Anchoring Effect

The cognitive bias in which an initial piece of information serves as a reference point for all subsequent judgments. In pricing, the first tier a customer sees — whether "Free," "Starter," or a high-priced "Enterprise" option — sets the scale against which all other prices are evaluated. The effect was first documented in the experiments of Tversky and Kahneman in the 1970s and has since been replicated across dozens of consumer contexts. A well-placed anchor makes the target tier appear either generous or reasonable by comparison, even when the absolute price difference is unchanged. The anchor does not need to be the most popular option; it only needs to be visible first.

Example: The "Individual" tier on Spotify's pricing page anchors customers to a single-user price, making the "Duo" plan feel like a significant step up in value for a modest increase in cost.