.png)
A low price can feel expensive if the value isn’t clear. A premium price can feel justified if the customer believes it will deliver results they cannot afford to miss. The price becomes part of the story you tell about your product—one of trust, outcomes, and confidence.
The question is, how do you shape that perception?
So, there are a couple psychological principles like perceived value, anchoring, and loss aversion that influence how customers see price, trust it, and respond to it. When applied well, they don’t just drive conversions—they build a connection between price and value that customers are willing to pay for. Let’s explore them more in detail.
Perceived value is how customers judge the worth of your product based on the outcomes they believe it will deliver. In SaaS, customers are not paying for features—they are paying for results. A CRM isn’t valuable because of its features. It’s valuable because it drives sales. An analytics platform isn’t valuable because of its dashboards. It’s valuable because it helps you take precise action.
Higher prices, in certain cases, can actually enhance perceived value. This is the concept of Veblen Goods, first described by Thorstein Veblen, an American economist in the early 1900s: where higher prices signal exclusivity, trust, and superior quality. Traditionally, Veblen Goods refer to luxury items—watches, cars, and designer brands. But the same principle applies to B2B SaaS. For enterprise buyers, a premium price signals confidence that the product will work as promised.
Zendesk, a leading customer service platform, provides a perfect example of this phenomenon. Initially successful in the SMB (small-and-medium business) market with affordable, easy-to-adopt plans, Zendesk struggled when it entered the enterprise segment. Its enterprise offering, introduced at a modest premium over standard plans, failed to gain traction.
Enterprise buyers saw the lower price as a red flag, questioning whether the product was truly enterprise-grade or just a repackaged SMB tool. To address this, Zendesk raised the price of its enterprise plans. As the price increased, so did demand. Buyers began associating the higher price with the qualities they valued most: scalability, reliability, and performance. Today, Zendesk’s enterprise plans cost nearly 10x more than its standard offerings, reflecting the higher expectations of this segment.
This pricing shift illustrates a critical reality for SaaS companies: the same pricing strategy that works for one segment may not work for another. For Zendesk, aligning its pricing with the perceived value of enterprise customers didn’t just open new opportunities—it redefined its place in the market.
When SaaS companies align pricing with perceived value, they move beyond selling features. They sell trust, outcomes, and a solution that feels essential—exactly what customers are willing to pay for.
Decoy pricing, also known as the asymmetrical dominance effect, leverages behavioral psychology to influence customer choices.The decoy pricing effect was first described by academics Joel Huber, John Payne, and Christopher Puto in a paper presented to a conference in 1981. It’s a strategic method that guides customers toward a specific option by introducing a third, less-attractive choice: the decoy.
The decoy isn’t designed to sell. Its purpose is to make another option—the one you want customers to choose—look far more appealing. This strategy exploits cognitive biases, helping businesses subtly steer decisions without overwhelming customers.
At its core, decoy pricing works because customers don’t evaluate options in isolation—they compare. By creating a clear contrast between choices, decoy pricing shifts focus from cost alone to perceived value.
To see this in action, let’s take The Economist subscription model, a textbook example of decoy pricing. If we were to map out how customers think while choosing their preferred option, the decision-making process might look something like this:
Now, coming to their pricing model, i.e.,
Now at first glance, you will see that the Print-only plan doesn’t make much sense. Why would anyone pay $125 for just the Print edition when they can get both Digital and Print for the same price? That’s exactly the point—it’s not designed to sell. The Print-only plan exists to make the Digital + Print option look like an obvious choice.
When customers compare the three options, the value of the Digital + Print plan becomes crystal clear. It offers more for the same cost as Print-only. By contrast, the Digital-only plan feels affordable but limited—fine for someone who doesn’t need Print access but less compelling for anyone who wants the flexibility of both formats.
This structure creates a simple decision path. Customers quickly gravitate toward the Digital + Print plan because it feels like the smartest, most balanced option. The decoy (Print-only) shifts focus away from price and toward value, making the choice effortless.
The decoy pricing strategy isn’t just limited to traditional products or subscriptions; it has been skillfully adopted by global giants like Apple. Known for its premium positioning and customer-centric design, Apple leverages decoy pricing to guide customers toward specific choices without them feeling pressured.
Let’s look at the latest iPhone 16 lineup:
Here’s where the decoy effect comes into play: the iPhone 16 Plus serves as a decoy to the base iPhone 16, and the iPhone 16 Pro Max serves as a decoy to the iPhone 16 Pro.
The iPhone 16 Plus, priced just $100 more than the iPhone 16, offers a larger 6.7-inch display and improved battery life but retains the same processor and camera system. This positioning makes the iPhone 16 appear as the more practical choice for those who value performance and affordability over screen size.
Similarly, the iPhone 16 Pro Max, priced $200 more than the iPhone 16 Pro, highlights the relative affordability of the Pro model. While the Pro Max offers a larger 6.9-inch screen and higher storage capacity as its differentiators, it shares the same cutting-edge A18 Pro processor and advanced triple-camera system. This nudges customers toward the Pro, which feels like the “sweet spot” for those seeking premium features without the Pro Max’s higher price tag.
By strategically using these decoy models, Apple subtly steers customers toward the iPhone 16 and iPhone 16 Pro as the most balanced options in terms of value and features. The decoy effect ensures the focus remains on perceived value rather than cost, simplifying the decision-making process for buyers.
When customers see a price for the first time, it doesn’t fade into the background—it sticks. That number becomes an anchor, the baseline they use to judge everything that comes next. The human brain doesn’t evaluate numbers in isolation; it compares them to that first price and uses it as a frame of reference.
Anchoring has two powerful implications:
1. Pricing Feels Relative, Not Absolute
Customers don’t think: “Is $890 expensive?” Instead, they ask: “Is $890 reasonable compared to what I’ve seen before?” Anchoring gives them a starting point to make that judgment.
2. Anchors Simplify Decision-Making
Anchors remove uncertainty. When customers face multiple pricing options, they evaluate each one relative to the anchor. This reduces friction and builds confidence in their choice.
In any market, there’s usually one company that sets the price customers associate with value. In the enterprise CRM space, that company is Salesforce. Salesforce anchors the market with its $165 per user per month price for Sales Cloud.
Here’s how that anchor works:
The anchor doesn’t just influence customers—it shapes the competitive landscape. When a company like Salesforce establishes itself as the benchmark, its anchor price becomes the standard customers trust.
Discounting in B2B SaaS isn’t about urgency or driving a quick close—it’s about managing the reality of enterprise sales. Procurement teams negotiate to feel like they’ve secured a “win,” but discounts that are unplanned risk signaling that your product’s value is flexible or unclear. This can erode confidence in your pricing and hurt long-term trust.
The key to effective discounting lies in preparation and purpose. Starting with a padded price creates room for concessions that satisfy procurement while maintaining control over pricing discussions. This ensures that discounts reflect the product’s worth rather than being reactive adjustments.
Discounting, when used strategically, can definitely show you many positive outcomes, such as:
So, discounts must serve a purpose. Reactive discounts send the wrong message about your product’s worth, but strategic discounts reinforce your value proposition. When done right, discounting becomes a win-win: customers feel they’ve negotiated a better deal, and you secure pricing that reflects the true value your product delivers.
People hate losing more than they enjoy winning. This is the heart of loss aversion—a psychological principle that explains why customers are far more sensitive to risks than rewards. In SaaS pricing, loss aversion influences how buyers perceive your product, weigh its value, and ultimately decide whether to commit.
For SaaS businesses, this isn’t just theory—it’s a roadmap for reducing hesitation, improving retention, and driving upgrades. Loss aversion is about understanding what customers fear losing and structuring your pricing to minimize those fears while reinforcing your product’s value.
Let’s break down how loss aversion influences the way customers evaluate SaaS pricing decisions.
But a discount should never be reactive. If you drop the price without intention, you risk signaling that your product’s worth is flexible or unclear. This can hurt long-term confidence in your value. Discounts must be purposeful—they should accelerate the deal, help navigate procurement demands, or support long-term adoption and renewals.
Discounting done right aligns with the customer’s expectations without compromising the integrity of your pricing. The customer wins because they negotiated a better price. You win because the price still reflects the value your product delivers.
As markets evolve, customer needs shift, and competitors set new benchmarks, your pricing strategy must keep pace. For SaaS businesses, pricing is not just about what customers pay—it’s about how they perceive value, justify their investment, and make decisions.
The principles of pricing psychology are tools that shape this perception. They simplify choices, reinforce trust, and align pricing with outcomes customers care about. But these tools only work when applied intentionally and revisited regularly.
Here’s what to focus on moving forward:
Pricing done right doesn’t just reflect the value you deliver—it builds confidence that your product is the most logical and essential choice. If you’re facing challenges with your SaaS pricing strategy, we can help. At Monetizely, we specialize in building scalable, customer-aligned SaaS pricing models for SaaS businesses. With over 28 years of experience leading top pricing teams at companies such as Twilio, Narvar, Medallia, etc, we make sure that your pricing doesn’t just work—it works for you. To learn more, you can book your free demo with us today, and get your hands on our new edition of Price to Scale Vol 2.
