Two weeks ago, one of the five most valuable and innovative companies on the planet did something incomprehensibly stupid. Or did it?
Apple held its annual Worldwide Developer’s Conference and announced a number of new updates and products, including a new operating system, a super powerful desktop computer, and a professional grade monitor. The show had something for everyone.
Then, it happened.
Toward the end of the show, after the introduction of the new hardware, an Apple VP showed a new computer monitor stand. It was nothing more than a piece of silver-colored metal to hold the monitor. But the price created the news of the day: $999. In the hall, people audibly gasped. And, following the live event, social media and reviewers lost their collective minds.
“Out of touch,” said one review. “Massive fail,” said another. “This is the latest sign of Apple’s identity crisis.”
Except it was none of those things.
In psychology, a concept known as “anchoring” describes the cognitive bias that makes us rely too heavily on the first piece of information offered when making a decision.
In marketing theory, anchor pricing is a common way to create higher perceived value in a product and, therefore, persuade consumers to pay a higher price.
A famous example comes from The Economist Magazine, which offered three subscription packages: Web only ($59), print only ($125), and print and web ($125).
Why did they even bother with a print-only price? Tests showed that when offered either web or print subscriptions (but not both), 68% picked the web-only subscription. But, when offered all three options, 84% chose the higher-cost print and web option because they perceived it as the better value. This is the anchoring effect at work.
Here’s a content marketing example. I worked with a financial services company promoting a quarterly research report. They initially offered two options: a print version of the research delivered via mail or a digital version via email. Most people selected the email option.
But when we added a third option (print version, electronic version, and an ongoing subscription to future research), the conversion rate increased by 20% overall. And 60% of the those who converted chose that premium package. The bonus was creating not just content transactions, but also subscribers who wanted to receive future publications.
I believe Apple is using the anchoring effect (and the press bit into this – er – Apple enthusiastically). Yes, a $999 computer stand is silly. But notice how no one is talking about an overpriced $5,000 computer monitor or $6,000 computer. In fact, one of the most common headlines is comparing the cost of the stand to the $1,000 iPhone. Suddenly an iPhone X doesn’t sound so expensive.
Whether they’re helping to set a psychological price point for a product or giving people a better rationale to choose what we want them to choose, anchors can be a way for you to better tell your story.
It’s your story. Tell it well.