Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a $200 Wine Glass Made a $40 One Feel Cheap
Transcript
- Lucas: So there's a famous wine list experiment where a restaurant added a two-hundred-dollar bottle to its menu, and suddenly the forty-dollar bottle started flying off the shelves. Luna: The two-hundred-dollar bottle didn't sell, right? It just made the forty-dollar one look reasonable. Lucas: Exactly. And that's the 'anchor within the anchor'—a premium decoy that exists not to sell, but to make the real target feel like a deal. It's a cousin of the decoy effect we've talked about, but the mechanism is slightly different. Luna: How so? Lucas: The classic decoy makes a specific option more attractive by comparison. The premium anchor doesn't need to be a realistic choice at all. It just shifts the entire price scale upward. You see it everywhere—from electronics to software tiers. Luna: I remember reading about Williams-Sonoma and their breadmaker. They had a model at two hundred seventy-nine dollars that wasn't selling, so they added a four-hundred-dollar version. Then the two-seventy-nine one became the popular pick. Lucas: That's the textbook case. The expensive model wasn't necessarily meant to sell—it was there to make the mid-tier feel like the sensible choice. And it worked spectacularly. Luna: But does that only work when the consumer doesn't know the anchor is there? I feel like once you're aware of it, you'd see through it. Lucas: You'd think so, but studies show anchoring works even when people are explicitly told it's a tactic. It's one of those cognitive biases that's hard to override. There's a classic study where real estate agents were shown a listing with a ridiculously high asking price, and even though they knew it was inflated, it still skewed their appraisals. Luna: So it's almost like your brain can't help but use that number as a reference point. Lucas: Right. And it's not just about making things seem cheaper. It can also make you spend more overall. Take Apple's storage tiers—you might think the base model is too small, the middle one is 'just right,' and the top one is for power users. But the top tier, at a much higher price, anchors the middle tier as the 'value' pick. People end up buying the middle one when they might have been fine with the base. Luna: So the anchor is there to nudge you up the ladder. Lucas: Exactly. And this works in SaaS too. You see it all the time with three-tier pricing. The premium tier is often packed with features most people won't use, but it makes the 'Pro' tier look like a steal. Luna: I've definitely been suckered into that. I signed up for a project management tool because the top tier was ten dollars more, and it came with unlimited integrations. I never used them. Lucas: That's the anchor doing its job. Now, there's a fascinating twist with this 'anchor within the anchor' idea. It's not just about adding a higher-priced version. Sometimes you can use a small, overpriced item to make a big-ticket purchase feel reasonable. I'm thinking of that car dealer we talked about in episode one twenty-nine, but there's an even cleaner example. Luna: What's that? Lucas: Think about a restaurant that offers a twelve-dollar glass of wine. That might anchor your whole meal budget. But what about a fifteen-dollar side of asparagus? It makes the thirty-dollar steak seem like the better value. Luna: That's a real thing. I've seen menus where the sides are almost as expensive as the mains, and suddenly the main doesn't seem so pricey. Lucas: It's a clever use of relative value. And it's not just restaurants. Software companies do it with add-ons. Paying an extra fifty dollars a year for a few more gigabytes? The annual plan at two hundred dollars suddenly feels like the smart choice. Luna: So the anchor doesn't have to be a product at all. It can be a price point you see somewhere else. Lucas: That's a great point. Anchors are all around us. Consider the airline industry. They advertise a low base fare, but then you see the checked bag fee, the seat selection fee, the carry-on fee. That base fare is the anchor. It makes all those add-ons feel like small increments, but they add up. A study from a few years back showed that the average domestic flight had over fifty dollars in fees beyond the ticket price. Luna: And those fees are presented one at a time, so you don't feel the total until checkout. Lucas: Right. And that's why it's so effective. Now, there's a dark side to this. If you push the anchor too far, it can backfire. JCPenney tried to simplify pricing by eliminating coupons and sales, but they also removed the anchor of a 'regular' price. Customers didn't see a 'deal' anymore, so they stopped buying. The psychology of anchoring is deeply tied to the perception of a bargain. Luna: So without the anchor, there's no perceived value. Lucas: Exactly. But there's also an ethical line. If you set an anchor that's absurdly high just to make everything else look cheap, customers might feel manipulated once they figure it out. There's been talk about regulatory scrutiny on drip pricing—that's when fees are added at the end—and some airlines have been sued over it. Luna: So it's a fine line between smart pricing and deceptive pricing. Lucas: And that's the question we should always ask: are we using anchoring to create value, or to obscure it? As marketers, we have a responsibility to our customers. If a $40 bottle of wine is genuinely good, then anchoring it against a $200 bottle is a legitimate way to highlight its value. But if the $40 bottle is just okay and the $200 bottle is there to trick you, that's a problem. Luna: That reminds me of a conversation we had about the $400 blender. It felt like a deal because the $600 model was right next to it, but was the $400 one actually overpriced? Maybe not, but the anchor made it feel like a bargain. Lucas: Exactly. The blender maker used a premium decoy to make the mid-tier seem like the rational choice. And it worked, but it's a tactic that requires nuance. If the decoy is too obviously a decoy, it can erode trust. Luna: So what's the takeaway for a small business owner listening? How can they use this without being slimy? Lucas: Start with your best-selling product. What's the next step up that you could offer? Create a premium version that's significantly more expensive, but make sure it has real value—better materials, more features, a higher tier of service. Then position your main product as the 'smart choice' between the budget and the premium. Luna: And you're not just inventing a decoy—you're building a real ladder. Lucas: That's the honest way to do it. And it's what we've seen work time and time again, from wine lists to software plans. The key is to anchor in a way that helps the customer make a confident decision, not a manipulated one. Luna: And if you want more of these conversations, you know what helps? If today's episode was worth a coffee to you, that's the link—buy me a coffee dot com slash fexingo. Lucas: That's a small way to keep this ad-free and independent. Now, let's get back to the wine list. There's a specific strategy sommeliers use—they place a high-priced bottle at the top of the list, then a few moderately priced ones, and then a 'house' selection that seems remarkably affordable. That house selection becomes the anchor for the entire meal. Luna: So the order matters, not just the numbers. Lucas: Order is huge. In a study on menu design, they found that the first and last items on a list get the most attention. So putting a high anchor at the top sets the tone for everything below it. Luna: That explains why every wine list has a ridiculously expensive bottle on page one. Lucas: And it's not just wine. Think about your phone plan. The carrier shows you an unlimited plan at eighty dollars a month, then a 10-gig plan at forty. The forty suddenly looks like a great deal, even if you only use three gigs. Luna: I've definitely upgraded my plan because the premium one made the mid-tier seem worth it. Lucas: So next time you see a 'deal,' ask yourself: what's the anchor? Is it genuine, or is it there to make you feel smart? Because often, the smartest decision is to ignore the anchor and think about what you actually need. Luna: That's a good rule for consumers. And for marketers, the rule is to use anchors ethically. Lucas: And that's the real takeaway. Anchoring is a tool. Used honestly, it helps customers understand value. Used deceptively, it erodes trust. And in the long run, trust is the best anchor you can have.