How Apple Is Getting You to Pay More for an iPod Touch
Apple’s lowest-priced iPod Touch for 2010 is now $229, but they’re using a tactic that will get you to pay $299 instead. Here’s how.
Prior to 2010, Apple’s lowest-priced iPod Touch was $199, and the next most expensive one was $299. The $199 model was reasonable, and a good amount of people bought that one. But Apple wants people to go for the $299 model, so for 2010 they’re attempting to sway people by implementing the decoy effect.
The decoy effect is basically placing less-desirable option A next to a more reasonable option B, to make B much more attractive as a result. You’re not meant to buy option A, but instead see it and be much more likely to go for the better (and pricier) option B.
In Apple’s case, they’re placing a slightly cheaper but significantly weaker option A ($229 8GB iPod Touch) next to option B (the $299 32GB one). By seeing that you can get 4 times the storage for a measly $70 extra, a lot more people will now get the more desirable $299 iPod Touch. The fact that the 64GB one (only twice the storage) is $100 more at $399 just makes the $299 32GB model all the more attractive and the likely purchase of a shopper.
Now don’t get me wrong: Apple is in no way doing anything wrong or shady. The $299 iPod Touch is indeed the best deal, and Apple is simply using an effective tactic to make that more evident. The decoy effect is a very effective pricing strategy that you can use for your own business, freelance offerings, products, and services to get more people to pay for the higher-priced items.
For proof that the decoy effect works, we can look at The Economist‘s subscription offer that Dan Ariely laid out in his book Predictably Irrational. Offer A was an internet-only subscription for $59, Offer B was a print-only subscription for $125, and Offer C was both print and internet subscription for $125. You read that right: Offer B and C are the same price.
Offer B is the decoy subscription offer meant to make Offer C (the one The Economist wants to people to sign up for) incredibly attractive. And sure enough, a big percentage of people signed up for the best deal that was Offer C for $125. Had Offer B not been there, a lot more people would’ve simply been okay with an internet-only subscription for $59.
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Very bright people think on these tactics. Great explanation
Perhaps it’s just me, but I have to disagree with this article. I do not view the 8gb model a decoy at all, in fact it would be my preferred choice. I already own a external hard drive, so I do not need or desire for all that space on my iphone. Have my favourite songs synced and leave the poop/clutter out of it. $70 is a lot of money, if there was a <$40 difference then yes I would say it’s a decoy model.
It’s not an iPhone, it’s an iPod, and only have 8GB of your music instead of 32GB makes a big difference. With 8GB you’ll have to keep swapping things off and back on because most people have music collections of at least 20GB or so.
These are the kind of tactics that make me despise Apple.
Welcome to business.
Something could be said of the articles here + why you do them + the revenue streams that they thus drive ;)
Well… Sorry, but everything you say in your article is quite obvious. I really think 95% of your readers (which are consumers too) should already be aware of the decoy effect.
No offense anyway. I juste hope to read more significant posts. ;-)
Well… Sorry, but everything you say in your article is quite obvious. I really think 95% of your readers (which are consumers too) should already be aware of the decoy effect.
No offense anyway. I juste hope to read more significant posts. ;-)
This is why I bought by iPods from refurb store. I paid for my iPod touch EUR200 while non-refurbished option was EUR270. The only difference was in packaging – Apple ships refurbished products in generic white boxes with gray logo.
@1-”Very bright people think on these tactics”
Better people unveil and make them public to all consumers.
Classic method, :p
I’m tending to agree with Joel.
A lot.
Buh-bye feed.
Seeming to be agreed.
Thats life, in a way its how our mind work, becuase when we buy a computer we notice that they wore a better one and so on.
The best part its that we all know the sistem and still we buy the more expensive one, knowing how thing work.
Nice post.
You have to take in account how much money it takes to produce an iPod to begin with. If an iPod, regardless of how much storage it has, takes $150 to produce, the price is only adjusted depending on the storage capacity. Apple is making their money not on the product itself, but overcharging for the storage in each device.
Let’s say the price to produce an iPod touch without the storage costs $150 (complete estimate).
$229 – $150 = $79 / 8 = $9.89 per GB
$299 – $150 = $149 / 32 = $4.66 per GB
$399 – $150 = $249 / 64 = $3.90 per GB
This “Decoy Effect” is obvious BUT it is nice to have it pointed out. I’d not have thought to, use it unless I had read this article so, well done and keep it coming!