Why adding a pricier option sells more of the cheaper one

A specialty retailer had a $429 bread maker that wasn't selling. Nothing about the product changed. What changed the outcome was adding a second model at $529, and sales of the original $429 machine doubled.

That result looks backwards until you notice what actually happened: the $529 machine never had to sell a single unit. Its job was to make $429 look like the reasonable choice by comparison. Shoppers don't evaluate prices in isolation; they evaluate them against whatever else is on the page, and Price and Profits of Online Stores spends a full chapter on using that fact deliberately instead of leaving it to chance.

Most small stores still price by cost-plus: whatever the product cost, plus a markup that feels defensible, published and left alone. That approach ignores that price itself is one of the strongest signals on the page: before a customer reads a word of copy, the number next to the product has already told them what to expect.

Anchoring, tiers, and the math underneath both

Price anchoring works because shoppers don't judge a number on its own: they judge it against whatever else is visible at the same moment. The bread maker story is the book's clearest illustration: a $429 machine sitting alone on the page reads as an expensive appliance decision. The same machine sitting next to a $529 alternative reads as the sensible option, and sales followed that shift in framing rather than any change to the product itself.

The same logic scales into a full pricing menu. The book's example is a skincare brand running four tiers: an entry moisturizer at $45, a standard one at $95, a premium at $195, and an ultra-luxury option at $350. That top tier isn't expected to be a bestseller, and isn't meant to be. Its entire job is to make the $95 option look moderate by comparison, while giving a small number of customers something aspirational to reach for. Run this architecture correctly and sales cluster around the middle option, which is usually the tier with the healthiest margin built into it.

Bundling works on a related principle. Amazon's Prime membership folds shipping, streaming, and other services into one price, and the effect is that customers stop pricing the individual pieces at all: the bundle becomes the unit of comparison instead of any single line item inside it. A store doesn't need Prime's scale to use the same idea: two products usually bought together, priced together at a small discount, remove a decision instead of just discounting one.

None of this works if the underlying unit economics don't hold up, which is where the book grounds its pricing psychology in plain arithmetic. Take a store selling premium yoga mats at $100, with a cost of goods sold of $40 and monthly fixed costs (platform fees, storage, marketing) of $5,000. The math is direct: $60 profit per mat means 84 mats sold before the business breaks even that month. Improve supplier terms and drop the cost per mat to $35, and the break-even point falls to 77 mats: the same fixed costs, spread over a slightly wider margin, moving the finish line closer without a single price change.

That's the piece easy to miss when a pricing tactic works: anchoring and tiering change what customers choose, but they don't change what a sale is actually worth. A four-tier menu built on a thin margin still fails, however well the tiers are framed, because the arithmetic underneath the psychology hasn't moved. The book's order of operations is deliberate: fix the unit economics first, then use anchoring and tier structure to guide customers toward the option that was already the profitable one.

Where people go wrong

The first failure is discounting as the default response to a slow week. A discount moves volume this week, and permanently resets what a customer believes the product is worth: the fastest lever available is also the one with the longest-lasting cost, since the next full-price sale now has to fight the discount memory too.

The second is building a tiered menu without checking whether the middle tier actually carries the margin the strategy depends on. A decoy that works and a middle option priced too thin still loses money on every sale it wins.

The third is setting prices before knowing the true break-even number. The book insists you calculate cost per unit including everything (shipping, fulfillment, payment fees, return probability) before setting the anchor, because a $95 "reasonable" price built on incomplete cost data can look profitable on a dashboard and lose money on every order. Getting the unit economics right in the first place is a system on its own, and the e-commerce guide walks through how margin, pricing, and the store's checkout flow all depend on each other.