The Real Genius of the iPhone 3GS Jun 24 2009

Apple’s iPhone 3Gs has had a bit of a muted–dare I say disappointing–reception. Unlike with the 3G launch, very few of the new OS 3.0 features depend on the 3Gs model, and for most iPhone users (for me at least), there aren’t compelling reasons to upgrade.

None of that matters, though. Apple’s going to make far more money for another reason: they didn’t discontinue sales of the regular iPhone 3G. Through AT&T subsidies, you can now get an iPhone 3G for $99. That puts the iPhone in the same price category as an iPod Shuffle!!!

While Palm, Microsoft and the phone manufacturers try to figure out how to build a better (more feature-filled, expensive) iPhone, Apple snatched the floor out from under the market. There’s very little distinction now between “regular” phones and “smart” phones in terms of price now, and Apple is making the best smart phone at the cheapest price. I wouldn’t be surprised to see iPhones completely dominating the entire phone market soon, forget about dominance in the smartphone category.

Update: I’ve since realized that the iPhone 3Gs might be what Dan Ariely calls a “decoy choice”. The expensive, top-of-the-line 3Gs causes the iPhone 3G to appear as a middle-of-the-road, value-conscious choice, by virtue of its straightforward comparison with the more expensive model. Ariely’s book Predictably Irrational, describes Williams Sonoma’s successful use of this technique to sell the first bread machines.