By starting high, you get as much money as you can from those who
really want the product, then expand the market at the lower price
Hmm … that sounds exactly like what Apple just did with the iPhone.
They brought it out at $599, sold one million iPhones, and then
dropped the price to $399 after two months, in the hopes of selling
nine million more this year.
So why did this strategy blow up in Apple’s face, leading them to
offer a $100 coupon to the early adopters, many of whom remain irate
despite the rebate?
What economists (and Apple too, I guess) ignore is that consumers
hate it when companies follow practices that look like they are
designed to maximize profits.