A customer walks past a shop window and sees sports shoes advertised for $800. Researchers have long shown that exposure to such high "price anchors" can increase the amount a customer is willing to pay for products in that category. But, what effects does it have on the prices consumers are willing to pay for products in unrelated categories? Will this high advertised price for sports shoes affect the price you are willing to pay for DVD players? That is, does the anchoring effect cross over to other products?
Rashmi Adaval and Robert S. Wyer Jr. investigate this question through four experiments and confirm that there is indeed a cross-over effect, but it happens under certain conditions.
They show that exposure to a high price can influence the price a customer is willing to pay for an unrelated product, if the exposure is incidental and the customer has not actively focused on the price.
"Thus if you walk by a display of expensive electronic goods and merely glance at some high prices without thinking about them, the prices might have a more general effect on how much you are willing to pay not only for products in related categories, such as DVD players and cameras, but also unrelated ones, such as shoes and bags," they say.
Suppose, however, you do think about the prices you have seen. Such deliberation could involve thinking about the general features of a high-priced product (such as its prestige or quality) which can lead to a willingness to pay a higher price for products in other categories as well. But, if a customer deliberates on the specific features of a high-priced item (e.g., thinking about the megapixels of an expensive camera or the RAM and hard-drive capacity of an expensive computer) the effect is quite different. "These thoughts about specific features that are elicited by the high price will influence how much you are willing to pay only for products to which these features are applicable," the authors say.
The study demonstrates these when customers are exposed to both obvious and subliminal price anchors. So, even when they are not aware they have seen a price anchor flashed at them amidst other images, it still takes hold.
The key difference in whether the price anchor has a cross product category effect is whether the customer is able to identify where this standard has come from, the authors say.
"In some cases, customers might be aware that the standard they are using is based on the price of a specific type of product, as might be the case when a merchant or an experimenter provides a product's price. In this case, features that represent a product of this type might be activated, and anchoring-like effects might generalize only to product categories to which these features are applicable.
"In other cases, a customer's inability to identify where the standard comes from precludes the activation of such product features. In this case, anchoring-like effects might generalize over product categories," they say.
Overall, the findings help to clarify how and when price anchors might be activated and applied. "Not thinking about products might actually have a more general, cross-category effect" than thinking about them, the authors conclude.