Price anchoring in online stores is a pricing technique that uses a reference price to influence how shoppers perceive the cost and value of a product. Instead of showing a selling price on its own, an online retailer may display a higher price next to it, such as “Was $150, Now $99.” The original $150 becomes the anchor, while $99 can appear more attractive by comparison.
This strategy is widely used in e-commerce because shoppers rarely evaluate prices in complete isolation. They often compare a displayed price with another number, such as a previous price, recommended retail price, competitor price, or premium product. Research reviewed by the UK Competition and Markets Authority describes reference pricing as displaying a previous or future price alongside the current price to make the current offer appear more attractive.
What Is Price Anchoring?
Price anchoring occurs when the first or most noticeable price a customer sees becomes a reference point for evaluating another price.
For example:
Original price: $200
Sale price: $129
The $200 figure acts as the anchor. The customer may perceive $129 as a significant saving because it is being compared with $200 rather than considered by itself.
The same principle can appear in subscription plans, product bundles, limited-time promotions, and comparison tables. A business can establish an anchor before presenting the price it wants customers to consider.
The concept is related to the broader psychological principle of anchoring, in which people tend to rely on an initial piece of information when making subsequent judgments. Research on advertised reference prices has specifically examined how reference prices affect consumer price perceptions and price-search intentions in online environments.
How Price Anchoring Works in E-Commerce
Online stores have several ways to establish a price anchor. The method depends on the type of product, business model, and information available to customers.
1. Showing an Original Price
The most recognizable example is a crossed-out price placed beside the current price.
For example:
$180 $119
The $180 price provides a comparison point. The customer can immediately see a $61 difference between the two numbers.
This format is particularly common during sales events and promotional campaigns.
2. Using Recommended Retail Prices
An online retailer may compare its selling price with a manufacturer’s recommended retail price or another legitimate reference price.
For example:
RRP: $250
Our price: $199
Here, $250 establishes the reference point, while $199 is presented as a lower alternative.
Reference pricing can take several forms, including comparisons with a retailer’s previous price, another retailer’s price, a manufacturer’s recommended price, or a future intended price.
3. Creating Tiered Product Plans
Price anchoring is not limited to physical products.
Software companies and online services frequently offer several plans:
| Plan | Monthly Price |
|---|---|
| Basic | $9 |
| Professional | $29 |
| Enterprise | $79 |
The $79 plan can establish a higher reference point. As a result, the $29 plan may appear relatively moderate to shoppers who compare the options within the same pricing table.
This is one reason online stores and subscription services carefully design the order and presentation of pricing options.
4. Using Premium Products as Anchors
Another approach is to display a more expensive product alongside less expensive alternatives.
Imagine an electronics store selling three headphones:
- Basic — $49
- Plus — $89
- Premium — $179
The $179 product provides a high reference point. When customers see the $89 option afterward, its price may seem more reasonable in comparison.
The products do not necessarily need to be discounted for anchoring to occur. The relationship between the displayed prices can itself provide the reference point.
Why Reference Prices Influence Shoppers
A reference price gives customers additional context when deciding whether an offer represents good value.
Without an anchor, a product priced at $100 might be difficult to evaluate. Is $100 cheap, expensive, or average?
But if the same product is displayed as:
$150 $100
the shopper receives an immediate comparison.
Evidence reviewed by the UK Competition and Markets Authority found that reference prices can affect consumers’ valuation of an offer and their intention to purchase. The review also notes that consumers may interpret the reference price as the normal or undiscounted price.
Research has also examined advertised reference prices specifically in Internet advertising and found that reference-price presentation can affect consumers’ price perceptions and intentions to search for prices.
Common Price Anchoring Examples
Price anchoring can be found across many areas of online retail.
Clothing Stores
A clothing website might display:
$120 $75
The customer sees the $120 reference price before evaluating the $75 selling price.
Electronics
An electronics retailer could show:
Regular: $799
Sale: $649
The difference provides an immediate reference point for the shopper.
Online Courses
An education platform might present:
Standard Price: $299
Today: $99
The higher price establishes the comparison point for the promotional offer.
Software Subscriptions
A SaaS website may present several monthly plans:
Starter — $10
Business — $35
Enterprise — $100
The different price levels provide context for one another.
Product Bundles
A store could show:
Individual value: $160
Bundle price: $99
The $160 figure becomes the reference point for evaluating the $99 bundle.
Price Anchoring vs. Discounts
Price anchoring and discounting are closely related, but they are not exactly the same.
A discount involves reducing a product’s price from one amount to another. Price anchoring describes the psychological and presentation effect created when one price becomes a reference point for evaluating another.
For example:
$200 → $150
This is a price reduction.
But presenting:
$200 $150
adds a reference point that can change how the shopper interprets the $150 price.
Therefore, the way a price is presented can matter almost as much as the numerical difference.
The Importance of a Credible Anchor
A price anchor is more useful when customers can reasonably understand where the reference price came from.
For example, a retailer might clearly identify:
- Previous selling price
- Manufacturer’s recommended retail price
- Comparable market price
- Regular subscription price
- Individual product value within a bundle
A vague or artificial reference price can create confusion.
The CMA’s evidence review notes that reference pricing can help consumers when it provides a genuine and useful signal about savings. However, fictitious or difficult-to-verify reference prices can mislead shoppers and potentially discourage them from comparing alternatives.
Risks of Misleading Price Anchoring
Price anchoring itself is not necessarily deceptive. The problem arises when the reference price does not accurately represent the comparison being communicated.
For example, imagine a product is normally sold for $100 but is advertised as:
$250 $100
If the $250 figure does not represent a genuine and meaningful reference price, customers may receive a misleading impression about the size of the saving.
The CMA review notes that misleading reference pricing can influence consumers’ willingness to shop around and can potentially result in consumers paying more than they otherwise would have.
For online retailers, transparency is therefore important. Customers should be able to understand what the comparison price actually represents.
How Online Stores Can Use Price Anchoring Responsibly
Businesses can use reference pricing while maintaining clear communication.
Use Genuine Reference Prices
A retailer should use a reference price that accurately represents the comparison being advertised.
Explain the Comparison
Instead of simply displaying a large crossed-out number, businesses can identify the reference:
Regular price: $120
Sale price: $89
This gives shoppers more context.
Avoid Artificially Inflated Anchors
An unnecessarily high reference price can create unrealistic expectations about the discount and damage customer trust.
Make the Final Price Clear
Customers should be able to identify the actual amount they will pay without navigating through unnecessary steps.
Provide Comparable Information
If a price is compared with an RRP, previous price, or another benchmark, the retailer should make the basis of the comparison understandable.
Price Anchoring and Online Shopping Behavior
Online shoppers have access to numerous alternatives, making price comparison easier than in many traditional shopping environments. However, the way prices are displayed can still influence how shoppers interpret offers.
A reference price can reduce the amount of mental work required to evaluate a deal because the shopper receives an immediate comparison point. The CMA’s review found evidence that reference pricing can affect consumers’ valuation of offers and reduce their efforts to search for alternatives.
This makes price presentation an important part of online store design.
At the same time, consumers can protect themselves by comparing the final price across multiple retailers rather than relying only on the displayed discount.
How Shoppers Can Avoid Price Anchoring Bias
Customers do not have to ignore discounts, but they can evaluate them more carefully.
Compare the Actual Selling Price
Instead of focusing only on the claimed discount, search for the product’s current price at other stores.
Check What the Reference Price Means
Ask whether the higher price represents a previous selling price, RRP, competitor price, or another benchmark.
Calculate the Real Saving
For example:
Reference price: $150
Current price: $120
The difference is $30, which is a 20% reduction from $150.
Looking at the actual numbers can make the offer easier to evaluate.
Consider the Product’s Value
A product being reduced from $200 to $100 does not automatically mean it is worth $100. The product’s quality, features, alternatives, and current market prices still matter.
Compare Multiple Stores
A retailer’s reference price is only one piece of information. Checking competing stores can reveal whether the current selling price is actually competitive.
Price Anchoring in Mobile Shopping
Price anchoring also matters on smartphones because mobile shopping interfaces often emphasize concise information.
A product page might show:
$89 $59
near the product title, immediately establishing the comparison.
Because mobile screens provide less space, retailers frequently prioritize prominent information such as the current price, discount, and reference price. Research into online reference pricing has examined how these price presentations influence consumers’ perceptions and search behavior.
This makes clear and honest price communication especially important on smaller screens.
The Role of A/B Testing
Online retailers can test different pricing presentations to understand how customers respond.
For example, a store might compare:
Version A: $79
with:
Version B: $99 $79
The retailer can then measure metrics such as:
- Conversion rate
- Average order value
- Product-page engagement
- Cart additions
- Checkout completion
- Revenue per visitor
However, better short-term performance does not automatically mean that a pricing presentation is beneficial for customers. Businesses should also consider transparency, customer trust, and applicable consumer-protection requirements.
Price Anchoring and Customer Trust
Trust is particularly important in e-commerce because customers cannot physically inspect most online products before purchasing.
If shoppers repeatedly encounter accurate and understandable pricing, they can develop confidence in the store’s offers. If they discover that reference prices are exaggerated or difficult to verify, the retailer may lose credibility.
The CMA has highlighted this distinction: reference pricing can provide useful information when it communicates genuine savings, but misleading reference prices can cause consumer harm and interfere with effective price comparison.
Final Thoughts
Price anchoring in online stores is a powerful pricing and presentation technique that gives shoppers a reference point for evaluating a product’s price. Common examples include crossed-out previous prices, recommended retail prices, premium product options, subscription tiers, and bundle comparisons.
The strategy works because consumers often evaluate prices relative to surrounding information rather than considering every price independently. Research has found that reference prices can influence perceived value and purchasing behavior, particularly when consumers use the displayed reference as a benchmark.
For online businesses, the most sustainable approach is to make reference prices genuine, understandable, and relevant. For shoppers, the best way to evaluate an anchored price is to look beyond the claimed discount and compare the actual selling price, product value, and alternatives.
