If ever there was a company that knows how to migrate customers from one product to another, it’s Apple. In product marketing, differentiation is a key component. Within product marketing is the pricing migration component, a somewhat subtle trick that moves customers up the pricing and product chain to spend more money to get more features.
Nobody does this better than Apple.
Let me take the iPad line as the first example of many.
The 12.9-inch iPad Pro starts at $799, $200 more than the new iPad Pro 9.7-inch model, which does not replace the previous 9.7-inch model, the iPad Air 2 which remains in the line up but at a much lower price point and starting with 16GB of storage. The iPad mini 4 also weighs in with a 16GB model, but Apple loves those $100 price increments– get 64GB for $100 more, or, add another $100 and the the $128GB model.
Customers can start looking at an iPad that is nearly two years old and another $100 moves them right up the pricing migration scale to the point where a fully tricked out iPad Pro, sans Pencil and Keyboard, the 256GB 12.9-inch model, actually is priced just under the more powerful MacBook model from 2015.
The iPhone line works much the same way, starting now with the iPhone SE– more or less an iPhone 5s with upgraded technology inside– starts at $399 which seems, on the surface of advertising and basic comparisons, to be competitive with many Android models. But that’s for the 16GB model, which Apple should be ashamed to sell. $100 more gets you four times the storage at $499.
At $499 for iPhone SE you’re only $50 away from the entry-level iPhone 6 where another $100 gets you the iPhone 6 with 64GB of storage. See? At every spot on the product line you’re just another $50 to $100 away from the next level. Drooling over that 64GB iPhone 6 for a mere $650, well, that’s the same price at the iPhone 6s. With 16GB storage. What’s the price for 64GB? You guessed it. Another $100.
The Mac line isn’t much different with the Mac mini starting at $499 but that’s without keyboard, mouse, or screen, so moving to the MacBook Air line is just a few hundred dollars more. A couple of hundred dollars more gets you an iMac with a Retina display. A few hundred dollars more gets a more powerful iMac.
See how that works?
Watch works the same way. Watch now starts at $299 but that’s for the diminutive 38mm model; $50 more for the more manly 42mm with the aluminum case. From there it’s all about case size and band type with prices that range from the entry-level $299 to 18-karat solid gold which starts at $10,000 (for a white sports band) and moves rapidly up the five digit threshold.
No company does this product migration and pricing migration better than Apple, and because the company fully differentiates products by hardware and software they can command premium prices which beget premium gross margins which begets gross profits.
Apple’s product and pricing migration is magnificent, make even more so because customers at all levels– entry level buyers who can barely afford an iPhone SE, to discriminating buyers of high end Macs, expensive Watch bands, and fully tricked out iPads that resemble and rival a Mac– are willing to pony up and pay the piper. And smile while they’re dishing out the money.