Don’t Insult Me With Your Pricing

Thoughts on utilizing manipulative pricing tactics.

The other day, I was shopping around for a B2B SaaS tool, and I came across a pricing page with the following tiers:

  • Hobby
  • Startup
  • Business
  • Enterprise

The lowest tier met my needs just fine, but I was immediately turned off by having to identify as a hobbyist. My trust in the company quickly dropped. It gave me just enough pause that I decided not to purchase and walked away with a bad taste in my mouth.

One might argue I am being overly sensitive – I beg to differ. I suspect this company’s intentions were not pure.

The product does not make sense for a hobbyist to use (it’s a tool for businesses). More likely, they’re hoping I will tell myself, “I’m not a hobbyist, I’m a real business!” and proceed to select a more expensive plan than I actually need. Put another way, they’re attempting to manipulate me into paying them more money.

This is called price anchoring, and it comes in a variety of forms:

  • Highlighting a plan as “Most Popular” increases the likelihood that people will mindlessly choose it.
  • Striking out a higher price next to the published price makes people feel like they are getting a deal.
  • Strategically naming your tiers increases the chance people will pick according to how they identify rather than by what features they actually need.

I’ve heard these tactics espoused from conference stages countless times. I’ve been guilty of implementing some of them in the past without considering the ramifications.

There are no absolutes, so it’s essential to know your intent before blindly implementing price anchoring.

If you have a plan that is particularly well-suited for the hobby use case, that name is appropriate. If you are hoping to trick unsuspecting prospects into choosing a more expensive plan based solely on the name, that’s a form of manipulation.

If you’re running an actual sale, striking out the list price makes sense. If you strike out a made-up price to give the perception of a deal, that’s manipulation.

If one plan really is chosen more often than others, it might make sense to highlight that fact. If your company is brand new with very few customers, that might not be an appropriate signal to send just yet.

Here are my rules of thumb:

  • Your success and your customers’ success should strongly correlate
  • Your tier breakpoints should align with naturally-occurring segments in your customer base
  • The names of your tiers should not be a primary factor in which tier customers choose
  • If possible, automatically place customers on the right plan based on their usage
  • Opt for metered billing over tiered pricing when possible

In addition to just being the right thing to do, abstaining from manipulative tactics sets you apart from the crowd and yields trust from your customers.

It’s your competitive advantage to seize. I hope you’ll join me.

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