Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a $1000 Laptop Anchor Makes You Buy a $600 Model
Transcript
- Lucas: You walk into Best Buy. You're looking for a laptop. Your budget is around six hundred dollars. You walk out with a one-thousand-dollar Surface Laptop. And you feel like you got a deal. Luna: That has happened to me. And I bet a lot of listeners know the feeling. But how does that happen? Lucas: It's the compromise effect — a specific flavor of price anchoring. Here's the setup: Microsoft's Surface lineup has three main models. The Surface Laptop starts around one thousand dollars. The Surface Pro is about fifteen hundred. And then there's the Surface Laptop Studio at two thousand. Luna: Right. So the two-thousand-dollar model is the anchor. It makes the fifteen hundred dollar Pro look reasonable, and the one-thousand-dollar Laptop look like a bargain. Lucas: Exactly. But here's the twist — Microsoft didn't always have that two-thousand-dollar anchor. A few years ago, the lineup topped out at around seventeen hundred. They introduced the Laptop Studio specifically to stretch the price ceiling. And suddenly, sales of the mid-tier Pro jumped. Luna: So the decoy isn't always the middle option. Sometimes the decoy is the premium one that nobody buys, but it reshapes the entire range. Lucas: That's the key insight. Retailers and manufacturers know that most people won't buy the most expensive model. But its presence changes how you perceive everything below it. Researchers call this 'extremeness aversion' — we tend to avoid the extremes and gravitate toward the middle. Luna: And the middle is where the margins are best, right? The one-thousand-dollar Surface Laptop probably has a higher margin percentage than the two-thousand-dollar Studio. Lucas: You nailed it. The anchor product exists to make the target product look like the smart, sensible choice. And it works across categories. Apple does the same thing with the MacBook Pro. The sixteen-inch model with maxed-out specs can hit seven thousand dollars. That makes the two-thousand-dollar fourteen-inch Pro feel almost economical. Luna: I've seen that in Apple stores. The giant display with the fully loaded MacBook Pro — it's not there because they expect to sell many of those. It's there to anchor your perception. Lucas: But there's a subtlety that most people miss. The anchor doesn't have to be a product you'd ever consider. It just has to exist in the same visual field. Studies show that simply placing a high-priced item next to a mid-priced item increases the likelihood of choosing the mid-priced one by over twenty percent. Luna: So retailers are literally designing shelf layouts and web pages to make sure you see the premium option first. On Amazon, the 'highly rated' or 'featured' product is often the highest-priced model, even if it's not the best seller. Lucas: Exactly. And this works online too. An e-commerce study from a few years ago tested two versions of a laptop product page. Version A showed only the six-hundred-dollar and one-thousand-dollar models. Version B added a fifteen hundred dollar model. In version B, the one-thousand-dollar model's selection rate jumped by thirty percent. Luna: Thirty percent. Just by adding a higher-priced decoy. No other changes. Lucas: That's the power of the compromise effect. And it's not just laptops. Think about cars. A dealership might show you a base model at thirty thousand, then a fully loaded version at fifty thousand. The mid-trim at forty thousand suddenly feels like the sweet spot. But the dealer's margin on that mid-trim might be twice as high as on the base. Luna: Let me ask a practical question. If a listener is shopping for a laptop next week, how do they avoid falling for this? Lucas: The simplest defense is to decide on your specifications before you look at prices. Write down your must-haves: processor, RAM, storage, screen size. Then filter for those specs. The anchor only works when you're comparing products holistically. If you're comparing only on price per spec, the anchor loses its power. Luna: That's good advice. But also, just be aware that the most expensive model on display is probably there to make the second most expensive look like a deal. Lucas: Exactly. And on that note — you know, a lot of the strategies we talk about on this show come from real-world marketing examples that listeners share with us. If these conversations have sparked something you've actually used, or you just enjoy the ad-free deep dives, a couple of dollars a month genuinely makes a difference. It's what keeps the show going. Luna: Yeah, it's true. Listeners have told us they've applied pricing tactics from earlier episodes at work, or just become savvier shoppers. And it's listener support that lets us keep doing this without ads. Lucas: So if you've gotten value from the show, you can head to buy me a coffee dot com slash fexingo. Even a small amount helps. And now, back to laptops. Luna: So we've talked about how the anchor appears in physical stores and on product pages. But what about when you're comparing across brands? Does the compromise effect work when the products are from different manufacturers? Lucas: It does, but it's trickier. If you're comparing a Dell, an HP, and a Lenovo, the anchor has to be a model that's clearly superior — otherwise, the comparison breaks down. Brands matter. But retailers like Best Buy use a technique called 'tiered display' where they group laptops by price range. The premium section anchors the mid-range section. Luna: So the anchor isn't always a single product. It can be a whole category. 'Premium laptops' anchors 'mid-range laptops.' Lucas: Exactly. And here's another angle: the anchor can be a service or a bundle. For example, Microsoft offers a Surface Laptop with a year of Microsoft 365 included. The standalone price of the software is about one hundred dollars. But when it's bundled, the laptop's price seems lower because you're mentally subtracting the value of the software. Luna: That's a classic bundling anchor. You're anchoring the laptop's price to the perceived value of the bundle. Lucas: Right. And it works because the anchor is in your mind — not just on the shelf. Once you've anchored to the bundle price, the standalone laptop seems more expensive by comparison, even though you're paying the same amount. Luna: So retailers are essentially using our own mental math against us. And it's not illegal or unethical — it's just psychology. But knowing about it can help you make better decisions. Lucas: Absolutely. And that's why we do this show. So next time you're shopping for a laptop, or a car, or even a coffee, take a moment to notice the anchor. Ask yourself: 'Would I still want this if the most expensive option weren't there?' Luna: That's a good litmus test. And if the answer is no, you might be falling for the compromise effect.