Decision-making in human beings where comparisons are being made is largely based upon mental waypoints called anchors. Once an anchor has been set for future comparisons, that anchor is hard to remove from the mind. This process of operating bias is appropriately called anchoring, and retail business can’t wait to use it on an unaware consumer. While there is no single tactic to resist the mind’s natural inclination toward anchoring, it pays to know how auto dealers use it to make high prices seem palatable. Knowing may help consumers to step back and take a look at prices with greater clarity.
Anchoring to high vehicle prices
Marcy makes her way onto a used auto lot, entirely unaware of the concept of psychological anchoring. She has a car that runs, but wants something new and shiny. After a couple of minutes of looking, she finds a lovely hybrid car. Marcy kicks the tires, gives it a good look and begins to fall for this car. But when she looks at the sticker price, the shock sets in. Lightning strikes when she reads the price tag: $ 24,998.
However, a smiling used auto salesman makes his way over. He asks her if she likes the car, and when Marcy does, she exclaims dejectedly that it is out of her price range. Marcy loves the automobile, but she hates the price. The salesman knows it’s time for the hook.
‘Don’t worry about that. It’s on sale right now for $ 14,000!’
That’s all that Marcy needs. Without so much as a thought, Marcy jumps at the chance. She has taken the bait for a top retail scam, writes You Aren’t So Wise. Marcy didn’t know exactly what the hybrid was worth before falling in love; the vehicle salesman used anchoring to reel her to the sales office. The markdown he offered seemed tremendous to Marcy, but the sad reality is the actual value of the auto was $ 9,997. The markup was out of control. That anchor was a killer, and the salesman didn’t have to do much. The dealer made out like a bandit, thanks to anchoring.
Haggle your way to a better price
The price we are willing to give up is rarely concrete. What the dealer says and what the true value is can be wildly different. It anchors the mind to an inflated price that is far above what the dealer paid for it, let alone its true worth.
Allow a dealer that kind of room to play games and your cash will turn to vapor. Haggling pulls you from the concept of anchoring and can make less experienced auto dealers squirm. Control the game, rather than allow yourself to be controlled by anchoring. Do your due diligence and be prepared to haggle for a lower price. Experienced dealers will play ball with such a smart consumer.
Wikipedia
en.wikipedia.org/wiki/Anchoring
You Are not So Smart
youarenotsosmart.com/2010/07/27/anchoring-effect/
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