Wednesday, August 4, 2010

Anchoring- Most Dealerships use this technique

When people attempt to make a decision, they use perceptions called anchors as points of comparison. Once an anchor has been set for future comparisons, that anchor is hard to remove from the mind. This process of operating bias is appropriately called anchoring, and retail business cannot wait to use it on an unaware consumer. The human brain will fall back on it if countermeasures aren’t prepared in advance. A little bit of knowledge won’t make one immune, but it will help on places like a used automobile lot.
An anchor in the car aisles
Marcy makes her way onto a used automobile lot, entirely unaware of the concept of psychological anchoring. The old commuter works, but Marcy wants something new and exciting. A sharp hybrid catches her eye. She checks it out from front to back, sits in it and wonders if she may have found her dream car. But the sticker price shakes her. Lightning strikes when she reads the price tag: $ 24,998.
Enter used automobile salesman with reassuring grin. He asks her if she likes the automobile, and while Marcy does, she exclaims dejectedly that it’s out of her price range. Marcy loves the car, but she hates the price. Then the salesman comes at Marcy with the hook.
'No worries. That car’s on sale for $ 14,000!’
That’s all that Marcy needs. She jumps at the chance to buy with such a discount. She has taken the bait for a top retail scam, writes You Are not So Wise. As Marcy didn’t know what the vehicle was really worth, the salesman could very easily use anchoring to play with her expectations. Markdown seemed excellent, but the real value of the car happened to be under $ 10,000. The markup is what was tremendous. Marcy needed an anchor to help her make her purchase decision, and also the salesman obliged. The dealer made out like a bandit, thanks to anchoring.
Haggle, do not buy the vapor
What we’re willing to pay is typically a vapor number that isn’t grounded in specific money value. What the dealer says and what the true value is could be wildly different. It anchors the mind to an inflated price that is far above what the dealer paid for it, let alone its true worth.
Allow a dealer that kind of room to play games and your cash will turn to vapor. Haggling pulls you away from the concept of anchoring and can make less experienced auto dealers squirm. Control the game, instead of allow yourself to be controlled by anchoring. Do your due diligence and be prepared to haggle for a lower price. Experienced dealers will play ball with such a intelligent customer.
Find more details on this subject
Wikipedia
en.wikipedia.org/wiki/Anchoring
You Are not So Smart
youarenotsosmart.com/2010/07/27/anchoring-effect/

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