Price Increase Conversations: Anchoring
As you begin to mention price increases to your customers (as in Conversation #2), you can drop a higher reference point for the price increase.
For example, you can mention to customers that you’re looking at a possible 15% increase by the end of the year (or quarter/ month).
Customers may begin to push back and be surprised (this is to be expected, but you can mitigate the damage by using techniques from these previous articles).
When the pricing does finally increase, you can deliver news that the prices are only increasing for them by 10%.
What you did was anchor them high (15% increase) and then drop it down to 10%, and your customers will feel a sense of relief because it was lower than originally expected.
If you have an idea of how much the price increase will be, maybe bump it up a couple of percentage points and when you drop the news, the customer will be pleasantly surprised by a lower price increase rate.
The anchoring effect is very powerful because you’re setting a high metric, and knowingly come in with a lower number.
Some have asked, “Is this manipulation?”
No, it’s not.
It is more about understanding human nature and working. with. it. If you know your prices are going to increase by the end of the year, it’s better to err on the higher side of the estimations so the customer can budget for a price increase.
Customers will be caught off guard and unhappy if you start low and then present a higher price increase. They won’t have time to budget and they’ll feel tricked into a higher price.
It’s much better for you and them to give a slightly higher percentage estimate before the price increase goes into effect.