Pricing move made Tuesday by Apple indicates strong demand for this product
Some will tell you that Apple is a master at designing products, making them all sleek and shiny until your brain can't take it anymore and you need to buy them. After watching and analyzing last week's "Time Flies" virtual product event, Loup Ventures analyst Gene Munster has discovered that Apple is, in his own words, "master of the upsell." So what is upselling? Glad you asked. According to BigCommerce.com, "Upselling is the practice of encouraging customers to purchase a comparable higher-end product than the one in question."
Apple is a "master of the upsell" says analyst Gene Munster
A good example of an upsell is when Apple is ready to sell you the iPhone 11 Pro Max with 64GB of storage for $1,099. However, for only an additional $150, you can take home the same exact phone but with 256GB of storage instead. Or how about this: for $999 you can be the proud owner of a 64GB iPhone 11 Pro with that gorgeous 5.8-inch AMOLED display.
But if you toss in just $100 more (less than $5 a month for 24 months), you've increased the display to 6.5-inches and have powered your new handset with the largest battery on an iPhone yet.
The new Apple iPad Air 4 costs 20% or $100 more than the last generation model
The thing about Apple and the upsell is that while salesmen can help push the customer toward a pricier purchase ("Sir, if you skip just one lunch at McDonald's every month it will pay for the 256GB model") in many cases the consumer will upsell himself. That's because of the customers' familiarity with the products. According to Munster, "The reason why Apple is able to motivate consumers to spend more is that the company builds the world’s greatest consumer tech products. The math is simple for consumers: the products offer more value than the incremental price premiums."
The most important thing about last Tuesday's virtual event, says Munster, is the $100 price increase on the fourth-generation iPad Air from $499 to $599. All year long we've been pointing out that Apple has seen increasing demand for the iPad thanks to the pandemic. The Loup Ventures analyst says that Apple must see this as well since it is apparently comfortable raising the price of the new iPad Air by 20%. With more people working and doing their schooling from home, the tablet, in general, has become more popular. Loup Ventures says that the whole iPad lineup accounts for 11% of Apple's total revenue with the iPad Air making up 4% of that figure. During the last reported quarter, which ended in June, iPad revenue rose 31%. According to the analyst, the iPad Air price hike should allow Apple to report growing iPad tablet sales for the quarters ending in September and December.
As for the other major product showcased at the event, Apple introduced the Apple Watch Series 6 and added the Apple Watch SE priced at $279. With the Apple Watch Series 3 tagged at $199, Loup Ventures notes that the average Apple Watch selling price will probably increase. The analytical firm believes that some potential Series 3 buyers will probably jump to the Apple Watch SE because of the improved features. As Munster wrote, "Potential Series 3 buyers will likely move to the higher Watch SE, given the modest $80 premium relative to its features. Similarly, potential Watch SE buyers will view the $120 premium for the Series 6 as reasonable relative to the additional features. In the end, we believe Series 6 will be the most popular model." The new Family Setup feature allows Apple to expand the potential Apple Watch market because it gives children and older adults the opportunity to own an Apple Watch without having to own an iPhone. Another family member can use his or her iPhone to handle any capabilities that require the handset.
Lastly, Munster says that with the new Fitness+ workout subscription service, Apple is going after Peloton’s $12.99 monthly Digital Membership plan. While the analyst says that Apple's software (meaning the actual workout videos that stream over the tech giant's devices) is "superior" to Peloton's offerings, he states that the latter has an advantage in software-hardware integration.
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