When individuals attempt 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 mental landmarking is called anchoring, and it is a retail salesperson’s greatest weapon. Consumers will naturally fall for anchoring unless they prepare ahead of time. Foreknowledge of this natural tendency helps, particularly in places like the used auto lot.
Anchoring to high vehicle prices
Marcy, an unsuspecting consumer with no knowledge of anchoring, ambles onto a used auto business. Her old Toyota is holding up, but Marcy wants something new and more environmentally friendly. A sharp hybrid catches her eye. After a close inspection and a sitdown, Marcy begins to think this car is for her. Yet the sticker price pulls her up from the umbra of her waking dream. The used hybrid costs $ 24,998; she simply cannot afford it.
Cue the used car salesman with the mustache and also the plastered smile. He asks Marcy what she thinks, and our heroine’s words – “It’s out of my price range” – plummet like lead balloons. She loves how she feels when she sits within the hybrid, but can’t get around that ugly price. The salesman knows it’s time for the hook.
‘Don’t worry about that. It is on sale right now for $ 14,000!’
That’s all that Marcy needs. Without further thought, she hits the finance office, applies for an auto loans bad credit and is eventually behind the wheel of her beloved new hybrid. She has taken the bait for a top retail scam, writes You Aren’t So Smart. Marcy didn’t know the true value of the automobile, so the salesperson used anchoring to his advantage. The markdown he offered seemed tremendous to Marcy, but the sad reality is how the actual value of the vehicle was $ 9,997. The markup was out of control. That anchor was a killer, and the salesman didn’t have to do much. The deal was poor for Marcy and spectacular for the dealer.
Haggle, please
The price we are willing to give up is rarely concrete. Focusing on the manufacturer’s suggested retail price – or within the above scenario, the used car dealer’s apparent markdown – creates an unrealistic expectation of cost. Dealers use anchoring to trap unsuspecting buyers.
When you allow a dealer to play psychological games with you, you are getting into a notion as solid as vapor. Haggling pulls you away from the concept of anchoring and can make less experienced auto dealers squirm. If you control the game, anchoring may have less pull on your attention. Be prepared with research before you buy a car and haggle for a lower price at each opportunity. Experienced dealers will play ball with such a wise consumer.
Additional reading
Wikipedia
en.wikipedia.org/wiki/Anchoring
You Are not So Smart
youarenotsosmart.com/2010/07/27/anchoring-effect/
