Analysis of Anchoring Effect in Online Product Pricing Strategies

Abstract

People nowadays convert their consuming habits from traditional shopping methods to the e-commerce way, as a result of which they can easily get access to different products via e–commerce regardless of region or country. Some goods are selling perfectly well due to some merchants’ brilliant pricing methods, though they are not that unique from other products. This phenomenon shows the importance of pricing strategies, and among the key components of pricing, the anchoring effect stands out as a crucial one. This review examines the application of the anchoring effect in pricing strategies, from its theoretical roots to current research development, including the effect of repeated anchors and so on, illustrating the deficiencies of using overly simplified goods type classification (utilitarian and hedonic) when research, presenting considerations regarding cultural and regional differences, and demonstrating the consequences of long–term repeated anchors. Moreover, classifying different anchor points, ranging from normal price anchors to nonprice anchors (including quantity, time and the effect of majorities’ decisions). The types of products have also been categorized into physical goods, virtual goods and subscription-based goods, which allow in-depth analysis about how to apply different kinds of anchor points. Finally, an advanced pricing method of using personalized dynamic anchors is proposed, which means anchor prices can be varied and adjusted based on various consumers and their different consumption behaviors.