Why compete when you can dominate your market? For those of you who haven’t read Blue Ocean Strategy , you should definitely read it. But that’s not what I’m going to talk about today. It’s something much simpler but yet profoundly important. So here goes:
Did you know that when a gosling hatched out of an egg, it will follow the first thing it sees? Konrad Lorenz demonstrated this by appearing before them, and they followed him ever since, mistaking him as their mother.
Interesting isn’t it?
In a way, we are like goslings
We also cling to the first thing we are exposed to. Don’t believe me? Here’s an example…
Let’s say the price of a car when you first become aware of it is… $50,000. Whether you know it or not, subsconciously you anchored to the idea that cars, in general, costs around $50,000. Then you grow older, you start to read more about cars and you saw a Ferrari… and to your big shock, it costs a whopping half a million dollar!
Why did you think that half a million dollars is expensive? Because you compared the price to your anchor, the $50,000 car.
But what if you were the King’s son and when you first asked your dad how much his car costs, he told you it’s about five million dollars. You then saw a Ferrari, wouldyou find it expensive? Hell no! You would it cheap as crap because you compared it to your anchor, the 5 million dollar car.
That’s what we do day in and day out. Comparing everything with an anchor extablished a long time ago.
How to anchoring
So what doe sthis have to do with marketing and selling in general? Well… let’s again imagine you first found out the price of a car is about $50,000. Then technology improved and out comes the Hybrid car, which in this example, require only water to run. The price for one these babies is also half a million dollars…
Do you think that’s expensive now? Hell no! It’s cheap!
Starbucks Used Anchoring
That’s how starbucks broke through the coffee business. Before them, coffee costs about $2 a cup but they charge $5 a cup… with negligible improvement on quality. How did they do it? Simple. Anchoring.
They provided a different kind of experience from other cafes. They named their coffee differently, they even named their sizes differently. They tried to be as unique as possible so that they can escape from being compared tot heir competitors… the general public’s anchor.
So when they step in with $5 coffee, you thought it was reasonable… because you had no anchor to compare it to. Unfortunately for Starbucks, Gloria Jeans was already present in Australia when it expanded into town.
Gloria Jeans also sells expensive coffe with similar experience to Starbucks. So what happens? Well, let’s just say Starbucks is jsut about ready to pull out.
How does this apply to you?
If you still can’t see it by now, then listen carefully. The word is differentiation. Differentiation can be achieved in many ways and that’s a whole other subject by itself. I’d recommend you read Differentiate or Die by Jack Trout for more on the subject.
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