'Anchoring' is the tendency for people to judge value in relation to other things and not in an absolute way. Marketers can use this psychological phenomenon to their advantage when positioning their brand.

For example, a brand is better able to command a high price and avoid its price being tethered to other brands, if it is seen as something different. If consumers don’t see a brand as similar to others, they won’t compare prices. And since people don’t make absolute judgments about how much a brand is worth, a unique brand can charge a high price.

Take Nespresso as an example. When Nespresso was launched, people saw it as something completely new and different, not comparable to instant coffee, which is why the brand was able to charge 30 cents a cup instead of five. If people did compare the price of Nespresso with anything, it was with the three dollars or so they were used to paying for similar drinks in coffee shops.

When launching a premium-priced product, people should be encouraged to compare it with a much more expensive ’anchor.’

What to learn more? Try asking Virtual Dan White.