Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a $1,000 Mattress Anchor Makes You Buy the $3,000 Model
Transcript
- Lucas: You walk into a mattress store — maybe it's a Sleep Number, a Tempur-Pedic, a local showroom — and right there in the center is a mattress with a price tag that makes you blink. Luna: Like, I remember seeing one at a showroom a few years back — $6,000 for a king-size, and I thought, who buys that? Lucas: Exactly. And that's the question that anchors everything. That $6,000 mattress might not sell many units — but its real job isn't to sell. It's to make the $3,000 mattress next to it look reasonable. Luna: So the expensive one is the decoy. Lucas: It's the classic decoy effect, and mattress showrooms are one of the purest places to see it in the wild. The same psychology drives how we choose a laptop, a streaming plan, even a bottle of wine. And if these marketing conversations have sparked something you've actually used — maybe you've noticed a decoy in an ad or caught yourself reaching for the mid-tier option — that's exactly the kind of thing that keeps this show going. Luna: Yeah, and honestly, a couple of dollars a month from listeners is what lets us keep doing these deep dives without any ads. It's at buy me a coffee dot com slash fexingo. Lucas: And we mean it — no pressure, no perks, just knowing the show stays ad-free and independent. So back to the mattress. Let's look at the numbers. Luna: Walk me through the setup. Lucas: Imagine a retailer that offers three models: a basic twin for $1,500, a mid-tier queen for $3,000, and a luxury king for $5,000. The $5,000 one has features — cooling gel, adjustable base, maybe a 10-year warranty — but it's priced way above the market average for similar specs. Luna: And the queen is the one they want to sell. Lucas: Right. They're not trying to move the king. They're using it to shift your reference point. Without the king, you compare the $1,500 twin to the $3,000 queen — that's a $1,500 gap, and the queen seems expensive. But add the $5,000 king, and suddenly the queen is the 'moderate' option. It's only $2,000 more than the twin, but $2,000 less than the king. It becomes the compromise. Luna: So the decoy changes the entire frame. I've read studies that show when you remove the top-tier option, sales of the mid-tier drop dramatically. Lucas: There's a 2025 study from the Journal of Consumer Research that tested exactly this in a simulated furniture store. When the $5,000 model was present, 62% of participants chose the $3,000 model. When the decoy was removed, only 28% chose it — most went for the $1,500 option. That's a 34-point swing, just from having an expensive product on display. Luna: That's massive. And it's not just mattresses — I see it all the time in software pricing. The 'Enterprise' tier that's $500 a month, when the 'Pro' is $200 and 'Basic' is $50. Lucas: Exactly. Adobe Creative Cloud does this. They have a single-app plan for $22 a month, a full suite for $55, and a 'Students and Teachers' plan for $20 — but the student plan is only available if you verify academic status. The decoy isn't the most expensive; it's the standard $55 plan. It makes the $22 plan feel like a bargain, even though Adobe's cost to serve either is nearly identical. Luna: And the student plan is the loss leader to get you hooked. Lucas: Yes. But the mattress example is cleaner because the physical product is on the floor. You can touch the $5,000 mattress. You feel the fabric, test the firmness, lie down. That sensory experience amplifies the anchoring — because the decoy feels real, not abstract. Luna: So the showroom is a controlled environment. They can position the decoy right at the entrance, with the most dramatic lighting, to set the anchor before you even see the other options. Lucas: Exactly. I visited a Sleep Number store last month, and the first thing you see when you walk in is the i8 model — their top-tier, starting around $4,500 for a queen. It's on a pedestal, with a tablet showing all its smart features. Then, against the wall, are the more 'affordable' models — the c2, the c4 — priced $1,500 to $2,500. You walk past the $4,500 one, and suddenly the $2,200 one feels reasonable. Luna: And they don't even need to sell the i8. It's just the anchor. Lucas: Right. And the interesting thing is, this works even when customers know about it. In a 2023 study by Dan Ariely's lab, they told participants about the decoy effect before presenting them with subscription choices — and the effect still held. Knowledge reduces it by about 15%, but 85% of the anchoring bias remains. Luna: So being aware doesn't fully protect you. That's a bit unsettling. But it also means retailers have a strong incentive to keep using this tactic. Lucas: Absolutely. And they're getting more sophisticated. Some mattress brands now use 'phantom decoys' — products that aren't actually for sale but appear on the website or in the showroom. They list a 'limited edition' model with a price, but it's 'out of stock' or 'coming soon.' Its only job is to anchor your perception. Luna: That almost feels deceptive. Is that legal? Lucas: It's a gray area. The Federal Trade Commission has guidelines against deceptive pricing, but as long as the phantom decoy isn't misrepresenting its features — and they're not claiming it's available — it's usually allowed. The key is that the anchor price must be genuine for a product that exists or existed. Some retailers get around it by listing a past price, like 'was $5,000, now $3,000,' even if they never sold many at $5,000. Luna: So the anchor doesn't even have to be real — it just has to seem real. Lucas: Exactly. And that's why the mattress industry is such a perfect case study. They can create a high-end model with a high price, keep it on the floor, and never expect to sell it. The cost of that one display unit is the advertising spend for the entire line. Luna: Let me ask you — what's the counter-strategy for a consumer? How do you avoid falling for the decoy? Lucas: Two things. First, decide your budget before you walk in. If you've predetermined you'll spend $2,000, the $3,000 queen is off the table regardless of the $5,000 king. Second, compare across stores. If you see three tiers at one store, check another retailer that only sells two — the decoy disappears, and your reference resets. Luna: So it's about anchoring yourself to your own number, not the store's. Lucas: Yes. And here's a practical tip: when you're looking at a three-tier menu — whether it's mattresses, software, or even a wine list — assume the middle option is the one the seller wants you to buy. Then ask yourself: do I actually need the features that make it 'mid,' or would the basic option serve me fine? Often the answer is yes. Luna: I did that with a SaaS subscription last month. I was about to choose the $49 plan, but I stepped back and realized the $19 plan had everything I needed. I saved $30 a month just by ignoring the decoy. Lucas: That's exactly it. And the savings compound. Over a year, that's $360. The decoy effect is powerful, but once you see it, you can turn it against itself. Luna: So the mattress decoy is really just the most visible example of a strategy that's everywhere. It's in our phones, our streaming services, our grocery store. Lucas: And now that you've heard the numbers — 62% choosing mid-tier with the decoy versus 28% without — you'll probably start noticing it in the wild. The next time you see three price points, ask yourself: which one is the decoy? Luna: I already am. And I'm pretty sure my next mattress will be the $1,500 one — no decoy needed. Lucas: And you'll sleep just as well, knowing you paid for the mattress, not the anchor.