The Price of Smartphones Seems Right to Me
If you’re not a neuro-marketer, you think cellphone prices are out of hand and “losing touch with reality” of what people will pay. Polls and journalists who don’t like to pay a lot for a phone agree. USA Today says that the majority of people don’t want to pay more than $750 for a phone. Hmm, how did they come up with $750? That seems a lot compared with a few years ago, but that is the new target.
Market researchers will tell you another story about pricing. “Brainfluence” calls it anchoring. We store a price in our brain and then use that number anchor to judge all other prices. How that anchor is set is where marketing comes into play.
There are drifting anchors (like gas prices), infomercial anchors (everything is $19.99), expectation anchors (expensive wine always tastes better than cheaper wines when you know the price). Then there are irrational anchors. Sometimes anchors are set by a high number you might hear right before your purchase. For example, if you think of the last two digits of your Social Security number, they will impact the price you are willing to pay for an item. “Brainfluence” calls that a “foible of human brains.”
So to cellphones: You can see how setting a high anchor price for smartphones would be advantageous, because as you lower it or offer incentives, they seem much more like a bargain.
“Brainfluence” also warns that you must work the demand curve. You “demand a high price from the portion of the market willing to pay that much before dropping the price to reach a larger number of customers.”
So if you know most people will pay $750 for a phone, then you would price the phone over $1,000 to take advantage of early adopters. Then lower to the range where most people will buy. They now think they are getting a real bargain.
Early adopters are happy because for a little while they have the prestige of owning the new phone, and you make the price-conscious adopters happy because they got a deal. And you make the cell company happy because they made a boatload of money on both.
Anchors away, my friend. Anchor your prices today.
Mark Mathis
Mark wrote his first direct-mail fundraising letter in 1981 for the University of Iowa Center for Advancement. The effort raised a few million dollars in undiscovered wills and legacy gifts. From that day forward Mark discovered a love of the big idea that moves the needle. After 12 years at KWWL, Mark became a business owner as a co-founder of ME&V — rebranded as AMPERAGE in 2015. After 25 years of leading creative teams in video production, graphic design, PR, writing and web development, Mark transitioned out of ownership in 2021. Today he serves in an employee role as special projects consultant. He is creatively ambidextrous — son of an artist and engineer — and famous for distilling complex ideas down to a few words and a few visuals. Mark is a writer. When he found that many nonprofits struggled with complex branding puzzles, he wrote the book, “NonProfit-NonMarketing .” He also wrote a novel called “Reenactment.” Mark is an active blogger OneMinuteMarketer® with nearly 1,000 readers each week on LinkedIn, Facebook, Twitter. One of his most popular YouTube videos is on “How to Look Good on Zoom.” One of Mark’s fondest business memories was being named to INC 500 two times and attending the INC 500 conference with other winners. Mark is considered by some a Civil War expert (and that explains his novel). Mark also served as an adjunct professor in the business and in the communications departments at Wartburg College. Mark is a graduate of the University of Iowa and is currently vice president of the University of Iowa Journalism and Mass Communications Advisory Board. Mark is married to state Sen. Liz Mathis, and the two love to travel, even when it means being trapped by a volcano in the Czech Republic for three weeks.
