“In its early years, how did Starbucks manage to thrive despite having prices that must have seemed at odds with the expectations of most consumers?
First, Starbucks did its best to disassociate itself from existing price anchors by redefining the product. The stores offered a different ambiance, they were permeated by an intense coffee aroma, the food items offered in glass display cases were high-end pastry items, and so on. Even the products themselves were distinct from other coffee vendors: the sizes weren’t small, medium, and large, but rather tall, grande, and venti. You weren’t buying a cup of coffee, you were buying a Caffè Misto or a Frappucino. All of this served to weaken the tie to anchor pricing formed at other shops.
Second, according to Ariely, repeated visits to Starbucks served to establish a NEW anchor price for high-end coffee products. Each purchase of $4 coffee strengthened that new anchor point.
Can marketers take advantage of irrational anchor pricing? Would asking customers to think of a number between 90 and 99 while standing in line at a fast food restaurant make them willing to pay more for a burger? Should stores hang posters of big numbers by the checkouts? While Ariely’s work suggests that this kind of irrational anchoring effect could exist, I wouldn’t recommend building a marketing strategy around such techniques.
Menu prices are a very subjective interpretation of irrational anchors.
