I hope to never own a Kindle. In fact, I have nightmares that the entire publishing industry will collapse and the only way to rescue it from completely imploding is to digitize all books. I confess I am a bit of a bookman.
My guess is that if you looked at my Amazon account, one’s initial reaction would be that either I am trying to singlehandedly and pre-emptively save the industry or I am stocking up patiently awaiting this collapse.
In reality, I love to read and a book is much more dynamic than any Kindle. My account doesn’t reflect my willingness to drop entire paycheck on book, but reflects my near-impulsive habit of buying used. I do realize I am not supporting the industry, but the truth is that I wouldn’t have access, and ownership, of half of my library without surfing the used market.
I haven’t thought much about this habit until I spent some time in an actual bookstore. I was there for a book (On Looking by Alexandra Horowitz, if it matters). What I soon realized was that I was physically unable to purchase it. The purchasing of used books on Amazon has completely altered my view of what a book should cost. As I was confronted with this harsh reality, in an aisle at Barnes and Noble, this internal conflict became too much and I left.
This cognitive bias is often referred to as anchoring. Anchoring can have a profound effect on our decision-making. This heuristic influences how we make decisions based on an initial reference point (or anchor). For example, I developed, over time, a reference point for the cost of a book. My mind has created a set point and sends off warning signals when my expectations haven’t been met.
In Thinking, Fast and Slow, Daniel Kahneman, discussed the powerful implications of this indexed heuristic. In one example, Kahneman showed this affect as it relates to donating to an organization. In the study, when no anchor (in this case a suggested amount) was present, participants reported that they would be willing to donate $64, on average. When the anchoring amount was set to $5, the contribution average dropped to $20. When the anchored amount was raised to $400, the amount respondents were willing to donate rose to approximately $143.
Our own rationing, combined with anchoring, is an often-used marketing tactic. For example, a store may run a 10 percent off sale, with either limited number available for purchase, or an unlimited number available for purchase. Kahneman pointed out that we tend to purchase more when there is a limit to the sales promotion. Our availability heuristic inevitably kicks in and we want to capitalize on the perceived scarcity.
As I continued to think about this behavior, I realized how “anchored” I really am. It has happened with clothes (I live in the south and we have the awe-inspiring retail outlet in every city), protein powder and music. Surprisingly, only one of these three has found a way to market to me around this concept…music.
It may not be a surprise, but our willingness to pay for CDs (and arguably music in general) has decreased as MP3s and file sharing have grown in prominence. As Krahmer (2003) argued, access to free and cheaper music, instant access and higher download speed, has essentially created a learned behavior that has decreased the appreciation, or value, of a product during and after consumption. Furthermore, customer-perceived value of downloadable music, in terms of expected value for money, has been found to be quite low among Milleninals and Generation Z (Styven, 2007). Arguably, this is because each generation has grown up with unlimited access to music.
How do you adjust the anchor?
Adjust Anchor With Agency
According to the Expectancy Value Theory, we develop attitudes that inform or create this anchor heuristic. Antecedents to these attittudes are a result of certain beliefs we have attached to a product combined with a certain value based on internal calculations. One way to adjust an anchor would be to provide a pro-environmental experience that gives the shopper the power, or perception that they have the power, to align the value they have placed on a product with the actual cost. In a sense, we want to give the consumer a sense of agency. Giddens defines agency as simply the ability, or power, to act.
As I have converted my extensive CD collection to MP3s, and then on to streaming platforms, the value I have placed on albums has decreased. What labels must do (for consumers like myself), is increase my perceived value of music. One way to impact this heuristic is to bundle. This can be especially powerful when the bundle spans both digital and non-digital products. For example, Polyvinyl Records, offered multiple product bundles when they re-released American Football’s self-titled album. My brain not only finds the “two-for-one deal” a bit better, but the introduction of something tangible creates a new perception of added value for my money.
Make it Scarce
Similarly, scarcity can adjust this anchor effect. A footnote to scarcity might also be a limited run of a product. Polyvinyl also introduced a vinyl singles series based around scarcity. By introducing a fun concept for music lovers (self-recorded songs specifically for the series), along with a good representation of artists, I begin to view this purchase with less risk. This self-generating anchor effect isn’t about lack of access, but securing something special. I perceive the experience to be scarce. To me, this is a powerful distinction.
I have continued to think about how this heuristic can be overcome within an in-store experience. Instead of a digital and non-digital pairing to increase perceived value, I believe products and the experience must pair to transcend the current reality of the consumer. For example, a JCrew just opened up in my neighborhood and there is a stark difference between the in-store experience JCrew creates and other retailers I frequent. Each section is set up to provide clothing combinations and the decor supports the brand’s image. As I walked around the store yesterday, I began to find myself coming up with reasons why I must have a $60 long-sleeved t-shirt. In the end, my wallet eventually won, but it amazed me how powerful the alignment of products, identity and in-store experience was to my rationale.