Have you ever wondered what makes some customers more likely to return or exchange their purchases, even if they’re satisfied with them? The answer lies in the psychology of shopping and returns, based on a cognitive bias known as the anchoring effect.
What is the Anchoring Effect?
The anchoring effect is a cognitive bias that makes people rely on the first piece of information they encounter when making decisions. This information, called an anchor, serves as a reference point that affects how people perceive and evaluate other information. The anchor can be any number, word, image, or emotion related to the decision at hand.
A person’s perception and evaluation of products, prices, and outcomes are affected by the anchoring effect. It can also influence how customers feel and behave after making a purchase, including whether they decide to keep or return the item.
In order to simplify complex decisions and save time and effort, people tend to use mental shortcuts or heuristics. However, these heuristics can also lead to errors and biases that limit the information people consider and distort their judgments.
The anchoring effect is one of these biases: it makes people focus too much on the anchor and adjust their estimates or opinions based on it, rather than on other factors or evidence.
When shopping both online and in-store, customers are likely to be influenced by the prices they see first or by other cues such as labels, ratings, reviews, or discounts.
How the Anchoring Effect Shapes Customer Expectations
The anchoring effect influences how customers perceive and evaluate products before making a purchase. It affects their subsequent judgments and comparisons, their information processing, and their beliefs and attitudes.
Anchoring can impact:
Subsequent Judgments and Comparisons
One of the main effects of anchoring is that it creates reference points that provide a basis for comparison that makes other options seem more or less attractive.
For example, when customers see a product with a high price tag, they may think that it is more valuable and desirable than a product with a low price tag. Conversely, when customers see a product with a low price tag, they may think that it is less valuable and desirable than a product with a high price tag.
Reference points can be manipulated to influence customer perceptions and preferences. For example:
- Comparison – By showing the original price and the discounted price of a product (e.g. $100/$50), you can create an anchor that makes customers think that they are getting a great deal and increase their willingness to buy.
- Display order – Displaying a higher-priced product before a lower-priced one (e.g. $200/$100), can create an anchor that makes customers think that the lower-priced one is more affordable and reasonable and increase their likelihood to choose it.
- Relativity – Showing a decoy product or option that is slightly worse or more expensive than the target product or option (e.g. $150/$100/$90), you can create an anchor that makes customers think that the target one is more attractive and valuable and increase their preference for it.
How Customers Process New Information
Another effect of anchoring is that it influences how customers select, organize, and evaluate information to form impressions and opinions about products.
Information processing can be biased by anchoring in several ways:
- Exposure bias – People are more likely to look for information that supports their preconceived notions about a product.
- Attention bias – Customers tend to focus their attention on information that aligns with their anchor.
- Interpretation bias – People often interpret information in a way that’s consistent with their anchor, shaping their perception of the product.
How Customers Form Beliefs and Attitudes
The anchoring effect influences how customers form beliefs and attitudes about products.
- Expectation – Customers may create a mental image or a standard of a product based on their anchor. For example, if customers see a high price tag for a product, they expect it to be high-quality or luxurious.
- Preference – Customers are likely to have a preference for a certain product based on their anchor. Low prices, for example, may entice customers to purchase cheap products.
- Attachment – Customers often create a commitment to or an attachment to a product based on their anchor. An example is if a product has a high price tag, customers may feel the need to justify their purchase.
How the Anchoring Effect Impacts Customer Satisfaction and Returns
The anchoring effect influences how customers feel and behave after making a purchase. It affects their post-purchase evaluation, their post-purchase regret, and their post-purchase dissonance.
Anchoring creates a standard that influences how customers assess their purchase outcomes. Customer satisfaction is determined by comparing actual results with expected results.
Post-purchase evaluation can be affected by anchoring in several ways:
- Expectations – Customers may experience a gap between their expectations and reality based on their anchor.
- Value – There may be a discrepancy between the customer’s perceived value and actual value.
- Quality – The actual quality might not match the perceived quality perceived by the customer.
Another effect of anchoring is that it creates a commitment that affects how customers feel about their purchase decisions. Post-purchase regret is a negative emotion that arises from thinking that a different decision would have been better.
Post-purchase regret can be triggered by several factors:
- Finding a lower price elsewhere – If customers discover that they could have purchased the same product at a lower price or found a better deal at a different store, they may regret their purchase.
- Product not meeting expectations – Customers might regret purchasing a product if it doesn’t meet their expectations once they get it.
- Lack of post-purchase support – Difficulty in contacting customer support or receiving unhelpful responses can contribute to post-purchase regret.
Anchoring creates a conflict that affects how customers cope with their purchase decisions.
Post-purchase dissonance is a cognitive strategy that aims to reduce or resolve the inconsistency between beliefs, attitudes, or actions.
Ways post-purchase dissonance may occur:
- Defend – The customer may rationalize or defend their purchase decision based on their anchor.
- Change – An anchor might make customers change or modify their beliefs or attitudes about the product.
- Return – Customers may return or exchange the product if they are not satisfied with it based on their anchor.
How to Reduce the Impact of the Anchoring Effect on Returns
Reducing returns is important for any business, as returns can incur costs, waste resources, and damage customer relationships. Here are some tips on how to reduce the negative impact of the anchoring effect on returns:
Offer Free and Easy Returns
Free and easy returns let customers change their minds and return items without paying extra fees or going through complicated processes. This can increase customer satisfaction and loyalty and reduce post-purchase regret.
When customers know they can easily return items without too much hassle, they’re more likely to go through with their purchase.
Use a self-service return portal and automate as much of the returns process as possible to make returns smooth and easy.
Chat with our experts to boost your customer return experience and LTV today.
Provide Detailed Product Information
Detailed product information helps customers make informed and confident decisions based on relevant information.
Providing a clear description of the product along with images, specifications, and dimensions can help prevent misleading customers or setting false expectations.
Make sure you organize and present your product information in a way that is easy to understand and access:
- Simple wording – Use simple and clear language appropriate to your audience.
- Clear layout – Highlight key features and benefits with bullet points, numbered lists, tables, charts, or icons.
- Multiple visuals – Include zoomable images, videos, 360-degree views, or virtual try-ons to show different angles and perspectives.
- Social proof – Show customer reviews, ratings, testimonials, and other social proof that shows the real opinions and experiences of your customers.
Understand and Use the Anchoring Effect
The anchoring effect can have positive or negative effects on your business depending on how you use it. Take advantage of it by creating reference points that make your products more attractive and setting standards that will make your customers more satisfied with your products.
By implementing effective strategies you can reduce the negative impact of the anchoring effect on returns while improving customer retention and loyalty.