If you want a Primer on iPhone Pricing…

  • September 5, 2014
  • Scott

There are lots of articles you can read that offer sneak peaks into the iPhone “6” and other new devices from Apple that are allegedly going to be announced next week.  But personally I’m drawn more to the speculation on screen sizes and pixel densities (thanks to Daring Fireball), and to pricing.  These have more to do with the business model, in many respects, than do the specific physical attributes of the devices.

Ben Thompson gives iPhone 6 pricing a great primer treatment. With comparisons to Louis Vuitton and Chanel, as well as asking the question: is the iPhone a Veblen good?  Does it inspire a sense of status when owned?

A Veblen good is a member of a group of commodities whose demand is proportional to their price; an apparent contradiction of the law of demand. A Veblen good is often also a positional good.

The Veblen effect is named after economist Thorstein Veblen, who first identified the concepts of conspicuous consumption and status-seeking in 1899.

The thought process and analysis Ben lays out makes a good case for why Apple hasn’t run down-market with its phones, and why it might be as likely to introduce a more expensive iPhone as well as a new phone at current price points.

If you read his post and understand it well, I think you can see why Apple has better pricing discipline in its markets than any other hardware vendor.  They don’t take the race to the bottom as a fait accompli.  That Apple must be considering the value as well as the price of what they’re selling.  And if Apple tests prices in the market, then I think Ben has outlined the ways in which Apple might test further price points up and down the curve, with value propositions that will appeal to those price points.


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