Apple Prices Strategies
Apple prices strategies.
Introductory prices. This strategy means to set low prices that are used to gain entry into the market. It is usual used from startup companies and companies that want to enter in the new market.
Establish a high reference price
Behaviorial economist Richard Thaler has noted that consumers are really bad at making decisions about value and constantly need "reference prices" for comparison. A dress costs $80. Is that too much? Not if it's marked down 50 percent from $160. The trick is, that artificial $160 reference price may not really exist.
Apple has played this game with itself by launching products such as the iPhone at artificially high reference prices - the iPhone cost $599 when it first hit the streets - and then rapidly lowering that price. Today, a $199 iPhone seems like a steal; Apple in essence is using its first-iteration pricing as a reference to make its current products feel affordable. You may be on the fence for a $499 iPad, but if it drops to $399 by Christmas, won't you feel better?
Bundle price components to hide what you can
Buy an Apple product and you'll spend more downstream. For every iPad or iPhone sold, Apple likely counts on your future song purchases, video rentals, and soon iAd clicks on app advertising.
That sexy new Apple TV thing doesn't store anything, so you'll pay to play. Apple is not unusual here; almost every mobile handset, for instance, has some of its costs buried in future monthly data fees over a two-year phone contract. All of this "bundling" means the price over time is much more than what you think picking up the Apple gadget.
The pricing strategy is brilliant. By staging a series of perceived technology innovations and then adding price decoys, reference prices, obscurity and bundling, Apple makes us willing to pay more to do the same stuff we did 30 years ago: read magazines, type messages, watch shows or make phone calls. The communication breakthroughs are mostly an illusion, but with
Introductory prices. This strategy means to set low prices that are used to gain entry into the market. It is usual used from startup companies and companies that want to enter in the new market.
Establish a high reference price
Behaviorial economist Richard Thaler has noted that consumers are really bad at making decisions about value and constantly need "reference prices" for comparison. A dress costs $80. Is that too much? Not if it's marked down 50 percent from $160. The trick is, that artificial $160 reference price may not really exist.
Apple has played this game with itself by launching products such as the iPhone at artificially high reference prices - the iPhone cost $599 when it first hit the streets - and then rapidly lowering that price. Today, a $199 iPhone seems like a steal; Apple in essence is using its first-iteration pricing as a reference to make its current products feel affordable. You may be on the fence for a $499 iPad, but if it drops to $399 by Christmas, won't you feel better?
Bundle price components to hide what you can
Buy an Apple product and you'll spend more downstream. For every iPad or iPhone sold, Apple likely counts on your future song purchases, video rentals, and soon iAd clicks on app advertising.
That sexy new Apple TV thing doesn't store anything, so you'll pay to play. Apple is not unusual here; almost every mobile handset, for instance, has some of its costs buried in future monthly data fees over a two-year phone contract. All of this "bundling" means the price over time is much more than what you think picking up the Apple gadget.
The pricing strategy is brilliant. By staging a series of perceived technology innovations and then adding price decoys, reference prices, obscurity and bundling, Apple makes us willing to pay more to do the same stuff we did 30 years ago: read magazines, type messages, watch shows or make phone calls. The communication breakthroughs are mostly an illusion, but with