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First Digit Anchoring

Disciplines > Marketing > Pricing > First Digit Anchoring

Description | Example | Discussion | See also

Description

In a number (including a price), the left-most digit has a disproportionate effect in the way it acts as an anchor, being remembered first and gaining greater significance than subsequent digits.

Hence in the number 15, the number 1 has a greater significance than the number 5. This is not always a huge effect, but it nevertheless can make a difference in complex ways, for example comparing 72 and 84 is perceptually different to comparison of 79 and 91, even though the difference in each pair is the same.

Example

A store changes the price of a product during a sale from $22 to $19. It sells a lot more of the product than other items that are reduced by $3 (such as one that is reduced from $24 to $21).

A marketer prices budget goods such that the first digit is always 1 or 2.

Discussion

This anchoring uses the primacy effect and also anchoring in the way that the number that is encountered first has the greatest effect, even within a number.

Speed is important here. We read a multi-digit number very quickly. This gives very little time for this first-digit effect to happen, which may make it seem less likely. Yet more significantly, the unconscious mind is capable of processing at this speed, while the slower conscious mind may not notice it, making this first-digit effect more subtle and possibly more influential.

The first digit anchoring effect conflicts with a boundary effect in which $9.99 may be seen as distinctly less than $10.00. In contrary to this, the first-digit anchoring effect is that $9.99 may also be seen as more than $10.00 as $9.99 starts with a 9 (and also continues with high single digits). This is different to the comparison between $10.99 and $11.00, where there is no first-digit effect.

Note that in some ways, the first digit is significant as it gives a real indicator of scale, so 35 is greater than 26, simply because the first digit in both cases represents 'tens'. This becomes different when decimal boundaries are crossed, for example in comparing 9 and 10, although a counterbalancing effect of number length may now also affect perception.

Overall, these effects highlight the complexity of perception in the way multiple biases can unconscious pull us in different directions at once, with a net effect that may affect different people in different ways.

See also

The Price Anchoring Effect, The 99 Effect

Thomas, M. and Morwitz, V. (2005). Penny Wise and Pound Foolish: The Left-Digit Effect in Price Cognition, Journal of Consumer Research, 32, 54-64