The Last Podcast Opinionated Web 2.0 News and Commentary


10 September 2007 @ 11am


iPhone Sales to Double with Price Cuts?

I see a lot of people are citing a study by that purports to give us some data about what prices people are willing to pay for an iPhone.

Adario Strange on the Wired blog concludes the following from those numbers:

-8 percent of consumers would be willing to pay for the iPhone at its original price point of $599.
-The “sweet spot” of consumer interest appears to be $100-$299.
-At $399, interest increased almost 2.5X to 18 percent.

So, if we’re to believe Compete’s survey, the iPhone sales flurry is just getting started.

Well, I fully agree that we will see a massive increase in interest by consumers in the iPhone, but mostly because the iPhone is now irrationally perceived as a bargain instead of a pricey luxury item.

However, the data from Compete isn’t much evidence for anything.

Here are the problems:

  • The data is from before the launch. People’s ideas about the phone have changed from then. That might be a positive thing for Apple, because consumers love the phone, but it doesn’t mean much good for the study.
  • The sample size seems to be 103 people. Not exactly a broad base for any study, and it only includes people shopping for an iPod.
  • Compete’s graph shows that 18% of respondents were interested in buying the phone if it were to cost more than $400. 28% of all respondents were interested in buying it if it cost more than $300. How this adds up to a 2.5x increase in potential sales, I don’t know.

Why do they says this? Because of the following flawed logic:

At a price point of $299, Apple seems to be signaling to its customers that the iPod portion of the iPhone is worth $299, and the phone portion is worth $100. That’s right in the sweet spot, which could mean even more iPhone interest moving forward than the 2.5X increase we’ve shown above.

Now, the price point isn’t $299, it is $399 – iPod or not. The 2.5x number only makes sense for an iPhone that costs $299. But the phone costs $399. Maybe a large group of people rationalizes the expense by saying that they are getting a free (and more versatile) iPod Touch worth $299 with their buy, but I am not sure how many consumers will think this way.