Latest / The Pricing Marketing Podcast with Fexingo: Price Anchoring, Bundling, and Conversion Pricing / How a 25 Percent Coupon Anchors Your Next Purchase
Transcript
- Lucas: So you’re browsing for a mattress online. You see one for twelve hundred dollars. You’re not about to click buy. Then a pop-up appears: 'Take 25 percent off your first order.' You enter your email, get the code, and suddenly that twelve hundred dollar mattress feels like a nine-hundred-dollar mattress. Luna: And you feel like you’ve won. The mattress is still twelve hundred dollars—you’re just paying less because you got a deal. Lucas: Exactly. But here’s what’s interesting: that 25 percent off coupon doesn’t just reduce the price. It creates an anchor. A new reference point. And that anchor can actually make future purchases at full price feel more reasonable. Luna: How does a discount anchor something higher? That seems backward. Lucas: It does, but the mechanism is pretty subtle. When you see 25 percent off, your brain registers the original twelve hundred dollars as the 'regular' price. That becomes the baseline. Later, when the company sends you an email offering a similar product at twelve hundred dollars with no discount, it doesn’t feel inflated because you’ve anchored to that number as the real price. Luna: So the coupon actually reinforces the original price as legitimate. Lucas: Right. And it’s not just mattresses. A lot of direct to consumer brands use this. Think of a company like Warby Parker or Casper. They offer a first-time discount, and then they rarely discount again. But because you’ve internalized the full price as the anchor, you’re more willing to pay it later. Luna: Is the percentage itself important? Why 25 percent and not 10 or 50? Lucas: Great question. Data from a few years back—I’m thinking of a study by the Journal of Marketing Research—showed that 20 to 30 percent off hits a sweet spot. Too low, like 10 percent, doesn’t feel worth the effort. Too high, like 50 percent, makes people question the original price. They think, 'If it was 50 percent off, the margin must be huge, and the anchor collapses.' Luna: So 25 percent is high enough to motivate action but low enough to preserve the credibility of the full price. Lucas: Exactly. And there’s another layer. When you have to enter your email to get the code, you’ve made a small effort. That effort increases your commitment. So when you later see the full price, you’re more likely to accept it because you’ve already invested in that brand. Luna: That’s the classic effort-justification bias. You don’t want to feel like you wasted your time. Lucas: Right. So the coupon isn’t just a discount—it’s a psychological anchor that sets the stage for future transactions. And this works especially well for products people buy infrequently, like mattresses or luggage. You don’t have a strong internal price memory, so the brand gets to set the anchor. Luna: You know, we talk about these pricing tactics a lot on this show, and I think part of the reason we can do that is because we don’t have advertisers pushing us to soften the message. We can just dig into what actually works. Lucas: That’s the whole point. We keep these episodes free and ad-free because we think these ideas are worth sharing without any commercial filter. If you’ve gotten value from the show, one way to support that choice is at buy me a coffee dot com slash fexingo. Nothing fancy, just a way to keep the lights on. Luna: Yeah, and it genuinely helps. We’ve had listeners say they use these concepts in their own work. That’s what keeps us going. Lucas: Alright, back to the anchor. So the 25 percent coupon works as a setup. But what about when the discount is framed as a dollar amount instead of a percentage? That’s a whole different game. Luna: Is one more effective than the other? Lucas: It depends on the price of the item. For expensive items, percentage off feels bigger. Three hundred dollars off a thousand-dollar laptop is 30 percent—that sounds substantial. But for cheap items, a dollar amount can feel more concrete. Fifty cents off a two-dollar coffee is 25 percent, but '50 cents off' feels trivial. Luna: So the anchor effect also depends on how the discount is communicated. Lucas: Exactly. And here’s where it gets interesting for marketers: if you anchor with a percentage off, you’re also anchoring the percentage itself. So when you later offer 15 percent off, it feels smaller than the original 25 percent. But if you never discount again, the 25 percent anchor fades, and the full price becomes the new normal. Luna: So the coupon is almost like a training tool. It teaches the customer what the 'real' price is. Lucas: Exactly. And some brands take it further. They use a limited-time urgency to strengthen the anchor. '25 percent off if you buy in the next 24 hours.' That urgency makes the decision more emotional, and the anchor locks in faster. Luna: I’ve noticed that with travel booking sites. They show a countdown and a percentage off, and I always end up clicking. Lucas: Right, and that’s the same mechanism. The anchor plus scarcity is a powerful combo. But the anchor itself is the critical piece. Without it, the discount is just a price cut. With it, you’ve shifted the customer’s reference point. Luna: And once that reference point is set, it’s hard to change. That’s why some brands never discount again. They don’t want to reset the anchor lower. Lucas: Exactly. Apple is a classic example. They almost never discount new products. So when you see a thousand-dollar iPhone, you accept it because there’s no lower anchor from a coupon. Though they do offer trade-in credits, which is a different kind of anchor. Luna: Trade-in credits anchor you to the value of your old device, not the price of the new one. Lucas: Right. So the 25 percent coupon is just one tool in the anchor toolbox. But it’s a particularly effective one for brands that want to acquire new customers and keep full-price integrity later. Luna: Is there a risk? Like, what if customers just wait for the next coupon? Lucas: That’s the danger. If you coupon too often, the anchor shifts to the discounted price. Then full price feels unfair. That’s why smart brands use the coupon only for first-time buyers, or very infrequently. They want the anchor to be the full price, not the sale price. Luna: So it’s a balancing act. Use the coupon to set the anchor, but don’t let it become the new normal. Lucas: Exactly. And if you do it right, the customer feels smart for getting a deal upfront, and then later feels okay paying full price because they’ve internalized that number as fair. Luna: I want to try this myself. Maybe throw a 25 percent off pop-up on a landing page and see how it affects future purchases. Lucas: If you do, test it against a control group that gets no coupon. I’d bet the coupon group has a higher lifetime value, even though they paid less on the first purchase. Luna: Because the anchor makes them more willing to pay full price later. Lucas: Exactly. And that’s the counterintuitive insight. A discount can sometimes be the best way to get customers to pay full price in the future.