From Stratechery (Paywall):
“It turns out there are two distinct strategies — the iPhone strategy and the iPod strategy
The most important difference between the iPhone and iPod pricing strategies is perhaps the most counterintuitive: how essential is the product in question? That is because any product has to answer two questions:
- Do I need a product from this category?
- Which specific product do I want?
No one needs an iPad, Watch, or Airpods (which, as Neil Cybart documented last week, are very low-priced relatively speaking). That means that price doesn’t just influence which product you buy within the tablet, health and fitness tracker/smartwatch, or headphone categories, but whether you buy into the category at all.
I strongly suspect the degree of price elasticity for a product is inversely correlated to the necessity of said product (that is the less you need a product the more sensitive you are to price).”