Look at the numbers below. Don’t actually multiply them—just estimate what you think the answer would be:
1 X 2 X 3 X 4 X 5 X 6 X 7 X 8
Amos Tversky and Daniel Kahneman showed people the numbers the same way I’ve them displayed above. When they asked people to estimate the product, the average answer was 512. However, if they showed the numbers in the reverse order:
8 X 7 X 6 X 5 X 4 X 3 X 2 X 1
then people estimated that the answer would be 2,250. (The actual answer is 40,320.)
People Anchor On Numbers
Whatever number people see first affects their perceptions moving forward.
Tversky and Kahneman researched this idea of the effect of numbers in many situations. For example, if a store advertises that soup is on sale, the average number of cans of soup that people will buy is three. But if the store advertises that soup is on sale and that there’s a limit of 10 cans per customer, then the average number of cans of soup that people will buy is seven. Kahneman writes about their experiments in his book Thinking, Fast and Slow (2011).
People will anchor on a particular number, and that number will affect their reaction (largely unconsciously) to other numbers that appear later, even if the later number has nothing to do with the original numbers.
Number Order Effects
This number effect has practical implications for how you display pricing. Let’s say that you offer three levels of service. Should the levels be presented in this order:
Silver: $15.99
Gold: $25.99
Platinum: $45.99
Or in this order:
Platinum: $45.99
Gold: $25.99
Silver: $15.99
Tversky and Kahneman’s research shows that people are more likely to purchase a more expensive service or product if the higher price is presented first, since they’ll anchor on the higher number.
Takeaways
- When you want people to spend more, show them high numbers before they get to the point of making a purchase decision. These numbers don’t have to be related to the price. You can show the number of people who have purchased your product (“over 10,000 customers”) before you show the price of your product ($199).
- When ordering prices for products or services, place the higher-priced items at the top of the list. This sets the anchor.
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