iPhone X: Apple makes a $999 gamble on its aspirational brand

Apple is taking a calculated risk with the pricing of its new phone. The $999 iPhone X is a bet on users’ loyalty and wealth and is on the surface consistent with the company’s longstanding strategy of differentiation and exclusivity. The danger lies in how the phone sells in the world’s huge and growing emerging markets; Apple clearly thinks it is a risk worth taking.

And it’s not without reason. Apple has always targeted the higher end of the market worldwide rather than just aiming for a larger base of users. In fact, if anything, Apple tends to price phones higher outside the US. The UK has to stomach an inflated price for the iPhone X even when tax differences are allowed for.

To be clear, the top end phone is not the only option. British customers will be able to pick up an iPhone 8 for £699 and an iPhone 8 Plus for £799. This is still more expensive than its direct competitors, but the demand curve for the iPhone is relatively inelastic. This means that for a given percentage increase in price, the percentage reduction in demand is smaller, giving an overall increase in revenues. No wonder the iPhone accounts for the majority of Apple’s revenues and profits.
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