Slicing Apple’s Art of Pricing

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Read time: 3 minutes 33 seconds

If you open Apple’s website, looking to buy an iPhone, you will be presented with three options.

1. Phone 16 Pro Max: From ₹144900

2. iPhone 16 Pro: From ₹119900

3. iPhone 16: From ₹79900

For most of the customers, the needs are met with the cheapest iPhone 16. But if you look at  TF International Securities analyst Ming-Chi Kuo’s post on X, you’ll see that the demand for the base model has dropped whereas suppliers have been asked to continue producting two pro models during China’s National Day holiday. Meaning, people are spending an upto 82%(+70k) extra for the pro versions.

Why?

The answer begins with “the center-stage effect”.

When presented with a range of choices, people perceive the middle option to be the best value-for-money. 

Even though most buyers don’t consider themselves a pro user, they are gravitated towards going for a iPhone pro

How does Apple Pricing Page work?

😎 Noticeable upgrade

Due to center stage effect, you probably start your buying journey from iPhone Pro (the centre). When you scroll down to the Summary, the larger screen size(highlighted in extra large font size) immediately reconfirms that you’ve chosen well.

The next 2 lines highlighting “Promotion technology” and “Always On display” marked in the Pro and Pro max models further nudge you to limit your selection between the two.

Now, Pro Max has a significant size advantage. So, you’re thinking, do I really need that big a display at a 30k premium?

You scroll down for more information. On reaching capacity, the new information makes you rethink your decision.

Comparing apples to apples, you find that your assumption of 30k price hike was biased 👀.  For the same capacity of 256GB, the price different between Pro and Pro Max is actually 20k (a drop of 33% from your initial assumption). 

You are intrigued but 20k still seems like a stretch. So, you go down to see what else.

Enters, power and battery.

Video and Audio playback on Pro Max is 23% higher . You ponder upon your phone usage. Most of it on Youtube, Insta Reels, Netflix, Spotify.  Makes you rethink again! -  you obviously need more power and battery. Maybe, that extra 20k is worth it.

🪂Winning the fence-sitters

There are three cohorts of iPhone buyers:

1. People who want the cheapest iPhone

2. People who want the best iPhone in the market

3. People who want the iPhone with the best value-for-money

Category 1 buyers, no matter how many features you add to the upgrade, will go for the base version. This is similar to people who are always inclined to buy the base version of a car.

Category 2 buyers need no convincing. They understand your product’s value, arguably have owned earlier versions and go for the best-in-class, no matter what.

It’s the third category of buyers, who are fence-sitters - they might have a preference for the cheapest iPhone in the beginning but they are open to spend more if they find value on the table. Apple’s pricing page is designed to maximize cart size for this cohort of buyers.

🎳Driving Cross-vertical value

CIRP finds that almost 60% of Apple users own either three or all four of the main devices. This gives a great potential for Apple to drive additional value from the ecosystem.

If you look at iPad Pro, it is compatible with the Magic Keyboard for iPad Pro (M4). So, if you are going for a iPad Pro, your keyboard purchase is limited to the top end model 

Similarly, there are upgrades on

Apple Pencil → Apple Pencil Pro

Airpods → Airpods Pro → Airpods Pro Max

The ecosystem propels you to go Pro in one vertical today and altogether in other verticals tomorrow!

See you next week! 👋

Saurabh