Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How Product Tiers Create a Natural Price Anchor
Transcript
- Lucas: I want to talk about something that seems obvious but gets messed up all the time: how to design product tiers so they actually anchor the buyer's decision. Luna: Because just slapping three price points on a page doesn't automatically make people pick the middle one. Lucas: Exactly. I've been looking at a mid-market SaaS company — let's call them WorkflowPro — that switched from a single $49 per month plan to a three-tier structure: Basic at $29, Pro at $79, and Enterprise with a custom quote. Luna: Right, the classic good-better-best model. But what happened? Lucas: Before the change, they had about 4,000 customers paying $49. After the tiers went live, total customer count stayed flat for six months. But average revenue per user jumped from $49 to $63, because almost 40 percent of new signups chose Pro at $79. Luna: So the $29 Basic wasn't the volume driver. It was the anchor that made $79 feel reasonable. Lucas: That's the core mechanism. But here's the detail most people miss: the tiers have to reflect genuine feature differences, not arbitrary price gaps. WorkflowPro's Basic had only core project management — no reporting, no integrations. Pro added reporting, API access, and 50 user seats. Enterprise added SSO, audit logs, and dedicated support. Luna: So the jump from Basic to Pro felt like real value. You're not just paying more for the same thing with a different label. Lucas: Right. And the Enterprise tier — even though most customers never request a custom quote — does something important. It creates an upper anchor that makes Pro look like a bargain in comparison. Luna: It's the decoy effect, but with a twist. Instead of a separate decoy nobody buys, the Enterprise tier is an aspirational anchor. Lucas: Yeah. And that's why you see this structure everywhere — from Slack to Mailchimp to Zoom. The middle tier is almost always the sweet spot, but only if the top tier is priced high enough to stretch the perceived range. Luna: What's the magic ratio? I've heard 1.5x or 2x between tiers. Lucas: There's no universal number, but the WorkflowPro case shows a gap of about 2.7x between Basic and Pro, and then Enterprise is typically double Pro again — so $79 to $150-plus per seat. That creates a wide enough spread that Pro feels like the safe, smart choice. Luna: And the custom quote removes the sticker shock of seeing a huge number on the page. You have to talk to sales, so the price is fuzzy. Lucas: Exactly. It's a psychological buffer. Now, one thing that really matters is how you present the tiers on the page. The order — left to right or top to bottom — creates a reading pattern. In Western markets, people scan left to right, so putting Basic first establishes a low anchor, then Pro looks like a clear upgrade, and Enterprise at the end is the ceiling. Luna: But I've seen some companies put the middle tier first, especially in mobile interfaces. Lucas: That can work too, but it's riskier. If the first price someone sees is $79, that becomes the anchor. Then when they see $29, it feels like a discount product — and they might question its quality. There's research from the Journal of Marketing Research that found that presenting the highest price first increases the perceived value of lower tiers, but it also reduces the likelihood of choosing the highest option. Luna: So order matters based on what you want to sell. If you want to push the middle, you'd start with the low anchor. Lucas: Right. WorkflowPro's order was Basic, Pro, Enterprise — and Pro did the heavy lifting. But if they had wanted to maximize Enterprise conversions, they might have put Enterprise first. Luna: Let's talk about a common mistake I see: companies that underprice their top tier. If Enterprise is only $99 when Pro is $79, the anchor effect collapses. Lucas: That's a huge problem. The top tier needs to be genuinely premium — not just in price but in features. If the gap is too narrow, the middle tier doesn't look like a deal. It looks like you're being nickel and dimed. Luna: So you need at least a 50 percent jump from middle to top, ideally more. Lucas: I'd say 80 to 100 percent is safer. But you also have to make sure the top tier has features that matter to a real segment. If nobody buys it, it's a decoy — and that's fine, as long as it affects the perception of the next tier down. Luna: A lot of this reminds me of the classic Economist subscription decoy study. People preferred the web-only subscription at $59 when a print plus web option was $125, but when they added a print-only option at $125, the web-only became less attractive. Lucas: Yeah, that's the Dan Ariely study. It's a perfect illustration of how an asymmetrically dominated option — the print-only at the same price as print plus web — makes the combined option seem superior. That's what WorkflowPro's Enterprise tier does. It doesn't have to dominate Pro; it just has to be expensive enough and feature-rich enough that Pro feels well-priced. Luna: And the features have to be additive, not overlapping. If Basic has 10 projects and Pro has unlimited, that's a clear value jump. But if Basic has 10, Pro has 15, and Enterprise has 20, the increments are too small to matter. Lucas: That's a mistake I see all the time — feature metering that's too granular. You want the tiers to represent distinct use cases, not just different quantities of the same thing. WorkflowPro's Basic is for a single team, Pro is for multiple teams, Enterprise is for the whole organization. That narrative makes the price difference feel inevitable. Luna: And that's also why you should avoid putting a feature in the middle tier that's really only relevant for large companies. It dilutes the value proposition. Lucas: Absolutely. Now, one more angle: how do you test these tiers? WorkflowPro ran a five-month A/B test before rolling out the new pricing. They tested three variations of the tier layout — one with the numbers we discussed, one with a $69 Pro instead of $79, and one with a $35 Basic. Luna: And the $79 Pro won, because it was far enough from Basic to feel like a real step up. Lucas: Exactly. The $69 version actually had a lower conversion rate to Pro, because the price gap was smaller — only 40 percent above Basic — so it didn't feel like a significant upgrade. And the $35 Basic? That made Pro look too expensive by comparison, because the jump was more than double. Luna: So there's a Goldilocks zone: not too close, not too far. Lucas: Yeah. And the testing also revealed something about customer psychology. When they surveyed new Pro subscribers, 78 percent said they considered Basic but decided the extra features were worth the price. Only 12 percent said they considered Enterprise. So the anchor was working exactly as intended — Basic was the reference point, Pro was the value choice, and Enterprise was the aspirational ceiling. Luna: That's a strong confirmation. It's not just that Pro sold; it's that customers explicitly acknowledged the trade-off. Lucas: Right. And this is why I think the best pricing tiers are designed to tell a story. Basic says 'start here.' Pro says 'this is where professionals live.' Enterprise says 'you've outgrown us? Talk to us.' Luna: It's almost like a journey map. And the price anchors guide that journey. Lucas: If these marketing conversations have sparked something you've actually used at work, I want to mention something. We deliberately don't run ads on these episodes. No sponsors, no mid-roll interruptions. That's a choice we make because we think the topic deserves focused attention. If you value that approach and want to support it, there's a simple way. It's at buy me a coffee dot com slash fexingo. No pressure, just a way to keep this independent. Anyway, back to the tiers. Luna: And I think we should also talk about what happens after you launch the tiers. The WorkflowPro team noticed something in the first month: a spike in requests for a custom plan between Basic and Pro. Lucas: That's a classic signal. When customers ask for a middle tier between your middle tier, it often means your feature gaps are too wide. WorkflowPro responded by adding a 'Pro Lite' option — at $49 per month — that had reporting but not API access. But they tested it and found that it cannibalized Pro sales without increasing total revenue. So they pulled it after two months. Luna: Interesting. So even if customers ask for it, it might not be the right move. The three-tier structure is a delicate equilibrium. Lucas: It really is. And that's why I think the most successful pricing tier designs are the ones that resist the urge to add more tiers. Four or five tiers usually dilute the anchor effect. The middle option becomes less distinct. Luna: Stick with three, test the price gaps, and let the top tier do its work as a ceiling. Lucas: Exactly. So to wrap up: if you're designing product tiers, think about the anchor first. Which price do you want customers to compare against? Then build features that make the jump feel justified. And test — not just the prices, but the order and the feature distribution. One last note: WorkflowPro's revenue per customer is still climbing. Eighteen months after the tier launch, ARPU hit $71. The anchoring effect didn't fade. Luna: Because the anchor was built into the structure, not just the initial price display. Lucas: Right. And that's the takeaway. A well-designed tier is a permanent anchor.