Excerpt from LinkedIn:

Last month, Apple CEO Tim Cook announced the long-anticipated iPhone 5S, and also a second product, the iPhone 5C, with a suggested retail price starting at $99. While Cook later argued that the 5C was not intended to be an entry-level device, it is clear that the less expensive device—Wal-Mart is currently selling it for $49—could enable less affluent customers to join the Apple family.

Basic economics strongly support this reasoning: demand for a product or service goes up as the price goes down. Keep prices low; encourage high demand. But oftentimes, lower prices have a paradoxical effect. In fact, lower cost is often equated with cheap, and nothing could be worse for Apple than having that association. It is one of the reasons that Steve Jobs always priced his products higher than others, even at the risk of losing market share.

The alternative to reducing prices is to eliminate them entirely. For many products and services, it’s not acceptable for the price to be low: it must be free. Apple may have been better served by giving the iPhone 5c away for free.

Read the whole article on LinkedIn, where it originally appeared.

(Photo Credit: wicker_man, Flickr)