Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How Your Brain Defaults to the First Price You See
Transcript
- Lucas: If I spin a wheel of fortune and it lands on 65, then ask you what percentage of African nations are in the UN, you will guess a higher number than if the wheel had landed on 10. Luna: That's the Kahneman and Tversky anchoring experiment from 1974. The wheel was rigged, by the way — it only landed on 10 or 65. Lucas: Right. And the median guess from the group that saw 65 was 45 percent. The group that saw 10 guessed 25 percent. A completely random number shifted the answer by 20 percentage points. Luna: So the first number you see — even if it's totally irrelevant — becomes a reference point your brain can't shake. Lucas: Exactly. And that's the mechanism behind almost every pricing page on the internet. The first price anchors your willingness to pay, and everything after it is a comparison. Luna: Give me a concrete example that isn't the classic $2,000 watch next to a $10,000 watch. Lucas: Sure. Take a direct to consumer mattress company. They list a queen-size mattress at $1,999, then immediately show a strikethrough with a sale price of $999. That $1,999 never existed as a real transaction — it's a pure anchor. But the $999 feels like a deal because your brain compares it to $1,999, not to the $600 wholesale cost. Luna: And if they listed it at $999 first, with no anchor, you'd hesitate. You'd wonder if it's worth that much. Lucas: Exactly. The anchor changes the question from 'Is this worth $999?' to 'How much am I saving?' And saving feels good. Luna: But does that still work in 2026? I can open a second tab and see the same mattress at a competitor for $899. The anchor is gone. Lucas: Great question. A study in the Journal of Marketing Research from this past April actually looked at that. They found that anchoring still lifts conversion by 12 to 18 percent, even when shoppers have access to competitors' prices in another tab. Luna: Huh. So the anchor kind of sticks in your head even when you know it's inflated. Lucas: It does. The researchers call it 'selective attention' — once the anchor is set, you tend to search for information that confirms it's reasonable, and you downplay contradictory data. So if the competitor is $899, you might think, 'Well, maybe they use lower-quality foam.' Luna: That's a pretty powerful bias. But there's a flip side, right? If the anchor is too extreme, it backfires. Lucas: Yes. The same study found that if the anchor is more than about 60 percent above the typical market price, people reject it entirely. They think 'This is a scam' and they leave. So the anchor has to be plausible. Luna: Plausible but inflated. Like the mattress at $1,999 — high, but not laughably high for a premium mattress. Lucas: Right. Another example is luxury hotels. A hotel in New York lists a penthouse suite at $950 per night on the booking page, and then shows the standard room at $350. The $950 is the anchor. The $350 feels like a reasonable compromise. Luna: And if they listed the standard room first at $350, you'd think 'That's expensive for a standard room.' Lucas: Exactly. The order of presentation matters enormously. That's why you almost never see a 'starting from' price at the top of a pricing page — you see the premium tier first. Luna: Even subscription services do this. I saw a SaaS tool recently: the Enterprise plan was listed first at $299 per month, then the Team plan at $99, then the Individual at $19. Lucas: Classic anchoring. The $299 makes $99 feel like a bargain, and $19 feels almost free. But if they listed $19 first, you'd think 'Twenty bucks a month for a note-taking app? No thanks.' Luna: So the anchor doesn't have to be the product you expect anyone to buy. It just has to be there. Lucas: Exactly. Kahneman and Tversky called it 'the anchoring and adjustment heuristic.' You anchor on a number, then adjust insufficiently. The adjustment is almost always too small. Luna: I want to push back a bit. Doesn't this assume the customer is paying full attention? What about people who scroll right past the first price? Lucas: The effect is subconscious. You don't have to consciously read the $1,999 for it to anchor you. In the original experiment, they told participants the wheel was rigged and irrelevant — and it still affected their answers. The brain processes it automatically. Luna: So even if you know about anchoring, you can't really avoid it? Lucas: You can mitigate it by deliberately reframing. For example, if you're shopping for a mattress, you could think in terms of cost-per-night: $999 divided by 2,000 nights is 50 cents a night. That's a different anchor. But most people don't do that mental math. Luna: So the practical takeaway for a marketer is: put your highest-priced option first, make it plausible, and let it do the work. Lucas: Yes. But also test it. The same study showed that the optimal anchor varies by category. For a low-consideration purchase like a pack of gum, anchoring barely moves the needle. For high-consideration purchases — mattresses, software, hotel rooms — it's very powerful. Luna: What about services? Like consulting or freelancing. Lucas: Even more so, because there's no transparent market price. A consultant can anchor with a $500-per-hour rate, then offer a package at $250 per hour. The client feels like they're getting a deal, even if the consultant's normal rate is $200. Luna: I've seen that in agency proposals. They list the 'strategic retainer' at $15,000 a month, then the 'growth retainer' at $8,000. Nine times out of ten, the client picks the middle one. Lucas: That's the decoy effect merging with anchoring. The $15,000 makes $8,000 feel reasonable, even if the client's budget was $5,000. Luna: Okay, so anchoring is real, it's powerful, and it works even when the anchor is obviously inflated. But there must be ethical boundaries. Lucas: There are. The FTC has gone after companies that use fake list prices — anchors that were never actually charged. If you claim a $1,999 price but never sold a single mattress at that price, that's deceptive. But if you have a premium tier that a small number of people actually buy, it's legitimate. Luna: So the anchor has to be a real price, even if it's rarely chosen. Lucas: Exactly. And that's actually good for customers too, because the anchor product needs to exist and deliver value. Otherwise you're just tricking people. Luna: Alright, let's bring it back to a concrete tip. If I'm a small business owner setting up my first pricing page, what should I do Monday morning? Lucas: Put your most expensive option first. Even if you think nobody will buy it. Make sure it's a real product with real features, and price it at the high end of plausibility. Then watch how the middle tier performs. Luna: And if you only have one product? Lucas: Create a second tier. It doesn't have to be complex. A 'premium' version with one extra feature, priced 40 percent higher. That one tier can act as an anchor and lift conversion on your main product. Luna: That's exactly what we've done on the pricing marketing podcast, by the way — we have a listener-supported model where people can chip in a few dollars. And honestly, a couple of bucks a month is genuinely what keeps these shows going. Lucas: Yeah, that's the same principle in reverse — you're setting a low anchor for participation. If you've gotten something out of these conversations, buy me a coffee dot com slash fexingo. It makes a real difference. Luna: Totally. And it keeps the show ad-free, which I think we all appreciate. Alright, back to anchoring. Lucas: One more nuance: the timing of the anchor matters. If you show the high price too early — before the customer understands the value — it can scare them off. You need to build value first, then anchor. Luna: So the sequence is: value proposition, then anchor, then price. Lucas: Yes. Apple does this brilliantly. They spend the first 20 minutes of a keynote talking about the technology, the design, the ecosystem. Then they show the price. By then, the anchor has been set in your mind by the value story. Luna: And the price feels justified. Even if it's $1,000 for a phone. Lucas: Exactly. And that's the final lesson: anchoring is not just about numbers — it's about context. The first number matters, but the story around it matters just as much. Luna: Good place to leave it. Next episode, I want to talk about the flip side: how to de-anchor yourself as a buyer. Lucas: That's a great topic. Until next time.