by Colin Hodge, author of “Outrageous Startup Growth: Uncovering the Secrets of User Psychology to Scale Your Success”
Nobody opens Netflix excited to compare plan architecture.
You just want to watch the show everyone keeps talking about before the internet ruins it for you. But then you hit the pricing page, and suddenly you are comparing plans like you’re investing in the stock market.
Can I put up with ads? Do I need 4K? How many people will leech off my account?
This is where pricing gets interesting.
Netflix currently offers three U.S. plans: 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 is not the exact price of Netflix’s plans. It is the way the choices are structured.
Customers rarely evaluate a price by itself. They compare it to the options around it.
That is the Anchoring Effect.
The lowest-priced plan tells your brain, “This is where the price starts.” The highest-priced plan tells your brain, “This is what premium looks like.” Then the middle plan sits there looking sensible, familiar, and defensible.
Not the cheapest. Not the fanciest. Just normal.
That is the psychological sweet spot many businesses are really trying to create: The Compromise Effect.
Small businesses do this all the time, sometimes intentionally and sometimes by accident. A consultant might offer a basic audit, a deeper strategy package, and a premium done-with-you engagement. A fitness coach might offer one class, a monthly plan, or unlimited access. A SaaS company might offer Starter, Pro, and Enterprise.
The mistake is thinking the customer is only asking, “Can I afford this?”
Often, they are asking something more emotional:
“Which option makes me feel smart, like I got a deal?”
“Which one feels right?”
That is why the middle option is so powerful. When people are unsure, they often choose the compromise. The cheapest option can feel limited or risky. The most expensive option can feel excessive. The middle option feels balanced.
Netflix is not the only company that understands this. Streaming services, software companies, airlines, gyms, and meal delivery apps all use tiered pricing because it changes the question from “Should I buy?” to “Which one is right for me?”
That is a much better question.
But pricing psychology is not about tricking people. At least, it shouldn’t be.
Good pricing helps customers understand the offered value faster.
A bad pricing page dumps features on people and expects them to do the math. A good pricing page translates those features into benefits.
Don’t just say “allows up to 4 users.” Say “enough seats for your whole founding team.”
Don’t just say “50GB storage.” Say “store every client file, stress-free”
Do not just say “weekly coaching.” Say “support every week while you launch.”
People do not buy using logic. They buy relief, confidence, speed, status, convenience, and fewer future headaches.
Netflix does this through familiar consumer language: ads or ad-free two devices or four devices, unlimited or most titles available. The customer instantly understands the tradeoff. They are not being asked to decode technical jargon. They are deciding what kind of viewing experience they want.
Small businesses should aim for the same clarity.
Then there are the tiny signals.
A badge that says “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 are skimming. They want help. If one option is genuinely best for most people, say so.
The key word is genuinely.
Do not call something “Most Popular” if it is not. Do not create fake scarcity. Do not invent a decoy that confuses 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 charm pricing and premium pricing.
A $9.99 product feels different from a $10 product. The first says deal, accessible, low-friction. The second feels cleaner and more confident. Neither is always better. If you sell a casual digital product, .99 might help. If you sell a high-trust service, a clean round number might feel more professional.
The mistake is assuming the number speaks for itself.
It does not.
The number is surrounded by signals.
So before you lower your price, raise your awareness of the context around it.
Here’s how you can put this into work 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 that option feel obviously valuable compared to the others?
- Am I making the cheapest option too weak, or the premium option too vague?
- Have I translated features into outcomes?
Your pricing page is not just a menu. It is a decision environment.
Netflix understands this. So do the best small businesses.
They do not just slap three prices on a page and hope logic does the rest. They guide the comparison. They clarify the tradeoffs. They make the right choice feel easier to see.
Because customers rarely judge a price alone.
They judge the story around 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 Scale Your Success” (Wiley, 2026) shares his decades of hard-earned wisdom from how he scaled startups to over 100 million users, navigated high-stakes negotiations, and achieved successful exits and even re-entries.
