A few weeks ago, I bought a new 2022 iPad Air 5, and it was one of the dumbest things I've ever done in my life.
It's silly to say this because I don't need the Air at all, a regular entry-level Number List iPad is enough for my daily use. However, I couldn't help but fall into Apple's marketing trap and end up spending more than originally planned just to get some features that I probably didn't even use.
William Poundstone wrote a book called "Priceless: Insights into the Psychology of the Masses and Playing the Price Game" (The Myth of Fair Value) on pricing strategy, marketing, and fair value. In this book, Poundstone presents a study of buying patterns that was conducted through 3 simple tests.
In Test 1, a company offered a product with two choices: regular and premium. 80% end up choosing the premium model.
In Test 2, the company added a third, cheaper option to see if it appeals to a wider audience, including those looking for a lower price point.
Interestingly, almost no one buys the cheapest option, and the ratio of regular to premium is reversed from that in Test 1. Customers now believe that the regular model is the fairest price, so 80% choose it, causing the company to lose potential revenue.
In Test 3, the company did the opposite of Test 2. They offer regular, premium and super premium options for their products. This time, 5% of customers chose the regular model, 85% of the customers chose the premium model, and 10% of the customers chose the super-premium model. This is the most income-generating method.
Whether you're grocery shopping, a car, a washing machine, or an iPad, you're faced with a price ladder. This marketing tactic is real and designed to get you as much money as possible. In this post, I want to show you how Apple has mastered this technology and used it to make billions of dollars, not just for the iPad, but its entire product line.
The law of diminishing returns
Think about it, most of the time when you buy a tech product like an iPad or a premium laptop, you: