An annual subscription to a reputable newspaper is available for $30.
Now answer this question: what's the most you would be willing to pay for an annual subscription to a reputable newspaper?
The number you just considered is likely close to the $30 figure I cited above.
And there's a reason for that: I used a tactic known as an anchoring bias.
By telling you that a quality newspaper subscription is available for $30, that's the "anchor price" to which you gave undue weight when I asked how much you were willing to pay.
If I had instead told you that an annual subscription to a reputable newspaper was available for $100, think about how that information might have influenced your maximum amount.
Price anchoring can be an extremely useful tactic for businesses when it's done well.
And it can be really harmful when it's done poorly.
Many of the newspapers I subscribe to have not received this memo.
The Washington Post has a compelling promotional offer: your first year's subscription is available for only $30.
After that, the price increases to $100 per year.
With this offer structured as it is, it's evident the newspaper is betting on the fact that I'll find so much value in the content I consume that I'll happily agree to pay more than three times as much when it's time to renew.
That's a stupid bet.
The Washington Post is using the concept of price anchoring to its disadvantage: its introductory offer anchors the price of a subscription to $30, and once that anchor has been dropped, subsequently paying $100 for that same subscription is absurd.
(Especially when choosing not to renew the subscription upon its completion and instead using another introductory offer to subscribe as a "new customer" is a viable option.)
To be clear, I don't have a complete understanding of either The Washinton Post's business strategy or financial models: it's certainly possible the organization knows a negligible number of people will choose to renew at the $100 annual rate and is fine with me paying just $30 CDN every year for as long as I wish to be a subscriber. But if that's the case, why bother with the "then CA $100 every year thereafter" language and risk having otherwise satisfied subscribers fail to renew because of an outrage you caused with a hefty price increase you didn't actually expect to realize?
If you're a marketer measured on customer acquisition and not customer retention, then promoting unsustainably-low introductory prices to attract new users is a perfectly understandable approach.
Just be aware that when you do that, you're teaching your customers to value your product at the "introductory price"...
... and attempting to increase that price later will prove more difficult than you might like.
P.S. What's an alternative to unintentionally anchoring your product to a lower-than-ideal price? I'll cover that in a future post. But if you need some help determining the right pricing model for your business right away and can't wait until then, reach out.
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