Apple this year released 5 new iPhone models, the most in the device’s history. Apple started in 2007 with one iPhone but soon established a “good-better-best” strategy, where budget and premium products flank “Goldilocks” options.
For years, the company did this by keeping older models around at slashed prices, writes The Wall Street Journal (Dec. 7, 2020). But recently, it has introduced more new options at various price tiers. This year’s lineup ranged from the $399 late-adopter-targeted iPhone SE to the feature-packed $1,099 iPhone 12 Pro Max—with a “just right” iPhone 12 in the middle. The company also gave Apple Watch shoppers 3 tiers of options for the first time.
While it may be more confusing for consumers to navigate the price and quality differences between the models, this kind of price ladder is strategic and ubiquitous—from airliner cabins to gas pumps.
The trick with offering multiple versions of a product is to offer enough to help people identify their own strike price but not enough to overwhelm them. “Apple is best at this,” said one industry expert, “creating variation between models in the number of camera lenses and the different levels of storage capacity. The ‘good’ option gives firms the opportunity to keep customers within the brand, for those who face economic pressure to downsize their lifestyle.”
The WSJ article also looked at a $275 bread-baking appliance sold by Williams-Sonoma. When the retailer added a second model, similar to the first but larger and more expensive at $429, sales of the cheaper model doubled. Peloton employed a similar strategy with its new 2-tiered bike offering. When the company released a new stationary Bike+ for $2,495—with a bigger screen and more powerful software—it marked its original bike down to $1,895, from $2,245. Covid-19 has led to an explosion of demand for connected bikes as gyms closed–and Peloton’s sales jumped 172% compared with last year.
Classroom discussion questions:
- In Chapter 5, we discuss product life cycles (see p.164-5). Where do the Apple 6 Plus, 8 Plus, 11, and 12 Pro fall?
- Why does Apple launch new products so frequently?