Hey this is Sammy Obeid and you’re watching YourBizz. Business news from around the world that you thought wasn’t your business… but [chuckles] now it is. The iPhone 11 just came out, and, man, I am excited – to watch other people buy it, ‘cause I ain’t. But it’s good for the economy. Ok, I’m sure it’s a great phone and it gives you just as much cancer as the previous models, but what’s makes the 11 sweet is its new lower price of $699! Which is the same as buying four Samsung Galaxy J3’s and a ferret. This is cheap of course compared to the $999 price of its predecessor the X, But when you look more closely, you see that the 11 is actually just the newer version of the iPhone XR, the X’s cheaper cousin, priced at $749, so the new model is only cheaper by $50, which barely buys half a ferret. Or for $999 you can get the new iPhone 11 Pro, which actually means the 11 is the 11 Amateur, So what the ferret is going on here? This can all be answered with one word: Psychological pricing. Ok, two words. I tricked ya! Psychological pricing is a marketing tactic based on the belief that certain prices have psychological impact. Basically, numerology for people in suits who want your money. And, just like the new iPhone, it comes in a few cool flavors! Let’s start with the obvious: charm pricing. Oh, stop it. As you can see, Apple loves the number 9, because it’s found in their prices all across the globe, dollars, euros, even in Mexico 17,499 pesos, that’s not an iPhone, that’s an Ay-ay-ay phone. This is charm pricing because it charms consumers into thinking it’s a cheaper price. Just like we charm someone on the first date to think we have less baggage. In his book “Priceless”, William Poundstone reported that based off of 8 studies,
charm prices increased sales by 24%. Which sounds like a lot but I did my own study, and it only increased sales by 23.99%. Next: Penetration pricing. Mmmmm. This is offering a deliberately low price to gain a bigger market share, before ideally raising prices later. But why would Apple do this now? It’s not like the releasing a game changing 5G phone next year! Next: Price skimming. This is a tactic of offering a product at a price, and lowering its price over time… which Apple does with each version of the iPhone, to get as many new users as possible, just like skimming all the cream out of the milk, until all you have left is boring nonfat milk, which is android users like myself. Lastly, anchor pricing, the biggest and rustiest of them all. Anchor pricing is when a company shows you one price as a frame of reference or anchor, and then reveals a different product that appears like a better deal. Anchor pricing is very difficult to explain but – Hey, what are you doing talking smack about the iPhone? I’m sorry, do you want to buy this apple for a hundred dollars? No, you bloody idiot, that’s ridiculous! What about this one for ten? Oh, well, yeah, that’s much better and, well, I’m hungry, that’s a deal. Is Apple taking advantage of people who don’t pay attention to numbers? I mean, the whole reason we get phones is so that we don’t have to remember numbers? Oy, idiot, ten dollars is really expensive for an apple! How about 9.99? Oh, yeah, that’s much better, sorry, sorry! I mean, the whole reason we get phones is so that we don’t have to remember numbers? Or maybe Apple itself just has a hard time counting? I mean, look at the way they number their iPhones: Three, four, five, six, seven, eight… X, 11 where did the nine go? I’ll tell you where it went, straight into their prices! Is this a conspiracy, or does it make logical sense that Apple didn’t want to name a phone after the specific number they associate with cheapness? Joining me is marketing professor Annalisa Fraccaro, You’ll share your thoughts on this matter? What they are doing at Apple is at best misleading. First, they got your attention with lower-than-expected prices, then with a clever rebranding. From that point on, it’s just a matter of time before consumers give in and buy the product. They follow a very simple but effective model that’s called AIDA in marketing: Attention, Interest, Desire, and Action. Everything they do corresponds to a typical marketing mix of a luxury brand, however, the prices all end in “nine”, just like for the products you would find at the supermarket. What kind of a phone is that? Do you want to buy an apple for a hundred dollars? I do. Now, am I saying Apple is manipulating our minds? Not at all. Ok, you saw the Steve Jobs movie, that guy wasn’t manipulative. I’m just saying, this level of temptation isn’t what you’d expect from a company whose logo is the original sin. Thank you for watching YourBizz! And now, it’s your biz. There’s nothing wrong with being an Apple user, we are just helping you be aware of this stuff, so you become a smarter consumer. Because the smarter consumers we have out there, the better prices you will have in the future. So basically, we just saved you money. You are welcome.