BusinessWeek recently called Apple on its pricing strategy pointing out their use of the ‘Douglas Bader’ anchor (come in high, and then dive). It’s a technique the airlines have mastered with flight delays (not with the flying itself, thankfully), but Micheal Gove – Secretary of State for Education in the UK – got the controls mixed up when he captained a free schools proposals.

[br]Price anchoring is no suprise. Even children playing ‘shop’ understand that raising or lowering prices can serve as punishment or reward. Apple understand this too. They price products high at launch – evangelists purchase, but mass market consumers shy away. Later, they drop the price to the mass market sweet-spot – which is made all the more sweet in comparisson to the original ‘anchor’ price. Apple benefit by picking up more custom on the back end.

“Apple in essence is using its first-iteration pricing as a reference to make its current products feel affordable. You may be on the fence for a $499 iPad, but if it drops to $399 by Christmas, won’t you feel better?”

Apple’s Pricing Decoys, Bloomberg Businessweek, September 1, 2010

[br]Anchoring strategy needn’t only be about money. It can be about anything of value – time, or status for instance. Time-and-status anchoring (on steroids!) is used frequently in the service industry. Airlines dealing with ‘bumped’ or delayed customers are known to use false anchors by suggesting the next available flight time is one that they know they can beat. It keeps customers calm and happy.

“well, I know I can put you on the 7:00 AM flight tomorrow, but let me see what I can do to put you on the earlier flight, which is at 9:00 PM tonight.”

How Call Centers Use Behavioral Economics to Sway Customers, Harvard Business Review, Tuesday July 13, 2010

[br]MIchael-Gove-006 Micheal Gove (pictured), is the Secretary of State for Education in the UK as part of the Liberal-Conservative governing coalition. He was the sponsor of a Free Schools program. It offers parents the opportunity to apply for funding to run schools. He had two ways to present the results. The first is broadly this:

“1. Under the last government only a couple of parent-promoted schools were created over 13 years.

2. It normally takes between 3 to 5 years to establish a new school.

3. …within just 4 months … there are…  high quality proposals… starting as early as next year.

4.Now I can announce 32 free schools this term.

The second is this:

“1. more than 1,000 schools had applied to become academies

2. [There are] More than 700 expressions of interest in opening new free schools…

3.Now I can announce 32 free schools this term.

The first way uses all the anchoring techniques that Apple and the airlines do: come in low/undesirable and build to the final position. The second way comes in high and then deflates to the final position. Both are true.

[br]Micheal Gove took the second option. It didn’t go well. The press and opposition slammed him for only managing to get 32 schools into service.

[br]Obviously Apple, airlines, and the Free Schools presentation, are not solutions that reduce carbon. But they are great examples of how presentation order can influence our feelings and subsequent behaviour. And this is no marginal consideration when creating a frictionless carbon descent.

[br]As Tim Stout says in his capacity as the Vice President of Energy Efficiency at National Grid:

changing consumer behavior is the next wave of savings that needs to be tapped.

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• Oliver (LinkedIn) is author of the behavioural communication book Inspiring Sustainable Behaviour: 19 Ways To Ask For Change published by Routledge, available in most countries.
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