Apple Dials Up a Clever Pricing Move

The new Apple iPhone 13 Pro and iPhone 13 Pro Max.

Photo: apple inc handout/Shutterstock

Apple Inc. AAPL -0.96% seems to have figured out how to deliver a price increase only to customers who choose it. Many probably will.

Like all electronics makers dealing with rising component and shipping costs, Apple is under some pressure to raise its prices. But the company appeared to resist the urge during the big reveal Tuesday of its latest iPhone models. During the virtual event, Apple noted that the starting price of the iPhone 13 and 13 Pro models was the same as those of last year’s iPhone 12 models. This might have disappointed some investors expecting Apple to protect its famously high gross margins; Apple’s share price slipped 1% following the event by the closing bell.

But the company also added some enhanced memory options to its lineup. The new iPhone 13 Pro and Pro Max models include versions with a whopping 1 terabyte of storage—nearly double the highest memory available in previous years.

Likewise, Apple added 512GB options for the iPhone 13 and 13 Mini options that also weren’t available in last year’s models of the iPhone 12 and 12 Mini. All told, the average price of the new iPhones introduced Tuesday comes in at around $1,106—nearly 11% higher than the $999 average of last year’s new models.

Not all iPhone buyers will pay up—the most expensive version of the Pro Max now sits at nearly $1,600. But Apple’s customer base includes many who prefer the best and biggest; the Pro and Pro Max versions of the iPhone 12 have accounted for 44% of total iPhone unit sales over the last three quarters, according to consensus estimates by Visible Alpha.

And many have learned to spring up for memory as sharply improving smartphone cameras inspire more picture-taking. Apps are expanding as well. Sensor Tower reported earlier this year that the average mobile game file size on the App Store in the U.S. has surged by 76% since 2016.

Apple isn’t all about the high end: The company kept 10 older iPhone models for sale on its site after the new iPhone 13s were added on Tuesday. It also cut the price on those models by an average of 11% while keeping the entry level iPhone SE starting at $399. That brings the number of iPhones sold as new by Apple to a record high of 24 configurations—a notable shift for a company once famous for brutally paring its product lines. But today’s Apple is the world’s most valuable company, which means it needs to do more than just upsell its base.

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Write to Dan Gallagher at dan.gallagher@wsj.com

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