Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How Subscription Tiers Hide a High Anchor Price
Transcript
- Lucas: So we talk a lot on this show about how a single high price can anchor your perception. But today I want to get into something more subtle: the way a subscription tier hides that anchor in plain sight. And the perfect example is a meal-kit service I've been looking at. Their pricing page lists three options: the classic plan, the family plan, and the premium plan. The premium plan is nearly double the family plan, but it's not that much more food. Luna: That sounds like the classic decoy effect. But what's the actual price difference? I need the numbers. Lucas: Right. So the classic plan runs about sixty dollars a week for three meals for two people. The family plan is ninety dollars for four meals for four people. The premium plan is a hundred and fifty dollars for four meals for four people, but with 'premium ingredients'—which basically means you get the same chicken, but it's free-range and heirloom tomatoes instead of regular ones. Luna: So the premium is essentially the same food, but marked up seventy percent? That's a huge jump just for a label. Lucas: Exactly. And nobody buys the premium plan. I mean, maybe a few people do, but the company likely knows it's mostly a decoy. It makes the family plan look like a steal. You're getting more meals, more variety, and the price per person drops to about eleven dollars per serving, versus fifteen for the classic. So the family plan becomes the 'smart choice' even though it's the thing they want you to buy. Luna: But is that really an anchor, or just good value engineering? Because the premium plan is genuinely more expensive, so it does anchor the price scale upward. Lucas: It's both. The premium tier serves as the anchor that makes the middle tier feel reasonable. And it's a tactic that's everywhere. Think about software: a lot of SaaS companies have a basic plan, a pro plan, and an enterprise plan. The enterprise plan is often 'contact sales'—you don't even see a price. But the pro plan is priced at a point that feels justified because the enterprise tier is presumably way more expensive. Luna: And I've seen gyms do this too. They have a basic membership, a premium membership, and a 'platinum' that includes personal training and a smoothie bar. That platinum is there to make the premium feel like a reasonable middle ground. Lucas: Right. And the trick is that the middle tier is often the most profitable, or at least the one you're steering people toward. The anchor isn't there to be sold; it's there to elevate the perceived value of the thing just below it. And this works because of what economists call the 'compromise effect'—people tend to avoid extremes, so they pick the middle option. Luna: But does that always work? I remember reading about a meal-kit company that tried this and it backfired. Their premium tier was so ridiculously priced that people just left the site. Lucas: That's a real risk. If the anchor is too extreme, it can seem insulting or just confusing. You need that premium tier to be plausible. If it's a hundred and fifty dollars for what's obviously the same chicken, people might think, 'This is a rip-off', and they lose trust. But if it's a hundred and twenty dollars and includes grass-fed beef and organic salmon, it becomes a legitimate option for some, and an anchor for everyone else. Luna: So the anchor has to be real enough to be believable, but not so good that it actually steals sales from the middle tier. Lucas: Exactly. And that's the art. You want a few people to buy the premium, because that's pure margin, but the majority is going to go for the middle tier. And the middle tier is your cash cow. So it's not just about pricing; it's about perception and positioning. Luna: I think what's interesting is that this works even when we know it's happening. I mean, I've read about the decoy effect, and yet when I'm on a pricing page, I still feel the pull toward the middle option. Lucas: That's because the anchoring is so automatic. It's not a conscious decision—it's a heuristic our brain uses to simplify choices. And that's why it's so powerful. It works even for informed consumers. Luna: So if you're a business listening to this, how do you actually implement this? What's the practical takeaway? Lucas: The first step is to figure out which tier you want to be your best-seller. Then price the tier above it so that the best-seller feels like a good deal. But you have to ensure the anchor tier has real value—it can't just be a fake product. And then test it. See how changing the anchor price affects conversion rates. A/B test it. Luna: And what about the anchor tier being too close to the middle tier? Like, if it's only ten dollars more, does it still work? Lucas: If it's too close, it doesn't anchor anything. You need a meaningful gap. In the meal-kit example, the premium is sixty dollars more than the family plan. That's a big jump, and it makes the family plan look like a bargain. If it was only ten dollars more, you'd just pick the premium because it's barely more expensive for 'premium ingredients'. Luna: That makes sense. So the anchor needs to be high enough to shift perception, but not so high that it's off-putting. Lucas: Right. And there's a psychological sweet spot. Some research suggests the anchor should be about one and a half to two times the price of the target tier. That creates a strong contrast without seeming absurd. Luna: So that's the rule of thumb. Now, does this apply to B2B pricing as well? Because I imagine enterprise sales are a bit different. Lucas: It absolutely applies, but the anchoring often happens in a more subtle way. In B2B, you might have a 'custom' pricing option that serves as a placeholder. Or you might use a case study of a huge company that paid a lot of money, which anchors your smaller client's willingness to pay. The principle is the same: give people a reference point that makes your mid-tier offer look good. Luna: And that's something I've seen in marketing agencies too. They'll have a 'brand anchor' client that they use in pitches—showcasing a huge fee they charged, which makes the actual price seem reasonable. Lucas: Exactly. It's all about context. And the key is to be deliberate about it. Don't just throw three random price points together. Think about which one you want to sell and then build the anchor to support it. Luna: And speaking of supporting things, I know this show is supported by our listeners. If you're finding these pricing breakdowns useful, and you want to keep them coming ad-free, you can support us at buy me a coffee dot com slash fexingo. Lucas: Yeah, that really does help. Every little bit keeps the lights on here. But back to the meat of this— Lucas: We've been talking about the anchor as a single price point, but there's another layer: the order in which you present the tiers. If you show them from cheapest to most expensive, the anchor is at the top. But if you reverse it, the anchor shifts to the bottom. That changes the entire perception. Luna: I've never thought about that. So the default is usually cheapest first, but what happens if you show the premium first? Lucas: When you show the premium first, it becomes the anchor for everything below it. The classic plan looks like a bargain, and the family plan looks like a steal. The order of presentation can be as powerful as the price gap itself. Luna: So a company could keep the same prices but just reorder the tiers and get a different result? Lucas: Potentially, yes. And I've seen some companies exploit that by putting the most expensive tier on the left, and then the cheaper ones trail off to the right. It forces the eye to start at a high number and work its way down. That's why you see that pattern on so many pricing pages. Luna: It's almost like a visual anchor. The first thing you see is the high price, and everything else feels lower by comparison. Lucas: Right. And there's also the 'middle option bias' where people just pick the middle regardless. But the anchor reinforces that. You want the middle to feel like the goldilocks choice—not too cheap, not too expensive. Luna: So if you're a subscription business, are there any other tricks to make the middle tier more attractive? Lucas: One thing is to label it as 'most popular' or 'recommended'. That's a social proof nudge that works alongside the price anchoring. You're telling the customer, 'Other people have done the math, and this is the smart choice.' Luna: And that can push people who were on the fence toward the middle. But does that ever backfire? Like, if it's too obvious? Lucas: It can, if the labeling is too aggressive. Some customers are skeptical of 'recommended' badges they think are just marketing—which they are. But that skepticism can actually drive them to the premium tier if they see it as the 'real' choice. So you have to be careful. Luna: Right. So it's a delicate balance. Now, you mentioned testing. Is there a specific metric to track to see if your anchor is working? Lucas: The best metric is conversion rate per tier. If you're seeing the majority of your sales in the middle tier, your anchor is working. If people are fleeing to the cheapest option or abandoning the page, your anchor is probably too extreme. Luna: That's a clean way to think about it. So the anchor is essentially a tool to steer decision-making, and you can measure its effectiveness by where people actually end up. Lucas: And the beautiful thing is that you can iterate. Change the anchor price, change the order, change the labels, and see what moves the needle. It's a continuous optimization process. Luna: I think that's the takeaway: your pricing table is not a static list—it's a dynamic tool that influences psychology. And you can tune it. Lucas: Exactly. And the next time you're looking at a subscription pricing page—whether it's a meal kit, a streaming service, or a SaaS tool—take a moment to identify the anchor. Once you see it, you can't unsee it. Luna: And if you're running a business, start thinking about which tier you want to be the hero, and design your anchor to support it. Lucas: That's the real power of pricing strategy. It's not just about setting a number; it's about shaping the entire decision-making context.