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What Apple’s Watch Pricing Has To Do With Moonwalking Bears

Mar 11, 2015

Apple pulled a great trick on everyone yesterday and they did it right in front of our eyes. Want to see the trick, well first watch this video. Go ahead, I'll wait. It's worth it.

Apple pulled a great trick on everyone yesterday and they did it right in front of our eyes. Want to see the trick, well first watch this video. Go ahead, I'll wait. It's worth it.

Did you catch it?

I didn't the first time.

It's ok. And if you did, well then Bravo to you.

oboy

So what did a breakdancing bear have to do with Apple's pricing for the Apple Watch? It's called the anchoring effect.

Anchoring is a psychological effect where, if you can establish a 'base' number or create a number that the brain focusses on, a particular value will become the bar against which other numbers are evaluated. Example: If I asked you if the population of Costa Rica was greater than or less than 15 million, what would be your guess?

Got it?

The actual population is less than five million but if you are like most people then you probably guessed something between 10 and 20 million because 15 million was a starting point which I gave you. If you guessed a number a whole lot closer to five million well then once again, bravo. Take your bow.

shia

Apple pulled this off with the Apple Watch yesterday. The Edition model ranges from $10,000 all the way up to a staggering $17,000.

Seventeen THOUSAND dollars.

That's a big number and everyone is talking about it. Here. Here. Here. Here. And so on...

Now what if I told you that I could get you something that has 100% of the functionality of a $17,000 electronic device, but you could have it right now for $349. Just a measly three hundred and change? That sounds pretty darn reasonable. Heck, get the better band and drop $500 or $600, maybe even $1000 for the sexy black metal one - why not? It's still $16,000 less than the full price...

And there, you just focused on the basketball and missed the break-dancing bear.

What if I pitched you the Apple Watch price this way: your iPhone 6+ cost you $299 on contract. Now you can buy a device that ranges from $349 to over $1,000 that adds some functionality to it, what do you do? If you really want it, you might by the $349 and you might splurge for the $500, but $1000? Come on, why pay $1000 when you can get it for less than $400. Especially when that new iPhone 6+ in your pocket cost you $299.

That, my friends, is the anchoring effect in action. If Apple never sold a single Edition (and they will, I suspect they'll sell out in conspicuous consumption markets like Russia and the Middle East), they would still have been worth producing simple to reframe how we view the base price of the lower models.

 
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noah@two-bulls.com
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