The iPhone X was released on 3 November 2017, with prices starting at $999. This is the most expensive iPhone launch price ever. In terms of pricing strategy however, it is an extremely astute approach.
Pricing for (un)affordability
Economically speaking, iPhones may well be classified as Veblen goods. These are luxury products where unusually demand increases as price increases.
By putting itself even further out of reach by the masses, iPhones may become more sought after by those who can afford it and want to visibly demonstrate it. In such cases, price is quality.
After all, an ostentatious status symbol derives value from being exclusive by virtue of its price.
This strategy is helped by the demise of British luxury phone manufacturer Vertu in July 2017. Vertu had been producing technologically mediocre but eye-wateringly expensive phones priced in the thousands.
Occupying the higher ground
Pricing the iPhone X at a starting price of $999 puts it in a clearly different price bracket where competition is much lower.
The competitive landscape has changed dramatically since the iPhone was launched ten years ago on 29 June 2007. Then, the iPhone was truly revolutionary. There was nothing like it and competitors were on the back foot. It took years for the other phone manufacturers to catch up. This was aided in part by the development of the Android operating system.
In the smart phone market today however, there is extremely stiff competition in the mid to premium price levels by big industry players such as Sony and Samsung. Just a couple of months ago in September 2017, both the flagship iPhone 8 Plus and Sony Xperia XZ Premium were priced at $799, with the Samsung Galaxy S8 Plus just behind at $789.
Apple has the ability to leverage its brand and price the iPhone at a level where competition is lower. And it has done just that.
Reinforcing superior brand image
Apple seeks to establish a premium brand that is seen as cool, technological superior, and preferred by the discerning consumer. This however has been under threat by other brands vying for the ‘premium’ crown.
Price is an inseparable component of a brand’s positioning and ability for differentiation from the competition.
The higher price firmly re-establishes Apple as the premium brand. Price psychology experiments have long found that people instinctively associate quality with a higher price. True to this, people and the media focused on trying to understand qualitatively ‘why’ the iPhone X was priced as it was.
And this goes beyond just mere impressions. Tangibly, the high price point allows for premium features to be incorporated. This reinforces the market perception of the iPhone (and Apple) as being technically superior.