Apple’s iPhone pricing: too high or too low?

“Apple iPhone followers got two conflicting pieces of data regarding its $499 price point. In one survey done by an online shopping firm Compete as reported by MacWorld UK, only one percent of the consumers who said they were likely to buy an iPhone said they would pay $500 for it,” Carl Howe writes for Blackfriars’ Marketing. “Sounds bad right?”

Online market research firm Compete surveyed 379 people in the US, most of whom had heard of the iPhone and have shopped for an iPod, to find out how interested they are in the device to produce the uncommissioned report. The iPhone is a combined music player and cell phone that Apple plans to start selling in the US in June and in Europe by the end of the year.

Among the 26 per cent of respondents who said they’re likely to buy an iPhone, only 1 per cent said they’d pay $500 for it. When Apple introduced the iPhone in January, it said it would cost $500 on the low end.

Forty-two per cent of those who said they’re likely to buy the phone said they’d pay $200 to $299.

Howe writes, “Now here, you have to actually wonder about that result and how they asked the question, especially when 42% said they’d buy one for $200 to $299. Did Compete ask those questions serially, or did they simply put the question up as follows:

What is the most you would pay for an iPhone?
• $500 or more
• $400 to $499
• $300 to $399
• $200 to $299
• less than $200

Howe writes, “Since this was an online survey, this format is quite likely. And it will give quite poor data. Why? Because it causes the reader to believe that there will be alternative prices for the iPhone that are lower than $500! And if Apple sticks to its mass-market luxury item strategy, there simply won’t be other prices available. The result: some of the people who said they’d only pay $200 to $299 will still buy the iPhone at $499 anyway [and], by the time Christmas of 2008 rolls around, Moore’s Law says that the price of the electronics in the iPhone will be half what they are now. Don’t be surprised if those 46% of consumers get their $299 iPhone then; they just have to wait eighteen months before it makes business sense for Apple to sell it at that price.”

More in the full article – highly recommended – here.

Related article:
Survey shows Apple’s iPhone a tad too expensive? – February 23, 2007

44 Comments

  1. I am pretty sure the RAZOR was around 500 when it first came out and what can that phone do????? Not much. 500 is not all that bad when you think about it, your not really buying a phone for 500 your buying an ultra portable mini computer.

    All we have to do is wait a year or so and I am sure they will come down in price and probably come out with a better model. Everyone is so impatient that they have to jump on the newest thing.

    I will get an iPhone eventually, but i am not about to just drop my cell phone company for a phone. When they start delivering the iPhone to other carriers then I will make the move. Everyone I talk to has Alltel so it would be stupid of me to switch.

  2. The Razr WAS $500 when it came out.

    On which basis the iPhone should be starting out at >$750.

    Ridiculous for anyone bar the disaffected to complain about the price frankly. If you can’t afford it too bad.

    Do people complain like thisabout the price of an Aston Martin?

  3. $499 is a lot of money. But I thought when the original iPod came out, the high-end version was $499. You are getting a lot of bang for the buck, if you need all those features. I don’t want a phone in my iPod, so I’m waiting for the higher capacity, longer battery life music/video iPod… all at the bargain price of $299 ” width=”19″ height=”19″ alt=”wink” style=”border:0;” />

  4. Let’s do some rough math, shall we? Let’s call the 379 people surveyed 400, just to make it easier. Then take the 26% who would buy an iPhone and call them 25%. That means 100 people are interested in the iPhone. Of that 100, 1% would buy it at $500. That means *1* person said they would.

    If this isn’t a clue that the sample size is too small I don’t know what else would get these folks to wise up. It’s a classic case of lying with statistics. Nevermind that Apple has always said that they only wanted to sell to 1% of the cell phone market in the first year anyway. So not only is their methodology flawed, they only ended up supporting Apple’s projected sales figures.

    Of course, the whole thing is still just a bunch of hooey.

  5. Apple can strong arm these people at Cingular. Why do you think they picked them? I think that you will see Cingular announce new technologies along with the phone catapulting them past their competition.

    -Pi

  6. The other thing I think is worth noting about the Complete survey is that it involved 379 people, “most of whom had heard of the iPhone and have shopped for an iPod.” The key here is that little word “most”. Thus, some of the respondents had never even heard of the iPhone or considered purchasing an iPod. Is it any wonder that these folks would have no interest in buying a device that they knew nothing about apart from the fact that it will be “a combined music player and cell phone that Apple plans to start selling in the US in June and in Europe by the end of the year”?

    And what of the “most” of the people surveyed? Well, having “heard of the iPhone” isn’t particualrly revelaing either. The term “iPhone” has been in currency for quite a while, so there’s a certain percentage of people who may have heard the word, but know absolutely nothing about the actual product. Others may have seen/heard/read of the iPhone in a news story or article, or perhaps they just took note when it made the front page of USAToday. Simple awareness that there will be such a thing as an iPhone doesn’t mean that these folks watched the Keynote or read feature articles outlining its capabilities. In other words, this survey would simply seem to have been of a cross-section of the general internet population.

    Even so, 98 of these 379 people expressed interest in purchasing an iPhone, and 1 of them indicated that s/he has every intention of purchasing one right out of the gate (not even taking into consideration the point the article makes about the way in which the question about pricing was likely presented). Given that the iPhone was only announced a little over a month ago, has not yet been adverstised, and won’t be released for several months, I would say that these results are pretty phenomenal and indicate how much mindshare Apple and the iPhone have already captured. To me, they portend a huge success.

    To put it another way, imagine that back in mid-October if someone had surveryed folks at random about the Microsoft Zune. Do you think that more than a quarter of respondents would have expressed a desire to purchase one?

    Remember, Apple’s initial goal is to achieve a mere 1% market penetration by the end of 2008.

  7. The phone is not priced too high because this is a Mac Fanboy Forum…

    As you know, The iPhone is priced higher than alot of other cellphones, but that’s because ALL other smartphones are “junk” and “crappy”…

    And Macs aren’t priced higher than PCs either because ALL other forums of computers are “junky” and “crappy”..

    I’m with you guys.. I’m buying an iPhone regardless of what the price is because Apple sells it..

  8. Wait until you see the new Dell Phone. It’s gonna blow you away.

    It’s made by Motorola so you know it’s good.

    It doubles your pleasure with twice the horespower and twice the battery life.

    People are going to learn quick, I’M BACK and I’M HOT and I’m rich……

    two outa three aint so bad.

  9. In some ways, I think the amount of time between the introduction and the actually availability has to be taken into consideration. If someone wants a house, they are aware that they have to go at it from a long-term perspective. The same holds true for the iPhone. We were given a far amount of time to put the funds on the side if we want to have this truly convergent technology. You are getting a pretty good quality phone, an internet appliance, ebook reader as well as a durable flash based iPod. When looking at it from the standpoint of it replacing your cellphone, pda, and media player, the price is very competitive. Competing devices from Nokia are much higher in price and this is the category of devices that we should be referring to when evaluating the iPhone; Nokia’s “multimedia computers” – the N90 series. It would be somewhat ridiculous to assume that the feature set on a future release device especially from Apple would only contain the feature set that was mentioned during the introduction. Just like the iPod, it started at a high price as a reflection of the careful thought and development that went into bringing it to fruition. I think more people especially since they’ve been informed of what to expect price-wise will be more than able and willing to set aside money to buy the iPhone and like the iPod before it, the feature set will improve with time as the price reduces. For me, I would be more inclined to consider buy the iPhone more than buying the Apple TV. The value of the iPhone in terms of obvious feature set is much clearer to me.

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