Apple's pricing strategy for its flagship iPhone has undergone significant changes over the years. The first model of iPhone was released in 2007 with a starting price of $499, which is equivalent to about $650 today. The iPhone X, released in 2017, had a starting price of $999, a nearly two-fold increase from the original iPhone.

In an interview, Tim Cook, Apple's CEO at that time, explained their pricing strategy as follows: “Well, it’s a value price actually, for the technology that you’re getting.” Which, in layman terms, means he thinks customers are going to want the iPhone X’s new features so badly that they’ll pay a lot more for them.

Cook went on to say, “Most people are now paying for phones over long periods of time, and so very few people will pay the pricetag of the phone initially.” Which still doesn’t answer the question of why Apple needed to increase the flagship iPhone’s price by more than 50% in one year. He was simply explaining why he thinks customers will still buy it despite the $1,000 price.

He was right. The iPhone X went on to become the world’s best-selling smartphone in 2018, and helped Apple achieve their most profitable quarter in history, generating $88.3 billion in the first quarter of 2018. Their risky pricing strategy paid off, and competitors took note.

With the following iPhone release in fall 2018, Apple pushed the envelope even further. They were successful in raising the average iPhone selling price from $618 in 2017 to $793 in 2018, but wouldn’t it be great to break that $800 threshold? Well, Apple gave it their best shot with their release of the iPhone XR, XS, and XS Max.

The entry-level XR started at $750, which was a $50 increase over the iPhone 8 a year earlier. The XS had the same $1,000 price as the X, but Apple decided to introduce a new model called the XS Max which had a larger display and sold for $1,100. Breaking the record set by the X of being the most expensive iPhone ever, and helping to raise the average selling price of the iPhone to well over $800 in 2019.

So up to this point in the iPhone’s history, we’ve only seen its price tag increase. But in 2019, Apple took a dramatically different approach to their iPhone pricing strategy. For the first time ever, they decreased the iPhone’s price from $750 to $700 with the iPhone 11.

While the premium 11 Pro and 11 Pro Max retained the same price tags as the XS and XS Max. But the $50 discount wasn’t the only thing that made the iPhone 11 so appealing. It was also its impressive feature set. You see, when Apple released the iPhone 8 and X in 2017, there were dramatic differences between the two models.

The iPhone 8 didn’t have an edge-to-edge OLED display, it didn’t have Face ID, it didn’t have the dual camera system, and it didn’t even have the same amount of RAM as the X. So for the $300 savings, iPhone 8 customers were giving up a lot of features.

Now, this dramatic disparity between models was narrowed with the iPhone XR’s release since it did feature an edge-to-edge display with Face ID, but its price was $50 more than the 8. And it still didn’t have a dual camera system or the same amount of RAM as the XS.

Consider the iPhone 11, it not only received a $50 decrease which put its price on par with the iPhone 8 from two years earlier, but it also received almost all of the features of the premium 11 Pro models. It has a dual camera system with an ultra-wide-angle lens, it has spatial audio, it has the same 4GB of RAM as the 11 Pro models with the same durable ion-strengthened glass.

The only compromises you’re making with the 11 is the LCD display rather than OLED, an aluminum frame rather than stainless steel, and no telephoto camera lens which means no 2x optical zoom. But most customers are happy to make these minor tradeoffs considering the $300 saving over the 11 Pro.

Despite analysts predicting a decline in iPhone sales due to customers waiting for a 5G model, sales actually jumped 8% compared to the first quarter of 2019 and helped Apple grow its overall revenue 9% to $91.8 billion. Outperforming even the most optimistic analyst expectations.

And that growth was largely fueled by the sales success of the iPhone 11, proving that Apple had struck a perfect balance between price and premium features.

Now as we look forward to a new iPhone models this fall, it’s likely that Apple will stick with their current pricing strategy and continue to offer as many features as possible in their entry-level model since it’s proven to be such a success.

"WEBVTTKind: captionsLanguage: enThe iPhone has been around for over a decadeand experienced some dramatic changes.From an almost doubling in screen size, toa major reduction in thickness.But perhaps the most undesirable change hasbeen its increase in price.The original iPhone, released in 2007, retailedfor $500.But that number has fluctuated quite a bitsince then.Reaching its lowest point in 2008 with the$200 iPhone 3G, and reaching a record highof $1,100 in 2018 with the iPhone XS Max.So in this video we’re going to explorethe history of the iPhone’s price and findout why it’s fluctuated so dramatically.This is Greg with Apple Explained, and I wantto thank Anker for sponsoring this video.If you want to help decide which topics Icover, make sure you’re subscribed, andvoting polls like this one will show up inyour mobile activity feed.So as I mentioned earlier, the original iPhone’sretail price was $500.But this is actually misleading, since thatamount only accounts for the device’s upfrontcost.There was actually an additional fee smartphoneusers had to pay after the initial purchase.And it was due to something called carriersubsides, which is an important concept tounderstand when calculating the full costof an iPhone.And it worked like this: A carrier like AT&Twould offer smartphones for hundreds of dollarsless than what they actually cost in orderto attract new customers.Then, they’d recoup their loss by tyingthose customers to a contract and chargingan additional fee to their monthly bill thatwent toward paying back the full price ofthe phone.For example, you’d buy an iPhone at an AppleStore for $500, then pay AT&T a $20 fee eachmonth which would go toward paying off thephone, on top of your monthly plan.And because the iPhone came with a two yearcontract, you’d end up paying a total of$480 in monthly fees in addition to the $500you paid upfront.Bringing the total cost of your iPhone to$980.Now let’s say once your two year contractwas over, you upgraded to the newest model.Well, you’d pay another upfront price forthe phone, and a new two year contract wouldbegin.But let’s say you didn’t upgrade to thenewest model, and continued using your iPhonewhich was no longer under contract.You might expect to stop paying that $20 monthlyfee to AT&T, but that wasn’t the case.Customers were obligated to continue payingthat fee even though their contracts had expiredand AT&T had recouped the full price of thephone.That meant the total cost of your iPhone wouldbe $1,220 after three years, and $1,460 afterfour years.Now that may sound like a crazy concept today,but two year contracts and carrier subsidieswere standard business practice at the time.And that’s exactly why it isn’t fair tocompare the full $700 price of an iPhone 11to the $200 retail price of the iPhone 3G.But there’s more to the iPhone’s pricethan carrier subsidies.Because although Apple stopped selling subsidizediPhones in 2015 with the the 6S and 6S Plus,there has still been a substantial increasein the iPhone’s price since then.In fact, the iPhone 7 was the last flagshipmodel to have a $650 price tag.In 2017, the iPhone 8 started at $700, whilethe iPhone X, the true flagship model of thatyear, started at $1,000.So what happened to cause the price of aniPhone to jump from $650 in 2016, to $1,000in 2017?Well, it was due to a couple factors.First, Apple needed to make more money fromeach iPhone they sold.Because in 2015 the company began experiencingslowing hardware sales across almost everyproduct category.And while you could say, well slowing salesisn’t a big deal since they’re still makinga ton of money.You’d be forgetting the primary goal ofany private company: To achieve revenue growtheach and every year.Because if Apple isn’t making more moneythan they did last year, then shareholders,people who invest in the company, won’tsee any returns on their investment.That means people stop buying Apple stock,their share price drops, and they become lessvaluable.So in the face of slowing hardware sales,Apple was forced to charge more for theirproducts so that they could still achieverevenue growth, even if they weren’t achievinggrowth in units sold.But they couldn’t simply increase the iPhone’sprice by $350 dollars in a year.So instead, Apple introduced several new iPhonemodels that ranged in price.First, was the iPhone 8 at $700, then the8 Plus as $800, and finally the X at $1,000.But every single model was more expensivethan $650, and the iPhone 8 was suspiciouslysimilar to the 7.Which was similar to the 6s, which was similarto the 6.Apple had used virtually the same iPhone designfor four generations, and ended up charginga premium for it with the 8 in order to generatemore revenue.This also gave customers an incentive to spendthe extra $300 for the more dramatically improvediPhone X.So considering how expensive iPhones havebecome, it’s caused many people to findother ways to save money.Like for example, lowering the cost of theirmonthly phone bill with Ting.They charge you based on how much data youuse instead of one flat rate.You can calculate how much you’d save byentering the amount of texts, call minutes,and data you typically use per month intoTing’s bill estimator.Most people end up saving almost 20% whichreally adds up over the lifetime of your device.Ting’s service is powered by Sprint, T-Mobile,and Verizon’s 4G LTE networks, so you’llalways have a fast, reliable connection.What’s also great is how easy it is to switch.80% of phones are already compatible withTing so all you’d need to do is switch outyour SIM card, and you can start enjoyinga lower monthly phone bill!So whether you’re buying the new iPhoneSE, or you’re not planning on upgradinganytime soon, you can bring your phone toTing and get a $25 service credit by goingto ae.ting.com.You can find that link in the description.Now, Tim Cook was confronted with a questionabout the iPhone X’s premium price in aninterview with ABC.When asked, “Don’t you find the pricetag for the iPhone X out of reach for theaverage American?”Cook replied, “Well, it’s a value priceactually, for the technology that you’regetting.”Which, in layman terms, means he thinks customersare going to want the iPhone X’s new featuresso badly that they’ll pay a lot more forthem.Cook went on to say, “Most people are nowpaying for phones over long periods of time,and so very few people will pay the pricetag of the phone initially.”Which still doesn’t answer the questionof why Apple needed to increase the flagshipiPhone’s price by more than 50% in one year.He was simply explaining why he thinks customerswill still buy it despite the $1,000 price.And he was right.The iPhone X went on to become the world’sbestselling smartphone in 2018, and helpedApple achieve their most profitable quarterin history, generating $88.3 billion in thefirst quarter of 2018.Their risky pricing strategy paid off, andcompetitors took note.With the following iPhone release in fall2018, Apple pushed the envelope even further.They were successful in raising the averageiPhone selling price from $618 in 2017 to$793 in 2018, but wouldn’t it be great tobreak that $800 threshold?Well, Apple gave it their best shot with therelease of the iPhone XR, XS, and XS Max.The entry level XR started at $750, whichwas a $50 increase over the iPhone 8 a yearearlier.The XS had the same $1,000 price as the X,but Apple decided to introduce a new modelcalled the XS Max which had a larger displayand sold for $1,100.Breaking the record set by the X of beingthe most expensive iPhone ever, and helpingto raise the average selling price of theiPhone to well over $800 in 2019.So up to this point in the iPhone’s history,we’ve only seen its price tag increase.But in 2019, Apple took a dramatically differentapproach to their iPhone pricing strategy.For the first time ever, they decreased theiPhone’s price from $750 to $700 with theiPhone 11.While the premium 11 Pro and 11 Pro Max retainedthe same price tags as the XS and XS Max.But the $50 discount wasn’t the only thingthat made the iPhone 11 so appealing.It was also its impressive feature set.You see, when Apple released the iPhone 8and X in 2017, there were dramatic differencesbetween the two models.The iPhone 8 didn’t have an edge-to-edgeOLED display, it didn’t have Face ID, itdidn’t have the dual camera system, andit didn’t even have the same amount of RAMas the X.So for the $300 savings, iPhone 8 customerswere giving up a lot of features.Now, this dramatic disparity between modelswas narrowed with the iPhone XR’s releasesince it did feature an edge-to-edge displaywith Face ID, but it’s price was $50 morethan the 8.And it still didn’t have a dual camera systemor the same amount of RAM as the XS.But consider the iPhone 11, it not only receiveda $50 decrease which put its price on parwith the iPhone 8 from two years earlier,but it also received almost all of the featuresof the premium 11 Pro models.It has a dual camera system with an ultra-wideangle lens, it has spacial audio, it has thesame 4GB of RAM as the 11 Pro models withthe same durable ion-strengthened glass.The only compromises you’re making withthe 11 is the LCD display rather than OLED,an aluminum frame rather than stainless steel,and no telephoto camera lens which means no2x optical zoom.But most customers are happy to make theseminor tradeoffs considering the $300 savingsover the 11 Pro.And despite analysts predicting a declinein iPhone sales due to customers waiting fora 5G model.Sales actually jumped 8% compared to the firstquarter of 2019 and helped Apple grow theiroverall revenue 9% to $91.8 billion.Outperforming even the most optimistic analystexpectations.And that growth was largely fueled by thesales success of the iPhone 11, proving thatApple had struck a perfect balance betweenprice and premium features.Now as we look forward to a new iPhone modelsthis fall, it’s likely that Apple will stickwith their current pricing strategy and continueto offer as many features as possible in theirentry level model since it’s proven to besuch a success.Alright guys don’t forget to like and subscribe,and I’ll see you in the next video.\n"