Prime Pricing: Decoding the Psychology Behind Amazon Prime Day, Anchoring, & False Discounts

Your cart is loaded with items you’ve been eyeing for weeks, all set for big discounts.

You’ve been waiting for Amazon Prime Day.

You’ve spent an insane amount of time to carefully select your items and brag to your friends about how much you’ll be saving.

But as Prime Day hits, you notice something odd — prices seem higher than they were before the sale. What gives??

That’s two psychology tactics called Anchoring and False Discounts in action. Let’s get into why this works so well, and how you can (responsibly!) use Anchoring to sell more products and services.

Opportunity Knocks:

80% of shoppers feel encouraged to make a first-time purchase with a new brand if they have an offer or discount. In the absence of a special deal, customers would otherwise abandon their carts.

And, research shows that small businesses estimate 17.7 percent of their total business over 12 months will be generated by promotions such as discounts, deals, coupons, or similar offers.

Many smart businesses use Anchoring to influence consumer behavior and increase sales.

Mind Games: The Psychology Behind Anchoring Bias – Why it Works 🧠💰️

Ever noticed how a lot of businesses seem to show a price that’s crossed out , with a lower price beside it. This Was/Now pricing is intentional.

Anchoring is a cognitive bias that happens when people rely on the first piece of information they see (the "anchor") to make decisions. In retail, the original price is the anchor.

When a product is "discounted" from this higher anchor price, it looks like a better deal, encouraging people to buy it.

In the car example above, he is lured into thinking it’s a great deal because of the high price he can still see ($60K), compared to the discounted price ($30K). This is more effective psychologically than just showing the discounted price of $30K by itself.

Our brains love a good deal and this creates the illusion of a better deal, prompting consumers to make a purchase.

False discounting makes this even stronger by adding urgency and value. False discounting is when retailers inflate the original price before applying a discount. This makes the discount seem larger even if the new price isn't actually a great deal.

For example, two weeks before a winter sale, a coat is priced at $99. As the sale approaches, the price increases to $150. During the sale, it’s offered at a “discounted” price of $110. This makes the $110 price point seem like a great deal compared to $150, even though it’s still higher than the original $99.

Popular Businesses That Mastered the Art of Anchoring

Amazon

Amazon is a master of using anchoring and false discounting, particularly during events like Prime Day.

Customers often report that prices of certain items are increased just before the sale, then marked as discounted during the event.

This strategy leverages the anchoring effect and false discounting to make the sale price seem more attractive, even if it's not a genuine discount.

For example, a popular air fryer might be priced at $50 a few weeks before Prime Day.

As the event approaches, the price might quietly increase to $70. Then, on Prime Day, it’s offered at a “discounted” price of $55.

This makes the $55 price point seem like a great deal compared to $70, even though it’s still higher than the original $50.

Despite the controversy, Prime Day sales continue to soar, illustrating how effective these tactics can be.

In 2023, Amazon's Prime Day was the single-largest sales day in its history, and helped Amazon bring in over $12 billion in sales, showcasing the power of perceived discounts​​​​.

Additionally, Amazon often pairs these “discounts” with limited-time offers and countdowns to create a sense of urgency – more marketing psychology.

Flash sales and lightning deals further enhance the perceived value, pushing customers to act quickly for fear of missing out (FOMO) on a good deal

Macy’s

Macy’s frequently uses anchoring and false discounting in their pricing strategy.

Items are often marked with a high "original" price, then "discounted" significantly to create the impression of a good deal.

This tactic drives foot traffic and online sales, making customers feel like they are getting exclusive offers.

In 2022, Macy’s reported an increase in sales during their seasonal promotions, attributing part of this success to their discounting strategies​​.

When Anchoring goes Overboard

While anchoring and discounting can be effective, there’s a delicate balance.

Companies like Shein and Fashion Nova often overuse this tactic, leading to “sale fatigue” among customers. When every item seems perpetually discounted, shoppers start to doubt the validity of the original prices.

This constant barrage of "sales" can erode trust and make customers hesitant to purchase, thinking another, better sale is just around the corner.

Striking the right balance is key to maintaining consumer trust while effectively using anchoring strategies.

This strategy has helped them capture significant market share but also led to some customer skepticism about their pricing authenticity.

How to CAPTIVATE with Anchoring

Here’s a few simple ways you can start leveraging anchoring to enhance your pricing strategy: 

1. Establish a High Anchor Price —

You get one chance to make a first impression.

• Set a Premium Original Price: Introduce your product with a higher price before offering discounts. This sets a strong anchor that makes any subsequent discount seem more significant.

• Highlight Savings: Clearly display the original price next to the discounted price. For example, "Was $100, Now $70" emphasizes the perceived savings.

2. Use Visual Cues —

Visuals are worth a thousand words.

• Strikethrough Pricing: Show the original price with a strikethrough and the sale price next to it. This visual cue reinforces the discount.

• Bold Discounts: Use bold and contrasting colors to highlight the discount percentage, making it stand out to shoppers.

3. Combine Anchoring with a Sense of Urgency —

Nothing good lasts forever, right?

• Limited-Time Offers: Use time-sensitive language to create urgency. Phrases like "Hurry, limited stock!" or "Only 24 hours left!" can drive quick purchasing decisions.

• Countdown Timers: Implement countdown timers on your product pages to visually reinforce the urgency of the offer.

** Extra Growth Tip: Create Your Own Prime Day —

Why let Amazon have all the fun?

Look at when your sales typically slow down—maybe it’s after the holidays or a post-summer slump.

Create your own annual event to drive sales during this time.

Think about calling it something catchy, like “Lightning Deals Day”, “Spring Savings Day”, or something that captures your brand.

Use the anchoring tips above, set high original prices through the year, and then offer compelling discounts during this time period to create incredible deals.

This can boost your sales during slow periods and help keep your customers captivated.

Putting It Into Action

Tony runs an online store selling home goods and is looking to increase sales next quarter.

He could use Anchoring by initially listing his new collection of kitchenware at a premium price. After a few weeks, he could offer a "limited-time discount" by reducing the price and highlighting the savings.

By setting a high anchor price and then discounting it, Tony can make his customers feel like they’re getting an exceptional deal, boosting his sales and revenue.

By setting an anchor price of $145 and then offering the set at $99 during the promotion, Tony can leverage anchoring to help customers perceive the discount as a great deal, leading to increased sales.

In Closing: Keep Them Captivated

--

If you like videos, check out the YouTube channel, BloomWell 360 >.

Stay great, captivate, and sell smarter! 🧠💰️

Until next time,

Profit Nic