Rafi Mohammed

The Pricing eMail Inbox

Posted on June 21st, 2007 (0 Comments)

I have found the process of developing and writing a blog both fun and stimulating. One of the most interesting parts has been reader feedback, which has ranged from the provocative to the…well, let's say "interesting." I thought it’d be fun to address a few questions/comments.

Question: Sharon from San Francisco asks “in your iPhone blog, you advocate raising iPhone prices. I can’t think of one new technology gadget where prices have increased after a release. What makes the iPhone so special?”

Answer: Excellent question and one that a global leader in new technology development just asked me. When most new products are released, they start out priced high and slowly drop in price. Often, a product gains good buzz after its release and as a result, increases in value. The obstacle to higher prices is competition. Eyeing a big opportunity, new players enter the market and drive down prices. Pesky competitors…they can be a real drag on profits.

That said, Apple products are different. It’s a challenge to replicate Apple’s style, innovation, and buzz. For example, Ethan Smith reports in his Wall Street Journal article “Apple says 100 million iPods sold” that 6 years after its release, the iPod still commands a 74% market share for MP3 players in the U.S. as well as 50% and 60% market shares in Japan and Australia respectively. I believe that since it’s so hard to emulate, Apple should have raised iPod prices (as well as offer lower priced versions) – the feature-packed Nano should have definitely been premium priced. My bet is that the same scenario will play out for the iPhone: the buzz will increase the product’s value and there won’t be credible competitors. There’ll be room for both higher and lower priced iPhone versions.

This advice is similar to what I discuss with book publishers. When a sleeper book unexpectedly becomes a blockbuster, why shouldn’t they raise prices by a dollar or two to capitalize on the book’s enhanced value (everyone wants it) and lack of credible substitutes? This hit book scenario is very similar to the anticipated iPhone market.

Comment: Regarding my blog on the hidden meanings of price tags, Claire Voyant from parts unknown writes “Dear Rafi (if that's your real name)...as a devotee of astrology and numerology, I found your recent on-line blog particularly compelling - did you know that your first name has four letters and your last name has eight? So, if you divide your 'Christian' name by your surname, you come out as a half wit. So, you can mess with this pricing mumbo-jumbo all you want, but the stars and numbers tell the truths... REMEMBER...figures don't lie, but liars can figure…"

Answer: I’m not quite sure how to respond to this comment…Ms. Voyant clearly has a point - but what is it?

Keep those eMails coming, I love them!

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