'Anchoring Sales Technique’: Sales Pricing Strategy for more Upselling (secretly used by Gucci and Apple)

‘Anchoring Sales Technique’: Sales Pricing Strategy for more Upselling (secretly used by Gucci and Apple): by Jason Li 2012 ©
 

The anchoring sales technique is used everywhere...

It’s a trap to get you to open your wallet...

And amazingly: as consumers we love it...

In fact, there are even times when you’ve got caught up in it and paid more than you budgeted due to a sophisticated anchoring marketing technique – it’s like legitimate robbery.

What is the ‘anchoring sales technique’?

Almost anyone who has looked at a product or service by a reputable brand would have been introduced to the ‘flagship product’- like the ones you see in shop windows....

This is the product that is the most expensive in the range...

Yet rather than put the prospect off, it will help the business make more profit... and here is how.

What happens here, is that the business will show the prospect the most expensive product with all the bells and whistles, which has the biggest profit mark-up, possibly with features and benefits that the user would likely never use; and then your customer is framed to believe that if they had the budget, they would willingly get this version with all the bells and whistles.

Straight away, your prospect is reasoning that your sales pricing strategy for the products in the range make sense. They’ll even agree with you that the best one in the range really is desirable and well worth selling your grandmother for.

But right now, your prospective customer is just looking for a product within their current budget range. So they start from the most expensive product pricing backwards to the one they can afford based on stripping off the other features and benefits.

But here’s the killer part in this business pricing strategy...

Most people who have a budget range may take a few minutes to work out what they can spend, or are a bit worried about spending money. So when they see the most expensive product priced at let’s say five times the cost of the product they want, they feel like the product they are buying is reasonably priced.

Masterfully, you have in one go taken away any objections based on valuation and pricing.

This is because some people just look at price (see Quality,Price, Delivery article). By framing the customers mind to think of the most expensive price first, it reduces the objection raised at the current price for price buyers.

And here’s the real kicker – the prospect thinks their budget purchase is associated with the premium version, they will perceive the budget version as premium quality – but just a cut-down version.

Anchoring marketing technique

Let’s take Gucci as an example. Gucci will display in their shop windows and on stands in their shops the very finest and most expensive products. The most luxurious products are displayed to raise the prospects expectations.

When a prospect comes into the shop and thinks of getting a little purse for £50, they see the amazingly beautiful purse or clutch bag on the stands. And the stand allows you to touch it and hold it, open it up, hold it some more in different ways, and smell the brand new smell.

At this point, you start to look for your purse. Now if you are a price buyer, you will stick to your £50 purchase rules.

If you are a bit flexible on your budget, then the anchoring marketing technique has got you involved in enjoying products at a higher quality. You have actively told yourself higher quality holds more value to you. And so you are likely to upgrade your search to a product to be closer to the most expensive and luxurious product in the shop, which could be ten times the price at £500 for a purse!

Anchoring telesales technique

In telesales, you can also have an anchoring telesales technique by making sure you have more than one product to your prospect. Of course, this depends on if your business does have a variety of products to offer prospects.

You can offer three alternatives and packages available to help prospects upgrade to a mid-range package if you have a basic, middle, and an ‘all the bells and whistles package’.

Anchoring sales tips

Make sure that the most expensive product is credible so that price buyers understand there is a lot of added value in the most expensive product or package.

But what strategy would you use to price the middle product? Is it cost of production or cost of doing the job? Well try to do the following and test your results.

Help the customer by pricing the mid-range product at a price closer to the cheapest price so that even price buyers can be drawn to pay a bit extra for the better quality offer. You’ll be anchoring more sales of people buying the cheapest to the next level up.

Anchoring marketing tips

Make sure that your most luxurious product is the best value product you can possibly offer. Let’s say you are selling carpets, then it has to be the finest rugs so that prospective customers know you can cater great quality if they are willing to pay for it.

Make sure the product is prominent for all prospective customers to see, can feel, touch and dream of having.

The price rise then drop method: helping prospective customers think you have ‘bargains’

Some retailers use this method to increase revenue with this anchoring price technique. They raise the price of a brand new product that is superior to the current product line. For a good few weeks, they get all the people who are not price sensitive to buy the brand new latest model. Then when sales drop off: they drop the price to a new lower price. But remember, this lower price is already profitable and is close to the price they would be happy to take orders at anyway.

Now check out the price of the older product when the next brand new model is on offer. You can work out the margin difference with the new model, and what the business can accept as the price for the older model. Don’t think businesses are losing money at the lower price or doing you a favour. They’ve been stuffing the tills from people who have to have the latest products for weeks on end.

So the original high price is in fact extra cream for their profits

And it makes prospective customers think they are now getting a bargain; how nice of the retailer or manufacturer! Hey, you want to believe in the hero brand right?

It happens a lot with technology. For example, when Apple bring out a new iPad or iPhone, the current line drops in price. But remember, Apple are not losing money because the price has dropped; no, they are still making a good profit. If they were losing money, then they would immediately discontinue the line instead.

What product could you have that is the absolute premium in quality and profit for customers?

What mid-range products can you add that take customers away from the low cost low profit margin products?

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Quality, Price, Delivery – What type of customer

Quality, Price, Delivery – What type of customer: by Jason Li 2012 ©

When you have a product or service on offer for your customer, there is a high chance there will be resistance. How can this be when you have an offer which the customer cannot refuse? You’re thinking it’s a no brainer. You would definitely snap it up if you were in their position.

Quality, Price, Delivery (QPD)

So let’s check the offer is right. We’ll use a customer with a shop assistant in a smart phone shop as an example.

When you go to buy a smart phone, what type of person are you. Do you buy based on quality and will choose on the best, no matter the price? Here is a guide to working a customer out quickly:

Quality – functions, benefits, the range of value created: from minimum to maximum a product or service can do.

Price – from the lowest price to most expensive in your range

Delivery – now or in two weeks

Only on the odd occasion does delivery guide the decision. Such as if you have a plumber who needs new taps for a job he is doing and needs it doing by the end of this afternoon – “what taps do you have in that I can take now?”

If there is no urgency, then it is down to quality and price now.

So here you will need to find out what is most important to the customer. You might ask:

“So what are the key features you are looking for?”

“What are the main things you want the phone to do?”

If you get: “not bothered really it’s down to cost”, then this is a cost person.

However, you might get someone giving you a long list of features they want – so you’re confused and wondering if they are really here to buy an item with the most beneficial features, and are in fact a quality person. So to double check you can ask after they have listed the features they want:

“So what budget range is ideal for you?”

“What’s a comfortable amount for you to pay each month?”

Funnelling

Funnelling is choosing a funnel to dig deeper with more questions to understand your customer better. Better let me explain.

Let’s say each criteria of quality or price or delivery is a funnel. What you can do is ask a series of questions on each subject to hear if the customer is willing to talk about it or finds it important – so that you understand a bit more about what suits their needs and wants. Here is an example of a quality funnel:

“If you spend a lot of time on the internet, what do you mainly do? For example reading lots of text/like online newspapers or watch videos?”

“Some customers do a lot of social networking and email and do lots of typing, how about yourself?”

“Let’s say the standard screen is 3.5 inches, tell me what screen size is suitable for you?”

QPD – putting it together

If the customer rambles on about: “as long as the phone does all the features listed and it’s not silly prices”, then they are a quality person, and cost not too sensitive.

If the customer says they only have a certain budget. Then this is potentially more a mix of quality and price person.

If the customer says ideally they want the best phone at £5 a month, then really they are a cost person. You might want to ask a further question to double check which features they would pay for and what they would stretch to. If they want a feature but won’t pay, you know the answer.

Hey, we all want to live for free. There is no point advising a cost person that spending a bit more will get them a feature they want, just leave them be.

QPD Profile

So you can create a profile of a customer each time now. In your head, you can mark each funnel out of ten to work out what type of customer you are dealing with here.

Let’s say out of ten, you can ask a few questions and know that a customer is maybe 6/10 quality, 3/10 price and 1/10 delivery – this is mostly quality. Or the next one is 2/10 quality, 8/10 price and 0/10 delivery – in fact they will walk 20 minutes to the next shop if they can save 50 pence.

You might have three directors in a room and they cannot agree, and are “Still thinking about it.” Well now you can build up a profile for each, then quote so that all three are happy as you make an offer that suits each individually.

Know your customer, tailor an offer

So you see, you might think you have a product or a service that is a no brainer and thousands will pay on the spot – but they don’t.  We are all different, different circumstances, tastes, values, stages in our life, and customers can be just pure baffling to you.

Now you have a way to work out what your customer wants and to offer them what they want to buy. After this, if they buy or don’t buy is up to them. If they don’t there will be possibly ten reasons that you would never have thought of.

The more you can understand your customer and tailor your offers, the better your products and services will be in meeting your customers buying requirements. This will lead to more people accepting your offers and buying from you, which means more profits.

Test the theory

Let’s take McDonalds. They are definitely not the best tasting burgers in the world. But I still go from time-to-time. Why? Well the quality of food is possibly 6/10. I have been to some cafes and spent ages pulling out grizzle and tiny flecks of bone cartilage out of my cheap beef burger. So now I must have decent quality beef due to these chilling experiences. It was just short of chasing down a cow and taking a bit at the knee. Back to McDonalds. The service is a decent 6/10, the restaurant itself is pleasant and better than some cafes so 7/10, and the toilets are always useful at 8/10. Then onto the cost, well it’s easily an 8/10. There are cheaper but then I can never go back to super cheap burgers again. As for delivery, it’s pretty much instant for popular products so 9/10.

So who generally doesn’t go to McDonalds, but would like to eat a burger and have no problems with McDonalds?. It’s likely to be people who want a great quality tasting burger at a nice restaurant, and can afford to spend more. They want more quality value and go elsewhere.

Is McDonalds successfully generating a lot of revenue? Is McDonalds profitable? Does McDonalds create value for a large part of the population? Can you look at your business to see how you create value that is irresistible to your customers?

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