Consumer Behaviour Assignment

Submitted To: Prof. Rajan Saxena

Submitted By: Group 1

Abhishek Khemka F029
Vaibhav Verma F062
Harsh Daga F061
Sourabh Yadav F052
Pavan Tulsija F061
Sanjana Acharya B002

PRINCIPAL - Anchoring effect to increase the willingness to pay

What is Anchoring?
Businesses assume that all consumers do a research, compare options and make a rational decision while
purchasing a product/service. This statement although seems plausible is untrue. People are illogical, it is
extremely hard to predict their behaviour and usually do not take time to think through before making a
decision. People tend to unconsciously latch onto the first fact they hear, basing their decision-making on
that fact… whether it’s accurate or not. This is called ‘Anchoring’. It is one of the most important aspects
of cognitive Psychology.
This can often be used as a powerful pricing strategy to give the customers a frame of reference to value
your product. It often enables you to guide your customers to choose the exact product you want them to
choose at the exact price you want them to buy.

We will use ‘Price Anchoring’ strategy in this study and the effect on willingness to pay. Price anchoring
refers to the practice of establishing a price point which customers can refer to when making decisions.

About The Company

Natural Interio Stone World Private Limited is a Private incorporated on 20 March 2017. It is classified as
Non-Government company and is registered at Registrar of Companies, Mumbai. . Its office is located in
Goregaon and factory in Kishangarh. The company specialises in stone carving, inlay works and also delivers
customisable stone products. Anchoring effect plays an important role in the organisations revenue
generation as the customers are unaware of the amout of hardwork and skilled labour that has gone into
the making of that product. Thus, they easily set a very high frame of reference as other retail outlets
charge a premium for the same quality of products.

Method Of Study

People were shown 3 products and asked to enter the highest price at which they would be
willing to pay for each product. Effect of an anchor on WTP was tested by initially giving
them an estimated selling price and some were not given any anchor. Then respondents were
asked if they would be willing to buy at that price. The next question asked was an open
ended question as in what would the highest price they are willing to pay for the product.
Picture is shown along with a brief description about the product. Participants are usually
divided into two groups. The first group is a calibration group, it only answers the open-
ended question without being exposed to an anchor. The second group will do the standard
anchoring experiment. The results of both groups will be compared. If the answers of the
open-ended question of group 2 match the calibration group, no anchoring effect has
occurred.
 Anchoring Effect Test

Crafted Crafted Indian

Sandstone Granite Marble
Estimated Estimated Estimated
Price - Price - Price -
Rs.1500 Rs.2500 Rs.4000
per Square per Square per Square
meter meter meter

Would You be willing to Would You be willing to Would You be willing to

pay this price for the pay this price for the pay this price for the
Sandstone? Sandstone? Sandstone?

What is the highest price What is the highest price What is the highest price
you are willing to pay for you are willing to pay for you are willing to pay for
the sandstone? the Granite? the Indian Marble?
 WTP w/o
WTP with estimated Price estimation
Product <2000 >2000
Crafted Granite 1000 3000 1500
Crafted Indian
Marble 1500 3500 2000
Sandstone 600 2500 1000
Average 1033 3000 1500