IPhone Pricing

  Apple launched the IPhone product at an inital price of 599$, clearly a high price to skim the first segment of customers, called the “early adopters”. However, some pricing folks even argued that this price still was not high enough. Only 10 weeks after launch, the price got cut down 200$ to 399$. Reactions of angry early adopters followed soon thereafter.

What Apple shows us with its current pricing of the IPhone is no more than the classic pricing strategy known as “skimming” in the literature. Skimming is loosely speaking defined as the strategy to introduce a product a high price in order to “skim” the high willingness to pay of the early adopters of the product. Of course, this leaves the big crowd on the table, but only firsthand. As soon as the early adopters market is satisfied, the price will be in order to attract a larger segment of adopters and speed up diffusion of the product in the market.

Still, the very short period of only 10-weeks until the first major drop in price astonished even the high-tech people. It will be interesting to see how the IPhones pricing history proceeds and if future “skimming-periods” will even be shorter.

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Author: Reto Hofstetter

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