Paul Baccaro Coolfront VP, Operations & Product DevelopmentBy Paul Baccaro, VP Operations & Product Development

For those of you that run service calls, does this exchange sound familiar?

Your customer: “So how much will it cost?”

You: “Between $300 and $500…”

You just set a price anchor (and probably didn’t know it). It turns out we humans rely heavily on the first piece of information we see/hear to make judgements and decisions. That first piece of information is called an anchor.

In the scenario above, $300, the first information received about price, has become the anchor. Your customer will rely on it (probably too heavily) to pass judgment on the final price. What about the $500? That was the second piece of information heard and has much less impact.

So when you present the final invoice, if the total is much higher than the $300 anchor, bad things happen.

Your customer: “What happened to the $300 you quoted?” they holler.

You have an upset customer and a price complaint to deal with. Ouch!

Interestingly enough, if the final HVAC service pricing total is much lower than $300, your customer will also have a negative reaction. They won’t complain about the price, but they will question it (and you). Did you cut corners? Did you install cheap/used parts? Did you misquote, possibly indicating you are not competent? Why the discrepancy from what you first quoted?

The farther off your final HVAC service price from the anchor, the more pushback you will receive. So your takeaway: Make sure the first price you present is fairly close to the final price you charge. Whenever possible, give an exact price upfront and stick to it. It’s one of the big reasons we’re such fans of flat rate pricing.

Here’s an example of how Steve Jobs used price anchoring to sell ipads.

And here’s a summary of the Anchoring Bias phenomena. BTW, this is one of my favorite sites for interesting psychological tidbits.

I think it’s important to remember that people will anchor whether you want them to or not. It’s a psychological phenomena that we are all prey to. I just wanted to make you think of it when you set your HVAC service prices.

Anchors away!

(sorry, bad joke)

One Trackback

  1. […] a previous post I explained Price Anchoring. This is the notion that we humans rely too heavily on the first piece of information we receive. […]

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