Price anchoring is one of the most effective and widely used techniques in retail psychology. Understanding how it works doesn’t make you immune to it, but it does make it easier to catch when it’s being used on you.

What Price Anchoring Is

Price anchoring works by presenting a high initial price to establish a reference point in your mind, then showing you a “discounted” price that looks favorable by comparison. The anchor doesn’t have to be real — retailers set it specifically to make the actual price seem like a deal. A jacket marked “Originally $299, now $149” is not necessarily a good deal just because $299 was on the tag at some point.

The Strikethrough Price Problem

Strikethrough pricing — showing the original price crossed out next to the sale price — is so common that most shoppers have become somewhat desensitized to it. The problem is that the “original price” is often set artificially high. Several retailers have faced regulatory action for routinely marking up prices before a sale specifically to create a larger apparent discount. The relevant question is not “how much am I saving from the original price” but “is this the actual fair market price for this item right now?”

The Middle Option Trap

When retailers present three options at low, medium, and high price points, the middle option typically sells most. Retailers know this and deliberately set the three prices to make the middle option — the one with the best margin — seem like the sensible, value-conscious choice. The best option for you may be the cheapest or even the most expensive depending on your actual needs.

How to Reset Your Anchor

Before buying anything where price is a consideration, search the item independently of whatever retail environment you’re in. Find the current market price on Google Shopping or at two or three different retailers. This gives you a real anchor based on current market conditions, not a manufactured reference point set by a retailer trying to make their price look favorable.