Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a Single Premium Price Makes Your Bundle Feel Like a Deal
Transcript
- Lucas: So Luna, I was looking at a software company's pricing page the other day, and they had a basic plan at nineteen dollars a month, a professional plan at forty-nine, and then this enterprise plan at, well, 'contact us.' Now, that 'contact us' is doing a lot of heavy lifting. Luna: Right, because there's no number, but you still know it's going to be a lot. It's like the invisible anchor. Lucas: Exactly. That's the classic phantom anchor. But I want to talk about something slightly different today, which is when you take that anchor and you attach it to a bundle. The whole bundle suddenly looks like a bargain, even if it's still expensive. Luna: So you're saying the anchor isn't just for a single product, it's for the whole basket? Lucas: Precisely. Let me give you a concrete example. There's a meal-kit company that sells a family bundle for thirty dollars. On its own, thirty dollars feels like a splurge for dinner. But they also have a premium bundle at fifty dollars that includes organic ingredients and a fancier recipe. Now, the thirty-dollar bundle doesn't look so bad. Luna: Right, because the fifty-dollar one is right there. It's the same principle as the two-thousand-dollar mattress making the six-hundred-dollar bed seem reasonable. Lucas: Yes, but the bundle case has this interesting twist. When you anchor a bundle, you're not just making one product look good, you're making a whole collection of items feel like a steal. The brain compares the bundle price to the anchor, not to the sum of its parts. Luna: And that's why so many 'value meals' at fast-food restaurants work. You see the big combo for eleven dollars, and the double cheeseburger alone is six. Suddenly, adding fries and a drink feels like you're saving money. Lucas: You've hit on something important. The anchor doesn't have to be a product that anyone actually buys. It just has to exist on the menu. In fact, the best anchor is often the one that sells the least, because its only job is to make the next tier down look like the sensible choice. Luna: So you're saying some companies put a premium product out there knowing it'll never sell, just to lift the prices of everything else? Lucas: That's a bit cynical, but honestly, yes. And it works. I remember reading about a wine list that had a bottle at two hundred dollars, and the sommelier said they'd never sold one. But it made the forty-dollar bottles look approachable, and the ninety-dollar ones look like a real treat. Luna: And I bet the restaurant made more money on the ninety-dollar bottles because of that two-hundred-dollar anchor. Lucas: Exactly. Now, let's bring this to bundles specifically. There's a really interesting study from a few years back, and I'm paraphrasing, but researchers looked at how people valued a bundle of three products. When they showed a high-priced version of one of those products before the bundle, people thought the bundle was a better deal. But when they showed the same products individually, the anchor had no effect. Luna: So the anchor works because it's inside the bundle itself. It's not just about the price of the bundle, it's about the composition. Lucas: Right. That's why so many software companies do the 'good, better, best' thing. You've got the basic tier, the pro tier, and the enterprise tier. The enterprise tier is the anchor. It's often priced so high that the pro tier, which is the one they actually want to sell, looks like a no-brainer. Luna: But isn't there a risk that people just go for the cheapest option anyway? Lucas: Sometimes, but that's where the decoy effect kicks in. If you put a middle tier that's only five dollars more than the basic, but it includes twice the features, people will pay the extra five dollars. The anchor at the top makes that middle tier seem even more worthwhile. Luna: So the real skill is designing the price ladder so each step up feels like a small jump in price but a big jump in value. Lucas: That's the art. And it's not just about software or wine. Think about any electronics bundle. A camera body with a kit lens is nine hundred dollars. Add a telephoto lens for three hundred, and a bag and memory card for a hundred, and you're at thirteen hundred. But if they show you the professional package at two thousand dollars with all the high-end gear, suddenly thirteen hundred feels like you're getting a bargain. Luna: And the high-end package might not even be what most people buy, but it's the reason the mid-tier bundle sells so well. Lucas: Exactly. So here's a question for you, Luna. If you were designing a pricing page for a subscription box, how would you create the anchor? Luna: I'd probably add a 'premium' tier with a lot of extra stuff, and price it at, like, double the standard tier. Even if nobody picks it, it makes the standard tier feel like the safe, smart choice. Lucas: And you'd be spot on. But there's a counterintuitive twist I want to bring up. Sometimes the anchor doesn't have to be the highest price. It can be the lowest. Luna: Wait, how does that work? A low price as an anchor? Lucas: Think about it. If you're selling a bundle of online courses, and you have a single course for forty dollars, that becomes the anchor. Then the full library for a hundred and fifty dollars doesn't seem that bad, because you're getting four courses at the price of roughly three and a half. The single course anchors the value of each item. Luna: So the anchor is about what you compare against, not just what's at the top of the list. Lucas: Right. And that's why I love the bundle as a pricing tool. It gives you a lot of flexibility to position your anchor wherever you want. You can anchor low to justify a bundle, or you can anchor high to make the bundle look like a steal. Luna: And there's a subtlety there though. If you anchor too high, you might scare people away from the whole category. If the premium bundle is two hundred dollars, some people might not even look at the thirty-dollar one. Lucas: That's a real risk. The anchor has to be plausible. It has to be within the realm of what someone might consider paying, even if they won't. Otherwise, they just think the whole company is out of touch. Luna: So how do you know if your anchor is too high or just right? Lucas: There's a simple test. Take your most expensive bundle and ask yourself, 'Does it make the next one down look more attractive?' If yes, you're good. If it makes people laugh and walk away, it's too high. Also, look at your sales data. If nobody even clicks on the premium tier, it might be too far off. Luna: And if people click on it but don't buy, that's actually a good sign. It means the anchor is doing its job. Lucas: Exactly. And that's something I've seen in a lot of SaaS companies. The enterprise plan gets a few clicks, but almost no one signs up for it. The sales team knows nobody will pick it, but it's what makes the pro plan convert. Luna: It's like the product that never sells, but it's the reason everything else sells. Lucas: Yes. And there's a name for that. It's called the 'decoy' or 'phantom' product. And it's a legitimate part of pricing strategy, as long as you're not misleading anyone. The product is real, it's just not positioned to sell. Luna: And you have to make sure the premium bundle actually delivers what it promises, otherwise you'll get bad reviews and it'll hurt your brand. Lucas: Absolutely. You can't just create a fake tier. It has to be a real offer, even if it's not the most popular one. That's what keeps it ethical. Luna: So before we wrap up, I'm curious. Has this changed how you look at your own purchases? Do you catch yourself anchoring? Lucas: All the time. Once you see it, you can't unsee it. I was at a store the other day, and they had a three-pack of socks for twelve dollars, and a single pair for five. I almost bought the three-pack because it felt like a deal, even though I only needed one pair. That's the anchor working on me. Luna: And that's exactly what this podcast is about, understanding those little nudges so you can use them or resist them. Lucas: And if you've been enjoying these conversations and they've given you some ideas you've actually tried in your own business, we'd love it if you'd consider supporting the show. It's what keeps this podcast free and ad-free. And it's as easy as buying a coffee. You can do that at buy me a coffee dot com slash fexingo. Every little bit helps us keep doing this. Luna: Yeah, we really appreciate it. And it genuinely helps us spend more time on research and episodes like this one. Lucas: So, back to the anchor. One more thing I want to mention. The anchor doesn't just affect the bundle's price perception, it also affects the perceived quality. If you have a premium bundle at a high price, people assume the lower-priced bundle is still pretty good, because it's associated with the same brand. Luna: That's the halo effect, right? The premium tier casts a glow over the whole product line. Lucas: Exactly. So the next time you're looking at your pricing page, ask yourself, 'What is my anchor?' And if you don't have one, consider adding a top tier that's just a little out of reach. It might be the most profitable thing you do. Luna: And if you're a listener, we'd love to hear your own anchor stories. What's the most expensive thing on your menu, and does it ever sell? Lucas: That's a good question to leave you with. Thanks for listening, and we'll catch you next time.