by Colin Hodge, author of “Outrageous Startup Growth: Uncovering the Secrets of User Psychology to Increase Your Success»
No one enthusiastically opens Netflix to compare plan architecture.
You just want to watch the show everyone is talking about before the internet ruins it. But then you go to the pricing page and suddenly you’re comparing plans as if you were investing in the stock market.
Can I support ads? Do I need 4K? How many people will unsubscribe from my account?
This is where the prices get interesting.
Netflix currently offers three plans in the United States: Standard with Ads, Standard, and Premium. The ad-supported plan is the cheapest, Standard removes ads and allows another device, and Premium adds 4K, HDR, more devices, more downloads, and spatial audio.
But the real lesson for small businesses isn’t the exact price of Netflix’s plans. It’s how choices are structured.
Customers rarely evaluate a price on its own. They compare it to the options around it.
This is the anchoring effect.
The cheapest plan tells your brain, “This is where the price starts.” The most expensive plan tells your brain, “This is what the premium looks like.” Then the middle plan stays there, seeming reasonable, familiar, and defensible.
Not the cheapest. Not the fanciest. Just normal.
This is the psychological sweet spot that many companies are actually trying to create: the compromise effect.
Small businesses do this all the time, sometimes intentionally and sometimes by accident. A consultant can provide a basic audit, a more in-depth set of strategies, and a premium engagement with you. A fitness trainer can offer a course, a monthly plan or unlimited access. A SaaS company can offer Starter, Pro, and Enterprise.
The mistake is to think that the customer is simply asking: “Can I afford it?” »
Often they ask for something more emotional:
“Which option makes me feel smart, like I made a deal?”
“Which one looks good?” »
This is why the middle option is so powerful. When people are unsure, they often choose compromise. The cheapest option may seem limited or risky. The most expensive option may seem excessive. The middle option looks balanced.
Netflix isn’t the only company to understand this. Streaming services, software companies, airlines, gyms, and food delivery apps all use tiered pricing because it changes the question of “should I buy?” to “Which one is best for me?” »
That’s a much better question.
But price psychology is not about deceiving people. At least, that shouldn’t be the case.
Good pricing helps customers understand the value offered more quickly.
A bad pricing page offloads features onto people and expects them to do the math. A good pricing page translates these features into benefits.
Don’t just say “allows up to 4 users”. Say “enough seats for your entire founding team.”
Don’t just say “50 GB of storage.” Say “store every customer file, stress-free”
Don’t just say “weekly coaching.” Say “support every week during launch.”
People don’t buy using logic. They buy relief, confidence, speed, status, convenience and fewer future headaches.
Netflix does this through language familiar to consumers: ads or ad-free on two or four devices, unlimited or most titles available. The customer instantly understands the trade-off. They are not asked to decode technical jargon. They decide what type of visual experience they want.
Small businesses should aim for the same clarity.
Then there are the little signals.
A badge saying “Most Popular”. A highlighted box. A “Best Value” label. A plan name like Pro instead of Plan B. These are not random decorations. They reduce decision fatigue.
Your customers are busy. They skim. They want help. If an option is truly best for most people, say so.
The key word is truly.
Don’t call something “most popular” if it isn’t. Do not create a false shortage. Don’t invent a lure that tricks people into spending more. Pricing psychology works best when it helps the right customer choose the right option with less anxiety.
The same goes for boutique rates and premium rates.
A $9.99 product is different from a $10 product. The first says agreement, accessible, without friction. The second feels cleaner and more confident. Neither is always better. If you sell a casual digital product, 0.99 could help you. If you’re selling a highly reliable service, a round, clear number may seem more professional.
The mistake is to assume that the number speaks for itself.
This is not the case.
The number is surrounded by signals.
So before lowering your price, be aware of the context surrounding it.
Here’s how you can put this into practice in your business, right now. Ask yourself:
- What is the first price my customer sees?
- Which option do I actually want most customers to choose?
- Does this option seem obviously attractive compared to the others?
- Am I making the cheaper option too weak or the premium option too vague?
- Have I translated features into results?
Your pricing page isn’t just a menu. It’s a decision-making environment.
Netflix understands this. The same goes for the best small businesses.
They don’t just throw three prices on a page and hope that logic will do the rest. They guide the comparison. They clarify the trade-offs. They make the right choice seem easier to see.
Because customers rarely judge a price alone.
They judge the story surrounding it.
Colin Hodge is the co-founder of DOWN and creator of The Outrageous Growth Method. His new USA TODAY bestselling book, “Outrageous Startup Growth: Uncovering the Secrets of User Psychology to Increase Your Success” (Wiley, 2026) shares his decades of hard-earned wisdom on how he scaled startups to over 100 million users, led high-stakes negotiations, and achieved exits and even reentries.
