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The Psychology of Price Anchoring and How It Can Boost Retail Sales

The Psychology of Price Anchoring and How It Can Boost Retail Sales

pricing compression profitable retail May 29, 2023

Would you buy a bread maker for $279? Is that too expensive? If there were two models available, and the second, premium model cost $429, would you still consider the first model pricey?

This tactic is called "anchor pricing." Price anchoring refers to the practice of establishing a price point that customers can refer to when making decisions. The strategy recognizes that consumers tend to rely too heavily on the initial piece of information (the anchor) when making decisions.

In fact, Williams-Sonoma used this exact example to double the sales of their original bread maker. Until they released the premium model, the original had seen very weak sales. Turns out $279 is not too expensive for a bread maker.

Luxury pricing can turn previously expensive items into bargains.

Psychological pricing, a subset of pricing strategies, is commonly used to influence customer behaviour. Research has shown that formatting prices in certain ways can trigger a subconscious response from customers and encourage purchases. Anchor pricing is easy to use and can improve pricing strategies to make them more effective.

Once you see examples of price anchoring, it is hard not to see them. They pop up when you subscribe to a service, or purchase a new product on Amazon. If you have ever bought a high ticket item like an engagement ring, you may notice the associate shows you the most expensive first, then will bring out a slightly less costly option. This alone can make the second price feel more reasonable.

Applying this concept to cannabis doesn't necessarily mean focusing on luxury products or the highest price points. It can also involve guiding customers towards products with different price ranges, and higher gross margins.

Restaurants are really good at doing this with menus, by highlighting specific items that have the highest margins.

đź’ˇThis is an aspect of Menu Engineering. To accurately determine which products allow for the largest profits, you need to understand their true cost. Learn how to start Menu Engineering in this blog.

The availability of lower or higher-priced options often influences our purchasing decisions. We tend to assume that the cheaper options are of inferior quality, while the most expensive options can seem exorbitant. As a result, it is natural to opt for a middle-priced option, which feels just right.

This can make mid-range products appear as the best value.

Tips for using anchor pricing as a cannabis retailer or brand


  • Utilize visual merchandising displays to showcase specific products and guide customers toward high-margin or fast-selling products.
  • Evaluate sections in the customer journey where anchor products are missing or could be more effective with competitive product placements.


  • Prepare your reps to identify where or when your product may be an anchor, and what to do about it.
  • Visit locations to guide retailers on product positioning. This will help anchors function effectively within the in-store customer journey.

By using anchors, you can strategically guide customers toward specific products. This, in turn, can encourage customers to purchase slow-moving inventory or high-margin products, supporting your efforts to combat pricing compression.

If this blog has you looking at your pricing strategy in a whole new light, make sure to subscribe to our newsletter. We help our subscribers tap into industry insights and recognize the signs of success to drive your business into higher profitability.

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