Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a 300 Dollar Anchor Makes You Buy a 100 Dollar SaaS
Transcript
- Lucas: Let's talk about the tier nobody buys — the one that's priced so high it seems almost absurd, and yet it's the reason you pick the middle option. Luna: The vanity anchor, right? The $300 plan that exists just to make the $100 plan look like a steal. Lucas: Exactly. I've been looking at a SaaS company called Kinsta — they do managed WordPress hosting. Their pricing page has three tiers: a 'Starter' at $30 a month, a 'Pro' at $60, and an 'Enterprise' that starts at $900 a month. Now, hardly anyone signs up for Enterprise at that price point. But its presence reshapes the entire perception of Pro. Luna: Because $60 suddenly feels like a bargain compared to $900. That anchor is doing all the work. Lucas: Right. And this is textbook decoy pricing — the 'decoy' is the expensive option that you're not meant to choose. It shifts preference toward the target. But there's a twist: if the decoy is too obvious, it can backfire. Consumers sense manipulation. Luna: Yeah, you can't just slap a $10,000 option next to a $100 one and expect people to fall for it. It has to feel plausible. Lucas: That's the key — plausibility. The expensive tier has to include features that justify the price, even if only a niche segment would actually need them. For Kinsta, Enterprise includes dedicated servers, priority support, custom contracts. It's real. But for most customers, it's overkill. Luna: So the decoy also has to be a legitimate product. Not a fake listing. Lucas: Exactly. And if these conversations have sparked something you've actually used in your own pricing or buying decisions, we'd love it if you'd keep the show ad-free by supporting us at buy me a coffee dot com slash fexingo. No pressure — just a way to keep these deep dives coming without commercial interruptions. Luna: Yeah, it really helps us stay independent. And we appreciate every single contribution. Lucas: Now, let's look at a classic restaurant menu example. The French Laundry in Napa — they have a tasting menu that's around $400 per person. But they also offer a 'supplement' course, like the white truffle addition, which can push the total to $600. That $600 option isn't just upselling — it anchors the $400 base menu as the sensible choice. Luna: And the $400 menu then feels like a deal. But if everyone ordered the $600 version, they'd still be happy. The anchor works both ways. Lucas: Now, apply that to SaaS. A company called Basecamp — the project management tool — used to have a $150 per month plan for unlimited projects. But they introduced a 'Business' tier at $300 per month that included priority support and more storage. The $150 plan suddenly looked affordable, and conversions on that tier increased by about 30 percent. Luna: Thirty percent is huge. And the Business tier probably had some takers too, so it's a double win. Lucas: It is. But the risk is if the decoy tier is too cheap — like, if you have a $5 plan, a $10 plan, and a $15 plan, the middle doesn't get the same boost because the anchor is weak. The spread needs to be significant. Luna: Right. The rule of thumb I've seen is that the top tier should be at least twice the price of the middle one, ideally three times. That creates enough contrast. Lucas: And the middle tier should be the one with the best value proposition — the one you actually want to sell. That's where you put the 'most popular' badge. Luna: Apple does this beautifully with iPhones. The latest lineup: iPhone 16 at $799, iPhone 16 Pro at $999, and iPhone 16 Pro Max at $1,199. The $1,199 anchor makes the $999 Pro feel like the sweet spot, and that's exactly where most sales land. Lucas: And Apple even adds a fourth tier sometimes — the older model at a lower price. That becomes a decoy in the opposite direction, making the new models feel modern and worth the premium. Luna: The key is that the decoy must be genuinely inferior on some dimension. The older iPhone has an older chip, worse camera. So the choice between old and new is real, not just price. Lucas: Let's talk about a failure. There's a famous case from a winery that introduced a $200 bottle of wine to anchor their $50 bottles. But the $200 bottle was a known commodity — critics had rated it poorly. Customers saw through it, and sales of the $50 bottle actually dropped. The decoy damaged trust. Luna: So transparency matters. If customers feel tricked, they'll punish you. The decoy has to be defensible. Lucas: Exactly. And that's why the best vanity anchors are real products that serve a real segment. For example, on a recent episode, we talked about Williams Sonoma selling a $300 pasta maker that made their $150 model look reasonable. But the $300 model was actually a higher-quality machine — it had a motor, a different build. It wasn't fake. Luna: It's interesting how this applies to subscription pricing too. Like, a $10 monthly plan with a $100 annual plan — the annual is the anchor, but it's also a better deal per month. So the decoy is actually the monthly plan, which you want fewer people to choose. Lucas: Right. That's a different flavor — the 'good-better-best' structure where the best is the anchor, and the better is the target. For SaaS companies, the common pattern is: Basic at $10, Pro at $30, Enterprise at $100. The Enterprise anchors the Pro. But if the Pro is the one with the best value, you'll see a 'Most Popular' badge there. Luna: I've also seen companies add a 'hidden' tier — one that appears only after you click 'See all plans.' That tier is often the highest, and its job is to make the visible top tier look reasonable. But it's a risk if customers feel you're hiding things. Lucas: Transparency is always a balancing act. The best approach, I think, is to be upfront. Show all tiers, make the decoy legitimate, and let the customer choose. The psychology works best when it's subtle, not manipulative. Luna: So if I'm launching a new product, what's the one thing you'd tell me about setting up a vanity anchor? Lucas: I'd say: price your top tier at least 2.5 times your target tier. Ensure it has features that justify the price to the small segment that might buy it. And put your 'best value' badge on the tier you actually want to sell. Test it — sometimes a 2x spread works, sometimes you need 3x. Luna: And if you test and conversions don't move, what then? Lucas: Then the decoy might be too close in price, or the value proposition of the target tier isn't clear enough. Or maybe your audience is too sophisticated — they see the anchor and ignore it. In that case, focus on feature differentiation instead of price anchoring alone. Luna: Good advice. I think we've given listeners a solid framework to experiment with. Lucas: Next time you're on a pricing page, notice which tier has the 'Most Popular' badge — it's almost never the cheapest or the most expensive. That's the magnetic middle, and the anchor is doing its work.