Why does Apple always come up with three versions of iPhone?
Let’s understand this by an example.
Let’s say you are an ice-cream lover. You find great value in eating ice-cream.
One fine day, you are out to treat yourself.
👉 Shopkeeper provides you below options:
One Scoop Ice Cream: 12 bucks
Two Scoop Ice Cream: 19 bucks
Three Scoop Ice Cream: 19.5 bucks
The negligible difference between the prices of 2nd and 3rd options gets your attention.
This is called Decoy Effect.
A 2nd option is just a Decoy option. Companies provide decoy option so that customer can compare Decoy option with an expensive option (and select the expensive one).
In the absence of a decoy option, the customer will compare: 12 bucks vs 19.5 bucks – and may probably go with a cheaper option.
But with decoy option, the customer now compares 19 bucks vs 19.5 bucks – and most likely selects the expensive option.
Can you see a similar pattern in the pricing of iphone 11 by Apple?
iPhone: $ 699
iPhone Pro: $ 999
iPhone Pro max: $ 1099
Apple does use Decoy effect to drive consumer to buy the expensive version of their product…..
Explained very well in Dan Ariely’s book “Predictably Irrational”.