When people try to make a decision, they use perceptions called anchors as points of comparison. Once an anchor has been set for future comparisons, that anchor is hard to remove from the mind. This process of bias is called anchoring, and also the retail sales industry uses it to great advantage when dealing with consumers. Consumers will naturally fall for anchoring unless they prepare ahead of time. Just a little bit of knowledge won’t make one immune, but it will help on places like a used car lot.
Anchoring to high car prices
Marcy, an unsuspecting consumer with no knowledge of anchoring, ambles onto a used auto business. She has a vehicle that runs, but wants something new and shiny. Soon she sees it: a beautiful hybrid hatchback. She checks it out from front to back, sits in it and wonders if she may have found her dream vehicle. But when she looks at the sticker price, the shock sets in. That used hybrid automobile costs a whopping $ 24,998.
Enter used vehicle salesman with reassuring grin. Salesman asks what she thinks, and Marcy shakes her head and says the price is out of range. Marcy loves the vehicle, but she hates the price. Then the salesman comes at Marcy with the hook.
‘Don’t worry about that. It’s on sale right now for $ 14,000!’
Ding dong. Without further thought, she hits the finance office, applies for an autoloans and is eventually behind the wheel of her beloved new hybrid. She has taken the bait for a top retail scam, writes You Are not So Wise. As Marcy didn’t know what the car was really worth, the salesman could easily use anchoring to play with her expectations. 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 to make it real
The price we are willing to give up is rarely concrete. The MSRP or a dealer’s so-called markdown can fool us. The dealer works with two prices in an anchoring exercise designed to ensure the buyer.
When you allow a dealer to play psychological games with you, you’re purchasing into a notion as solid as vapor. Haggling pulls you from the concept of anchoring and can make less experienced auto dealers squirm. If you control the game, anchoring could have less pull on your attention. Come prepared with data regarding the auto you intend to purchase, but always try to haggle for a lower price. A veteran dealer will notice that you’ve done your homework and respect that fact.
Additional reading
Wikipedia
en.wikipedia.org/wiki/Anchoring
You Aren’t So Smart
youarenotsosmart.com/2010/07/27/anchoring-effect/
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