Price Sensitivity and iPhone Repair

For an equivalent good or service, different people almost always have different willingnesses or abilities to pay. You can see a simple example of this when you break the screen on your phone.

The average consumer would take it straight to Apple, who would charge you $100-300 and either repair it or just hand you a new (refurbished) iPhone to replace it. You're paying quite a bit for a pretty simple fix, but you also get the peace of mind of a manufacturer-supported, official support channel.

A savvy techie might do the whole repair himself. For $30-140 (depending on the phone), iFixit will sell you the parts you need and show you how to open up and fix the phone. A significant savings over Apple, but on the other hand, if you're not deft with your hands you could break the part or even void your warranty. We save a little money going the DIY route, in exchange for some amount of risk.

Right in the middle of the two extremes are the third-party repairmen. Whether they're mail-in or local, these services undercut Apple by anywhere from 30-75%. After trying and failing to fix a 3GS screen in 2008, I contacted a neighborhood guy on Craigslist, who had me on my way with a new screen in 10 minutes for $50.

With the right marketing, a single company might be able to offer a product that's compelling to each of these customers– an expensive white-glove service for the rich and risk-averse, a cheap DIY kit for the very price-sensitive, and a referral to a network of third-party contractors to capture the middle ground. That last one's a little tricky, though– you want to certify the contractors so your name isn't associated with poor quality, but you also want to communicate the added value of your more expensive tier. The technical term for this is price discrimination, creating different tiers of products for consumers with different willingness-to-pay or information about a product.