The Psychology Behind the New iPhone’s Four-Digit Price | Harvard Business Review

Apple made headlines by announcing that the price for its new iPhone X (a fancy term for 10) will range from $999 to $1,149. These prices are commanding attention because they are significantly higher than the base prices of the two other iPhone models that were also announced, the 8 ($699) and the 8 Plus ($799). The X’s price is also noteworthy because it approaches, and breaches, the key threshold of $1,000. Boosting prices into four-digit territory crosses an important psychological barrier for consumers.

Why did Apple push the limits of pricing on the highly anticipated device? A key reason involves using a premium price to set an expectation of excellence in consumers’ minds.

This is a pricing strategy similar to the one successfully implemented by the Eagles. The popular Southern California band, whose album Their Greatest Hits 1971 – 1975 is the second highest-selling album of all time, had broken up in 1980. After a 14-year hiatus, the band reunited to release a new album and embark on a worldwide tour. What differentiated this tour, from a pricing perspective, is that the Eagles were the first major rock band to break the $100 ceiling of concert prices by selling tickets above that critical threshold.

As a lifelong fan of the band — their hit song “Hotel California” seemed to play every 15 minutes on the radio when I was growing up in Cincinnati — $100+ tickets made sense to me. The band’s timeless hits and lengthy absence from the music scene was fueling strong demand. Going back to the demand and supply fundamentals of Economics 101, this results in higher prices.

To confirm my intuition, I called Irving Azoff, a well-respected personal manager in the music industry and the mastermind of this pricing strategy for the Eagles, his longtime client. Azoff said the Eagles’ pricing wasn’t just about matching supply and demand — it was a statement of quality. “We used price to make a statement to fans that they are seeing the greatest American rock-and-roll band, not a washed-up reunion band,” Azoff recalls.

Read complete article here:

The Psychology Behind the New iPhone’s Four-Digit Price.