How Apple Got Us to Pay So Much for the iPhone

It is amazing how after just 10 years Apple has convinced consumers to pay up to 10x more for the new iPhone than they did with their first phone.  Apple phone sales have flattened out recently, but prices, and presumably margins just keep on rising. Despite competitors who have largely closed the gap on functionality.

The three new phones approach $1300+ in cost. The XS Max is $1519. More than many laptops and all other cell phones. The new gold phone will likely be a big seller in China as a luxury good according to CNN. “Better than ever before” promises Apple exec Phil Schiller. Sure size, colour and new functionality is important. But what is really driving value and a luxury brand price premium? The power of the Apple brand. The emotion that goes along with treating yourself. Status. Feeling even perhaps a bit more powerful. Out front.

Apple sells to desire not need.  And like all powerful brands they make and consistently deliver a compelling promise. Powerful brands command a price premium and deliver superior margins.  And earn what is so uncommon these days – consumer loyalty. I have to admit sneaking a peak at the new XS iPhone and wondering when my iPhone 8 contract ends. You can pre-order yours today.

By: Matthew Kelly, Managing Partner

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