The Apple Watch's Big Pricing Problem
Preorders for the Apple Watch kickoff today and expect the wild hype that Apple is expert on - ever notice how there’s always a shortage of Apple’s latest product? A few interesting facets of the Watch’s pricing standout: (1) Apple is releasing a variety of styles – and while the styles are different, the inherent technology is the same (typically Apple releases a few models that differ by technology) and (2) The price range of the Apple Watch ranges from $349 to $17,000. No, $17,000 is not a typo!
Apple is hoping that the Watch will be its next big hit – its pricing strategy isn’t doing it any favors. Please check out my latest piece for the Harvard Business Review which discusses why I think Apple blew it on its pricing strategy and what it should have done instead.
I discussed this piece on Bloomberg West this afternoon, here's the clip.
Readers' Comments on This Blog Entry
Per, I agree, there is rationale to set a high price in order to make a lower price more appeasing. However, there also studies - as well as we've seen it in our own work - that when providing a range of prices, especially when attributes are unknown, people tend to pick the middle to get a "good one." In the case of the Apple Watch, that mid-point is around $8,000 As noted, I believe this spread of prices is far too wide - and a detriment to the release of the Apple Watch.
Ridiculous.. I can't even see the hardcore Apple fans buying this. Look at the Nike Fuelband, way cheaper than this and lost its niche in about 2 years. Apple is 10 years too late in bringing this, especially at that price point! People have smartphones and so much more these days Apple.. who the hell is going to buy their "luxury" version of a watch when they don't even have experience in the luxury watch business!
What Apple is doing with the $17k watch is a classic example of price imaging and marketing excellence. Just about every time media talk about the Apple watch, they mention the price range. The phycology of pricing in all of works so that every time we see two prices we compare them and make a mental note of how we feel. Thanks to the wide ranging publication of the price ranges, every time we see the $349 and the $17,000, we will feel that that $349 becomes cheaper and cheaper. Furthermore, studies after studies has shown that the higher the high price image price is, the more effective it becomes to make us believe the price of the low(er) price products are a bargain.