Cannabis App Development
Price Anchoring for Dispensaries
Posted by: Nikki Tabberrah
June 19, 2023
In the highly competitive cannabis industry, retailers must constantly explore innovative ways to boost their sales and increase profits. One proven tactic that can significantly impact a business's bottom line is price anchoring.
In this article, we will explore what price anchoring is, how it works, and how cannabis retailers can effectively use it to their advantage. We will also provide practical tips and advice for both online and offline retailers, along with insights into consumer psychology related to price anchoring.
What is Price Anchoring?
Price anchoring is a psychological pricing strategy used by retailers to influence customers' perception of product value by establishing a reference or "anchor" price. The anchor price serves as a benchmark against which potential buyers compare other prices, making them more likely to perceive the actual selling price as a better deal.
In the general retail industry, big retailers like Costco are pretty smart when it comes to using psychology to get us to buy more.
So, imagine you walk into a Costco, and the first thing you see is this super expensive TV or fancy appliance. That's the "anchor" they set up for you. It's like they're saying, "Hey, look at these pricey items we have!"
Now, as you keep walking through the store, you'll start seeing other stuff that's way cheaper than that first anchor product. And because you saw that high-priced item first, your brain goes, "Wow, these other things are such a bargain compared to that TV!" which encourages you to keep shopping all throughout the store.
That's the magic of price anchoring and framing. And Cannabis retailers like you can use it too.
Practical Tips and Advice for Cannabis Retailers
Setting Anchor Price Points
- Research the market: Analyze your competitors' pricing strategies and identify the average price points for similar products in your market. This will help you determine a suitable anchor price that is neither too high nor too low.
- Align with your brand positioning: Ensure that your anchor prices align with your overall brand positioning and target audience. If you cater to budget-conscious consumers, setting an excessively high anchor price may alienate them.
- Test and adjust: Regularly test different anchor prices to determine which one generates the best results. Be prepared to make adjustments based on customer feedback and sales data.
When to Use Sale Pricing
- Seasonal promotions: Offer discounts during holidays or peak seasons to capitalize on increased consumer spending.
- Excess inventory: Use sale pricing to clear out excess inventory and make room for new products.
- Attract new customers: Offering limited-time discounts can incentivize new customers to try your products and potentially become loyal patrons.
Positioning Prices Relative to Competitors
- Highlight product differentiation: Emphasize the unique aspects of your products that justify a higher price point compared to your competitors.
- Leverage price-quality perception: Consumers often associate higher prices with better quality. By setting a higher anchor price, you can reinforce the perception of your products being superior in quality.
- Offer bundle deals: Create value-added package deals that allow customers to perceive greater savings compared to purchasing individual items.
Consumer Psychology and Framing Effects
To maximize the effectiveness of price anchoring, retailers must also understand the framing effect – a cognitive bias where people react differently to the same information depending on how it is presented.
In the context of price anchoring, framing can be leveraged by:
- Displaying price reductions as a percentage: Consumers often perceive percentage discounts as more significant than absolute dollar savings.
- Using a strikethrough on the anchor price: Visually emphasizing the price difference makes it easier for customers to appreciate the discount.
- Positioning products side-by-side: Placing a higher-priced item next to a lower-priced one can make the latter seem like a better deal.
- Strategic Offer Placement: Showcase these prices in a well-thought-out manner to achieve optimal visibility throughout the entire shopping journey.
For Brick & Mortar Stores
- Use prominent shelf positioning: Place products with anchor prices at eye level, making them more noticeable to customers as they browse.
- Create a dedicated discount section: Group discounted items together in a separate area of the store, making it easier for customers to identify and compare deals.
- Leverage in-store signage: Use clear and eye-catching signs to highlight anchor prices, discounts, and promotions throughout the store.
For Dispensary Mobile Shopping Apps
- Feature special offers on the home screen: Display discounted items or limited-time offers prominently on the dispensary app's home screen to capture users' attention.
- Implement a "Deals" or "Sale" tab: Create a dedicated section within the app where users can easily find and browse discounted items, sorted by categories or percentage off.
- Use push notifications: Send targeted notifications to users, informing them of price reductions or special promotions on products they have shown interest in.
- Leverage Banner Ads: Deploy full-screen banner ads inside the app to promote special discounts, seasonal sales, or featured products upon opening the app.
- Integrate a custom price search filter: Offer users a search filter that encompasses a broad range of prices, allowing them to easily find products within their budget and preferences.
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- Design an engaging homepage banner: Use a visually appealing banner on your website's homepage to showcase anchor prices, discounts, or limited-time offers.
- Create a "Sale" or "Clearance" page: Dedicate a page on your website to feature discounted items, allowing customers to easily find and compare deals.
- Incorporate dynamic pricing widgets: Use pricing widgets that display the anchor price with a strikethrough alongside the discounted price, making it easier for customers to perceive the value.
In conclusion, price anchoring is a powerful tool that cannabis retailers can use to drive sales and increase profits. By understanding the underlying consumer psychology and implementing strategic pricing practices, businesses can effectively create perceived value and encourage customers to make purchases.
With careful planning and execution, price anchoring can become an essential component of any cannabis retailer's marketing arsenal.