Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a Single Price Anchors Your Entire Subscription Budget
Transcript
- Lucas: Luna, I want to talk about something that happens every time you open a subscription sign-up page, and I bet you've never noticed it. Luna: Okay, now I'm curious. What am I missing? Lucas: The order in which the prices are shown. Specifically, which price you see first. There's a reason the premium tier almost always appears on the left or at the top, and it's not because the company thinks you'll buy it. Luna: Right — it's an anchor. Set a high number first, and everything else looks cheaper by comparison. Lucas: Exactly. And it's not just about the specific product page. There's a broader effect: the first subscription price you ever encounter in a category — say, the first streaming service you signed up for — can anchor your willingness to pay for every similar service afterward. Luna: So if I started with Netflix at, what, $15.49 a month back in the day, then anything above that feels expensive, and anything below feels like a deal? Lucas: Precisely. There's a 2025 study from the Journal of Marketing Research that tested this directly. Researchers had participants evaluate a series of hypothetical subscription services — news, fitness, productivity software. The group that saw a $29.99 per month option first rated a $14.99 option as 'very affordable.' The group that saw a $9.99 option first rated that same $14.99 option as 'somewhat expensive.' Luna: Same absolute price, completely different perception. Just based on the order. Lucas: And it persisted. After the initial exposure, even when participants were shown other prices in random order, their first-anchor preference held. The brain doesn't re-anchor easily. Luna: So what does that mean for, say, a new streaming service launching today? They're competing against years of anchors set by Netflix, Hulu, Disney Plus. Lucas: They have two strategies. One is to undercut the dominant anchor — price so far below it that you create your own new anchor. Apple TV Plus did that at $6.99 a month when the going rate was around $12 to $15. It felt like a bargain. Luna: Right — because Netflix was the reference, and Apple came in at half the price. Lucas: The other strategy is to go premium and own the high end. Think of something like MasterClass at $180 a year, or the Calm app at $69.99 a year. They don't want to be compared to Netflix. They want to anchor a new category: 'premium self-improvement.' Luna: But isn't there a risk that consumers become savvy to this? I feel like people are starting to recognize when they're being anchored. Lucas: There's evidence that awareness helps, but it doesn't eliminate the effect. In the same JMR study, they told half the participants about anchoring beforehand, and those participants were slightly less influenced — but the anchor still shifted their ratings by about 15 percent. Luna: So even when you know it's happening, it still works. That's a little unsettling. Lucas: It's the automatic system in your brain. That's why companies invest so much in getting the first number right. Let me give you a specific example from the media industry. Luna: Please. Lucas: The Atlantic magazine, a few years back, tested two sign-up page designs. One showed the digital subscription at $49.99 per year first, then a print plus digital bundle at $79.99. The other showed the bundle first. The version with the $49.99 anchor led to 20 percent more digital-only sign-ups. But the version with the $79.99 anchor led to higher overall revenue because more people chose the bundle. Luna: So the anchor didn't just influence which tier you picked — it influenced whether you picked the cheaper option or the more expensive one. Lucas: Exactly. And that's the core insight. The anchor shapes not just your perception of value, but your actual choice architecture. If you want to sell the premium tier, you lead with an even higher decoy. But if you want volume, you lead with the mid-tier. Luna: I've seen this with software as a service, too. Like, the project management tool Monday.com shows you a 'Basic' plan at $8 per seat, then 'Standard' at $10, then 'Pro' at $16. But the Basic is so stripped down that nobody picks it. The anchor is actually the Pro price, making Standard look reasonable. Lucas: Right. That's a classic decoy-anchor combo. And it works because the comparison is so easy. You see three numbers, and your brain immediately does a relative evaluation. The middle option becomes the 'safe' choice. Luna: But what about services that only offer one price? Like, say, a small newsletter? There's no tier to anchor against. Lucas: Then they use an external anchor. They'll say something like 'Netflix is $15 a month, but our newsletter is only $5.' They borrow the anchor from a well-known service in a different category. Luna: Which is interesting because it implies that consumers have a general 'subscription budget' in their head, and each new service has to fit within that. Lucas: There's research on that too. A 2024 study from the University of Chicago found that the average consumer has a mental cap of around $50 to $60 per month for all digital subscriptions combined. So if you're the fifth service they're considering, you're fighting not just against other options but against that budget anchor. Luna: That would explain why bundling is so powerful. If you can get someone to pay $30 for a bundle of three services, the per-service cost feels negligible. Lucas: Exactly. And the anchor for the bundle itself is often set by the most expensive component. So if the bundle includes a premium service, the bundle price seems like a steal. Luna: So where does this leave the consumer? Is there any way to avoid being anchored? Lucas: The best defense is to establish your own anchor before you look at any prices. Decide, for a given category, what you think is a fair price. Then compare. But most people don't do that — they let the first number they see set the frame. Luna: It's like going to a car dealership. You're supposed to know the invoice price before you walk in, or else the sticker price becomes your anchor. Lucas: Perfect analogy. And the same principle applies to everything from salary negotiations to charity donations. Luna: Speaking of which, I think this idea of anchoring applies to how we think about supporting shows like this one. If you've gotten value from these pricing conversations, a couple of dollars a month is genuinely what keeps these going. Lucas: Yeah, it's a small number relative to the anchors we talk about — buy me a coffee dot com slash fexingo. It's a coffee's worth. Honestly, it makes a real difference in keeping the podcast ad-free and independent. Luna: We don't have a premium tier or a decoy. Just a simple 'if you find it useful, chip in.' And we appreciate everyone who does. Lucas: So back to the anchor effect — one thing I find fascinating is that anchors work even when they're completely arbitrary. In a classic study, people were asked to write down the last two digits of their Social Security number, then bid on items like wine and chocolates. Those with higher digits bid up to 300 percent more. Luna: That's the famous 'arbitrary anchor' study. Dan Ariely, right? Lucas: Yes. And it shows that the anchor doesn't even have to be relevant. It just has to be a number that enters your working memory before you make a decision. Luna: So if a subscription service can get you to think about a high number — any high number — right before you see their price, they can boost willingness to pay. Lucas: Exactly. Some websites do this by showing a 'regular price' with a strikethrough, even if the product was never actually sold at that price. That's a deceptive practice, but it's common. Luna: And it's probably why regulators are starting to crack down on fake reference pricing. The FTC has been looking at this. Lucas: Right. Because anchors can be manipulative when they're based on false information. But when used ethically — like honestly showing a premium tier first — it's just a way to help customers evaluate value. Luna: I think the key is whether the anchor is real. If the premium tier genuinely exists and has real features, then it's a legitimate comparison. If it's a phantom tier, that's manipulation. Lucas: Agreed. And for marketers, the takeaway is: choose your anchor carefully. It will define the entire conversation with your customer. Luna: And for consumers: maybe look at the second price first. Lucas: Or the third. But know that even that second price is influenced by the first. The anchor effect is one of the most robust findings in behavioral economics, and it's not going away. Luna: So the next time I see a pricing page, I'm going to pause and ask myself: what's the anchor here? Lucas: That's the first step. And if you catch yourself thinking 'that's a steal,' just remember — you might be comparing against a number someone else chose for you.