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Decoy and Psychological effect in iPhone 14 pricing

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iPhone 14 has arrived in India with this pricing:

  • iPhone 14: ₹79,899
  • iPhone 14 Pro: ₹1,29,900
  • iPhone 14 Pro Max: ₹1,39,900

Do you see why there is so much difference between the 1st & 2nd options but very little between the 2nd and 3rd options?

This pricing strategy of iPhone14 is using 2 principal strategies: the decoy effect + Psychological Pricing of cheap economical deal.

Decoy Effect

Here the company would offer 3 varieties:

  • one with basic things
  • another two with best things but with little difference.

It has experimented with popcorn pricing at cinema halls.
At one time, they offered only 2 options:

  • Small: 2$
  • Large: 7$

Now as a consumer thinking, 7$ is too much as compared to 2$, so almost everyone chose a small size.

But another time, they introduced one more option in between these.

  • Small: 2$
  • Medium: 6.5$
  • Large: 7$

Now medium-size options influenced many people so they started opting for medium but you see if they pay half a dollar more then they would get large-size popcorn. So they finally end up buying large size. Now as the medium is at 6.5$ so large size also looks affordable.

In iPhone 14 Pro Max case also, it's about you will get memory extra and some other little improvements. And you end you buying that by paying 10k extra.

This strategy is used in many places. Have you checked Mac Book Pro pricing? It follows the same Decoy effect.

Psychological Pricing of cheap deal

Notice that many companies price their products such that ending with 99 and not 00.

Note the prices again:

  • iPhone 14: ₹79,899
  • iPhone 14 Pro: ₹1,29,900
  • iPhone 14 Pro Max: ₹1,39,900

Only the basic model is ending with 899 while other 2 models are priced with 900 ending. Also, note that the higher models could have arounded to a higher price by adding 100.

So, the basic model is playing with 1 INR while the higher models are playing with 100 INR. So, people who stretch their means to pay for the basic model get psychological sense of a cheap deal. People paying for Pro and Pro Max get a psychological feeling of a good deal (not cheap) for a luxury product.

This is the concept behind the pricing model of iPhone 14.

If the strategies are not used, the pricing would be like:

  • iPhone 14: ₹80,000
  • iPhone 14 Pro: ₹1,30,000
  • iPhone 14 Pro Max: ₹1,40,000
Benjamin QoChuk, PhD

Benjamin QoChuk, PhD

Benjamin QoChuk is a Computer Science Researcher, Inventor and Author. His educational background include Bachelors at Vanderbilt University and PhD in Computer Science at Peking University.

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Decoy and Psychological effect in iPhone 14 pricing
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