for a bit less, $1,985. Would you go to the other store for the lower price? Probably not.
Now instead, imagine you’re at the same electronics store ready to buy a new calculator for $19.95. You check online and find the same calculator at the competing store down the street for less, $9.95. Would you go to the other store for the lower price? Probably so.
What’s going on??
What’s going on is that your frame of reference or “anchor” is changing. In the first bonus example, you compare $10,000 to $0 so of course you’ll be happy. You just gained $10,000. In the second bonus example, you compare your $10,000 to the $20,000 your co-workers got. Now you feel like you’re down $10,000 and you’re unhappy. However, from a rational perspective, it shouldn’t matter because in both scenarios you have $10,000 more than you did before.
In the electronics examples, the decision is about saving $10. However when you can save $10 on an almost $2,000 purchase, you feel it’s not worth the trouble of going to a different store. It’s only half of 1%. But when you can save $10 on a $20 purchase, you feel compelled to go to the other store. After all it’s saving 50%! But logically, it’s still $10 in both scenarios. And $10 is $10.
Anchoring is just one example from the rich field of behavioral economics that demonstrates how our mental accounting is not always logical or rational. It’s not necessarily a bad thing; it’s simply how most people operate. Knowing and understanding the powerful principles of behavioral economics and how to apply them in med tech marketing can help you appeal to customers in ways that better fit how they process information and make decisions.
Please share your examples of taking the anchoring principle into consideration (or not!) and tell us what resulted.
Read about the status quo bias and how to overcome it: Why Selling New Technology into Hospitals is Hard: Overcoming the Status Quo Bias