| name | evidence-based-pricing |
| description | Behavioral economics applied to pricing — with academic citations. Covers anchoring, decoy effect, charm pricing, choice overload, and endowment effect. Use when designing pricing pages, optimizing pricing tiers, planning A/B tests for pricing, or when you need the research behind pricing psychology tactics. |
| license | MIT |
| metadata | {"author":"johndturner.com","version":"1.0"} |
Evidence-Based Pricing
Behavioral economics applied to pricing decisions. All tactics are testable hypotheses until validated with your data.
Evidence Marking
- 📚 = Peer-reviewed academic research
- 💼 = Practitioner-validated (widely used, not academically tested)
Core Principles
| Principle | Effect | Risk | Source |
|---|
| Anchoring | First price sets reference | Low | 📚 Tversky & Kahneman, 1974 |
| Decoy Effect | Inferior option makes target shine | Medium | 📚 Ariely, 2008 |
| Charm Pricing | $X99 feels cheaper than $X00 | Low | 📚 Thomas & Morwitz, 2005 |
| Choice Overload | Fewer options = more conversions | Low | 📚 Iyengar & Lepper, 2000 |
| Center Stage | Middle option chosen more | Medium | 📚 Valenzuela & Raghubir, 2009 |
| Endowment Effect | Ownership increases value | Low | 📚 Kahneman et al., 1990 |
| Loss Aversion | Fear of losing > desire to gain | Low | 📚 Kahneman & Tversky, 1979 |
Decision Framework
When Analyzing a Pricing Page
- Audit current tactics — Which principles in use?
- Identify gaps — Which low-risk tactics missing?
- Prioritize tests — Start low-risk, high-impact
- Define metrics — Conversion, plan distribution, refunds
When Designing Pricing
- 2-3 options — Avoid choice paralysis
- Charm pricing — $199 not $200 (value positioning)
- Social proof — "Most Popular" on target plan
- Anchoring — Show reference price or lead with higher tier
- Test one variable — Isolate changes to measure
Testing Priority
| Priority | Tactic | Why |
|---|
| 1 | Anchor text | Zero risk |
| 2 | Presentation order | Zero risk |
| 3 | Social proof badge | Low risk, proven |
| 4 | Charm pricing | Low risk |
| 5 | Strikethrough pricing | Medium risk |
| 6 | Decoy plan | Higher risk, test carefully |
Common Patterns
3-Plan Structure
Basic $99 Pro $199 [Most Popular] Premium $349
(limited) (recommended) (unlimited)
- Center Stage effect pushes to middle
- "Most Popular" adds social proof
- Premium anchors perception
Decoy Pattern
Basic $99 Pro $199 [Decoy] Premium $249 [Target]
(5 users) (10 users) (unlimited)
Pro at $199 for only 10 users makes Premium's unlimited look like a steal.
Strikethrough Pattern
~~$399~~ $199
- Reserve for sales events
- Risk: Can feel gimmicky if overused
- Monitor refund rates
Anti-Patterns
| Avoid | Why |
|---|
| Fake scarcity | Damages trust |
| 4+ options | Decision paralysis |
| Hidden fees | Increases abandonment |
| Discount popups | Trains discount expectation |
| Round numbers for value products | $200 feels more than $199 |
Metrics to Track
- Conversion rate — Pricing page → checkout
- Plan distribution — % selecting each tier
- Refund rate — By plan (impulse vs. considered)
- AOV — Average order value
- Time on page — Confusion indicator
References
Part of the Evidence-Based Marketing series.
