Anchoring: How Does the First

Anchoring: How Does the First

Positioned Offer Affect a Purchase

Decision in Hotel Choice.

Herman Blöte

Marketing Management | Marketing Intelligence Thesis Defence

Goal of the

Research

81% of all holiday bookings are made online. (Holiday Habits Report, 2018)

Theory

The Anchoring and Adjustment heuristic (Tversky & Kahneman, 1974).

➢ The human tendency to rely on the first piece of information received.

➢ “an ubiquitous phenomenon in human judgement” (Furnham & Boo, 2011). Error cost

Hypothesis

The Data

› Data on both the choice, and non-chosen alternatives.

› Search and offer level data.

› MNAR data on every 5th _position.

› Data scarcity.

› Anonymized.

› Mix of different pricing laws.

› Varying number of seen alternatives.

Methodology

Measures

➢ Dissimilarity to the anchor: Minkowski Distance (Price, Star rating, Location score). ➢ Error cost: number of individual + number of searched days.

Means-end Theory

➢ Every individual has an utility for an attribute - an individual will pick the offer that maximizes total utility.

➢ Adjust utility estimates, to best fit the observed choice.

Method

➢ Bayesian Inference – using Markov Chains.

➢ Increasing sampling bias with an extra metropolis step.

Results

Posterior distributions attribute utility

H1: The more dissimilar an option is to

the anchor, the less likely it is selected = rejected

➢ People lean towards, preferring offers similar to the anchor. But to much unexplained variance

Results

Minkowski distribution of heterogeneity for individual level variables

H2: Search importance weakens the

anchoring effect in online searches. = rejected

➢ Complete lack of an effect of search importance.

➢ Suggesting the confirmatory

hypothesis* is a better explanation for the mechanism of the

Implications

Additional finding

➢ higher error cost brings the utility for positioning closer to zero.

➢ Searches with higher error cost, are more indifferent towards positioning Theoretical

➢ Additional error cost, does not affect anchoring.

Methodological

Limitations Future research

› Inability to connect individuals over multiple searches.

› Some offer attributes are not in the data, for example: visual information or a pool.

› Lot of real-world effects, not controlled for.

› First positioned offer is not always the anchor.

› Testing the anchoring effect using an A/B test, include some outliers on the first position.

› Does error cost affect the utility of

Thank you.

Marketing Management | Marketing Intelligence Thesis Defence