The Apple One subscription provides a great lesson on how to price bundles

The Apple One subscription bundle should change its pricing or offering if it wants to attract more consumers.

December 23, 2020

In October, Apple announced that it was launching a services bundle: Apple One.

With pricing plans starting at ~$15/month, customers could get access to cloud storage, Apple Music, Apple TV Plus, Apple Arcade, and more.

According to Rob Litterst — a contributor to The Hustle and writer of business strategy newsletter Good Better Best — the bundle actually has a problem…

… and it has to do with fandom

Shishir Mehrotra — the CEO of Coda and a Spotify board member — tells Litterst that consumers are either: 

  • Super Fans, who would 1) pay retail for a good, and; 2) have the activation energy to find it
  • Casual Fans, who lack one of the 2 Super Fan criteria above
  • Non Fans, who ascribe zero (or perhaps negative) value to having access to the good

An effective bundle attracts Casual Fans and Non Fans that otherwise wouldn’t purchase either product.

However, Shishir explains, most bundles are priced to appeal only to Super Fans of both products, limiting the opportunity to reach new customers.

The Super Fan test applied to Apple One

To gauge the opportunity of a given bundle, Shishir asks, “For how many products in the bundle do I have to be a Super Fan to justify paying for it?”

In the table below, you can see the pricing for each individual Apple product: Apple Music ($10), Apple TV+ ($5), Apple Arcade ($5), iCloud ($1).

Based on individual pricing, paying $15 for the bundle only makes sense for consumer types in example A (Super Fans of Apple Music + Apple TV Plus) or example B (Super Fans of Apple Music + Apple Arcade).

Critically, if someone isn’t a Super Fan of Apple Music, there’s no way to justify paying for the bundle.Shishir calls this an “Add-On Bundle,” essentially a retention play geared toward current Apple Music subscribers. If Apple wanted mass adoption, a price around $10 would be way more enticing.

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