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Does a $99 iPhone break the psychological barrier to buying?


Sure, the reduced price on the iPhone 3G 8GB model is swell, but is there something magical about 99 dollars? The AP story on yesterday's product announcements gets a quote from analyst Michael Gartenberg where he seems to think there may be some retail psychology at work:

"Every $100 you move down in consumer electronics brings in a lot more customers," [Gartenberg] said. "Ninety-nine dollars is a psychological price point, so that's a real barrier to move through. It becomes something people can afford - it becomes an affordable luxury.
In my experience, a $99US item is right at the point where I can at least consider buying it on impulse without consulting my spouse; this was the case with Palm's Zire handheld when it debuted, and it includes the iPod shuffle now. Anything that could be a 'checkout line' purchase should hit at that price point or below, so it's all well and good to include the 8GB 3G in the mix for new or over-contract purchasers... but knowing that the real cost of the phone is in the two years of voice and data, will consumers bite in large numbers? The Wall Street Journal cites Sanford Bernstein analyst Toni Sacconaghi's guess that the price cut could increase iPhone demand as much as 50%, even with the presence of the 3G S at the top of the food chain.

Is iPhone demand that price-elastic? I have my doubts... but it's worth noting that the numbers from the first quarter, where RIM had to give away a free Curve with every purchase to catch up with Apple in handset sales, indicate that the smartphone market can definitely get a big boost from price cuts.

[via MacDailyNews]

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