iPhone Ultra strategy may work, but could easily backfire on Apple

Could Apple be planning a new iPhone Ultra that will cost even more than the Pro Max? This is a weekend earnings proposal, and it could be backed up by a hint made by CEO Tim Cook in last week’s earnings call.

Asked about the company’s continued push to increase the average selling price (ASP), Cook said:

The iPhone has become an integral part of people’s lives. It contains their contacts, their medical information, their banking information, their smart home and so many different parts of their lives, their means of payment and – for many people. And so I think people are willing to really go all out to get the best they can afford in this category…

It was previously reported that the upcoming Pro Max model could be renamed Ultra to match the Apple Watch, but Bloomberg’s Mark Gurman suggested an alternative.

Instead of rebranding the Pro Max as “Ultra,” Apple could add an even higher-end iPhone on top of both Pro models. Internally, the company has discussed just that — perhaps by the release of the iPhone in 2024.

Price trend for top-end iPhones

If true, it makes sense why Apple is considering this move. The company has gradually raised the prices of its flagship iPhone models higher and higher, and all evidence suggests that the proportion of people choosing one of the Pro models has increased, not decreased.

Let’s take a look at the price of the most expensive iPhone (top tier, max storage) Apple has offered since the iPhone 8:

iPhone 8 Plus: $949 iPhone X: $1,149 iPhone XS Max: $1,449 iPhone 11 Pro Max: $1,449 iPhone 12 Pro Max: $1,399 iPhone 13 Pro Max: $1,599 iPhone 14 Pro Max: $1,599

There have been a few pauses and one drop, and these are pre-inflation prices, but it’s undeniable that the general trend has been towards even more expensive highs.

The fact that Apple continues to push the boundaries clearly shows that there are enough people willing to pay that kind of price for Apple to make these models. Indeed, in the case of the iPhone 14, all available data indicates that the Pro and Pro Max models are more popular than the base ones.

The success of the Apple Watch Ultra

Then there’s the Apple Watch Ultra. The Apple Watch Series 8 starts at $399 and the Ultra is literally double the price.

Again, all available data indicates that Ultra has been a great success.

Apple has demonstrated that thinking big is at work when it comes to pricing.

Small-medium-big tricks

There’s an old sales trick first made famous by drinks.

If you give people two sizes to choose from, small and large, many people will choose small. If you add a medium size, most people will choose it even if it is the same size and price as the old large. The new large one is just meant to make the medium look like a smarter choice.

So if Apple makes an Ultra, it could make the Pro Max a smarter choice, boosting sales for what is currently the top tier.

There is a variation of the small-medium-large technique known as the lure trick. With this, you make the difference in price between medium and large so small that buying medium seems stupid. A classic example is the price of drinks at, say, $2, $4, and $5 for large sizes. If you were planning on buying a $4 drink, it’s designed to make you think it would be stupid to do so when you get a lot more for just a dollar more.

One could argue that Apple is using this trick with the iPhone 14 lineup:

The base model iPhone 14 (small) is $799, while the iPhone 14 Pro (medium) is much better and only $200 more, which equates to a fairly small difference in monthly costs. This may well be to make buying the base model look silly if you can afford the Pro.

Similarly, the iPhone 14 Pro Max (large) offers a significantly larger screen and better battery life for just $100 more. For those who don’t hate the size, this can be done to make buying a Pro look silly, even if you’re buying directly.

So anyone who was thinking about buying the base model can easily upgrade to the Pro. Many who were planning to buy a Pro can easily resell the Pro Max. Apple may well extend this approach to the iPhone Ultra.

But iPhone Ultra strategy rumors could backfire

I pointed out the $100 price difference between Pro and Pro Max. I’m sure this has convinced many to pay a relatively small amount for a larger model.

But… there are those who want better features in a more pocketable phone. Some of them already consider the Pro Max too big, more like a small tablet than a big phone. Apple has treated them well this year, making the Pro and Pro Max identical in features, but this year we expect the periscope lens to be exclusive to the Pro Max – and Gurman suggests that the Ultra in 2024 can combine the best features with even larger screen size.

Tying features to screen size risks alienating those who want better performance in a more compact phone. The bait trick might even end up working the other way around: instead of making the Ultra look good, it might instead make the Pro Max look overpriced.

What’s more, it could raise suspicions that Apple is deliberately hiding features that could easily be included in cheaper models, just to get people to buy more expensive ones.

So I think Apple needs to be a little careful. It may not be the smartest move to introduce a new top model that will make extra money if it alienates those who have historically been Apple’s most profitable customers.

Much smarter, in my opinion, would be to keep the same feature set and physical size, and use materials and design changes to differentiate the top tier.

What is your point of view? Assuming the iPhone Ultra has a bigger screen and more features than the Pro Max, should Apple make it? Or has the company gone far enough? Take our poll and share your opinion in the comments.

Conceptual image: 4RMD