Impact Pricing Blog

Are iPhone Users Not Price Sensitive?

Are they? Before I give my answer, think about this yourself. How would you answer it? There is an important lesson here.  

OK, my answer is … “it depends”. It depends on the product category.  

Bob uses an iPhone. What does that tell you? It tells you that at some point in time in the past, when he bought his first iPhone, Bob thought the additional price for the Apple product was worth it. That doesn’t mean he wasn’t price-sensitive, it may have meant that he valued the features of the iPhone over an Android that he was willing to pay for them.  

Then Bob upgraded to a new iPhone. What does that tell you? It probably tells you that the cost of switching phone technologies to an Android is so high, that he didn’t even consider an Android phone. In this case, he is probably not price-sensitive. He is willing to pay an even larger premium over Android. He still has the benefits of the iPhone plus the added benefit of not having to switch.  

Here’s the big lesson. This is only his phone. Bob may own an old beat-up car because he thinks spending money on new cars is insane. He is price sensitive when buying cars. Bob may always pack his lunch because he thinks buying lunch at restaurants is foolish. He is price sensitive.  

The key insight is people have different levels of price sensitivity based on the product category. Think about something you splurged on. Something you bought the best available because to you it was worth it. You don’t do that for everything (unless you’re Bill Gates). People are not price-sensitive or insensitive. Their willingness to pay changes based on the product category.  

People at the income extremes likely have tendencies toward a level of price sensitivity. Rich people probably buy at the high end of a product category and poor people at the low end. But most of us have enough we splurge on some things and skimp on others. 

When I try to figure out which buyers are the least price-sensitive (willing to pay the most), I look to what they value. What is important to them? The factors they value are much better indicators of willingness to pay.  

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