Apple & The Art of Pricing
Tags:
October 26th, 2022

Pricing is not an easy thing. Anybody whose run a business can tell you that.

Non-tech businesses have it easy. They have a build-of-materials. They have rent. They have payroll. Put 20-50% above that and sell it. That's the price.

Software businesses have it much harder. How much is something worth if distribution is effecitvely free?

Apple has mastered the art of pricing like few others. They put it just out of reach, but not uncomfortable so. It sits in this uncanny value of "no way am I paying that" and "that's a steal!" The marginal price of an upgrade always leaves you thinking "meh, its $400 more to double the RAM but I'll probably use it so why not".

That feeling is key.

Teenage Engineering is another company that nails this. Their PC Case is $200. That's a lot for a PC case but it's a pretty cool one. A normal one is ~$100. So would you splurge? When a total build is something like $1500, what's another $100?..

Pricing software means putting yourself in the minds of your customer and thinking "what's just out of reach?". That's the sweet spot. It's a little more than somebody would be fully comfortable with, but it's still within "yeah, okay, lets do this."

Margins are a state of mind. You can always work backward from a price and figure out what would justify that. It's much harder to do the opposite.