“If Apple is indeed a Veblen brand (or more accurately, the goods produced by Apple are Veblen Goods) then why not try to raise the price of the next iPhone by $100?” Tim Worstall writes for Forbes. “For the increase in price might even boost sales.”
“Yes, I know, it’s a slightly farfetched idea but there is a solid economic background to it. It shouldn’t happen in a world where purely neoclassical economics holds sway but an awful lot of modern economics is about finding out when and where those purely neoclassical assumptions don’t hold,” Worstall writes. “As a first stage, the existence of brands and product differentiation means that there’s at least more complexity to the world than the standard assumptions allow.”
“A Veblen Good… This is where the value of the item is perceived as being determined by the fact that it is expensive. Owning an iPhone, in this formulation, would show that you are the sort of person who owns an iPhone. Thorstein Veblen, who we name these goods after, coined the theory of conspicuous consumption and that’s what this is all about,” Worstall writes. “All of us do it sometimes as well: we will purchase a produce precisely because it advertises something about us that we wish to have advertised. Perhaps that we’ve got the good taste to realise that this is the best product but in the purer form we’re saying that we’re rich enough to purchase this more expensive version of whatever it is.”
Read more in the full article here.
MacDailyNews Take: If lines around the block for a decade plus don’t scream “Veblen Goods,” nothing does. A product can be a “Veblen Good” and also the best product available.
As http://macdailynews.com/2014/04/14/analyst-apple-negotiating-to-raise-prices-by-100-for-iphone-6/we wrote yesterday: “Exotic materials, esoteric manufacturing processes, unparalleled build quality, and seamless access to unequaled ecosystems that patent-infringing imitators simply cannot match is worth well more than $100.”
Related article:
<Analyst: Apple looks to raise prices by $100 for iPhone 6 – April 14, 2014
Except it’s not a Veblen good. The value of Apple’s products isn’t in its high price tag, but its quality. A Veblen good would be the $999 “I Am Rich” app. Part of the glamour of iPhones (and other Apple products) is the fact that while the price may be higher than the competition, it’s still in reach of the average consumer. Apple has no reason to ruin that image.
Well said
With the advent of hiring YSL and Burberry ceos .. I have a feel that apple it intending to test the Veblen territory… MayBE with certain models of the iwatch though. And while at it why not throw an iPhone model in there too..
At first glance, as far as the iWatch is concerned, I would agree – I don’t know what Apple is planning to do with the iWatch that would make me care. Then again, I thought the same thing about the iPad, but now that I’ve seen it, I can actually see some ways that I would use it over my MacBook (although I would still keep the MacBook for some high powered apps).
But the iPhone is still a device for the masses.
Yes… Iphone is for sure mainstream.. And so will be most of iwatch models. I mean there can be a model of each that targets the super high end !
Apple tried to test the exclusivity game with the gold iphone at the beginning… It was kept in super short supply and not readily available and people paid premiums to have the gold !
What an awful pretentious term. Thought (hoped) it was a misspelling for a moment then it got worse when I actually read it. I buy Apple goods because they are quality and easy to use not because I want to overtly broadcast superiority. I leave that to tacky brands like Dolce & Gabbana
Already said here, but I’ll put in my $.02.
The iPhone is successful because it is the best product on the market. It isn’t because it is a status symbol. If the brand were to actually make that leap, I would probably then quit buying it. It depends – if they were then *just* Veblen and not the quality product it is, then I would absolutely abandon them in a heartbeat. Not sure what I would do, though, as SameSong is not an option. Who is number 3? And will they still be around next year?
Meh, kind of a bullshit premise. I’ve heard it in Economics class, but does the iPhone really have ‘snob’ appeal? Meh. The Veblen good ‘label’ suggests that Apple products are appealing BECAUSE of the high price (which runs counter to normal goods which are typically less appealing if they have a high sticker price).
I think Apple just wants to make higher quality devices which are ‘normal’ goods. The appeal of the phone is the phone.
And many evaluations reveal that equal features and build quality costs more from Apple competitors that the real Apple product does. If you expand the analysis to TCO, Apple turns out to be the low cost product.
If there is any “conspicuous consumption” Apple, it is Conspicuously Smart Consumption, missing the Veblen criteria completely.
There may be some who buy iPhones because they must be seen to have the most expensive items, but I reckon that there is only a fairly limited number of such people. There is a much larger number of people who buy iPhones because they are of excellent quality and sold at a realistic price.
I think that artificially raising the price of iPhones simply to make them appear to be more exclusive is not Apple’s way of doing business. If the cheapest version included a generous amount of storage, then a $100 price increase would make perfect sense.
Forbes lets pretty much anyone who wanders into the building write articles with their name on it I guess. This author clearly came from the street with a very shallow education but a strong desire to sound educated. This is just a pile of dung.
Yeah, too bad MDN decided to agree with them (see the MDN take) solely based on the fact that people line up to get one on release day. :-/
There is certainly room for reviewing pricing. If they knocked off $20 would they sell any more? Probably not. Increasing by $20 would probably have next to no effect either, they’d just make more. If they increased the price substantially I doubt they would sell any more because that would imply getting in buyers who are currently spending more, but who are these people? iPhones are already high priced phones, the only ones costing any substantial amount more sell very few or are jewel encrusted modified nonsense. I can’t see there being a huge market of people currently put off buying an iPhone because of the low price.
Apple cut the price after launch to promote sales, but obviously felt cutting it further wouldn’t promote them enough to justify the loss, maybe they feel the customer base is mature and loyal enough to not be swayed by an increased price. $100 might be a bit much though if it was the same screen size. If you had the option of a 6 at the same size/price, or could “upgrade” to a larger one for $100 more then that’s different.
In America, where the perceived price of an iPhone is just $200 (rather than $650), the Veblen factor is minimal, if it even exists. There are so many competing phones out there that have the same initial acquisition price of $200, so there is really no perception that the iPhone’s principal value is in its high price.
However, in the developing world, where the concept of two-year contract simply doesn’t exist, the Veblen factor is in full display. There are a few countries where the iPhone is still not officially sold, and therefore don’t have a functioning App Store. Yet, there is a market for iPhone, even though those owners cannot even get apps from the App Store (they have to jailbreak and sideload through some Cydia work-around). The actual value of the iPhone over there may even be lower than the competing Androids, where Google’s ecosystem is fully functional. Yet, the iPhone is by far the most coveted item and it as such it epitomises a Veblen brand.
I say “Let the market determine the price.” Put iPhones on sale by auction; that is – no fixed price.
Veblen brands – Looks like another meaningless buzzword.
I think this kind of pricing works when price is the discovery mechanism for value. Suppose you see two diamonds or two artworks side by side. The average person can’t judge these so you look at the prices to find the value.
The iPhone, for most people, is a great tool the value of which is dominated by its utility and durability.