Apple's pricing strategy keeps consumers spending more

Apple offers a variety of products - iPhones, iPads, iPods, not to mention Macintosh computers - that have been copied by other technology companies, often for hundreds of dollars less. So why does everybody still spring for Apple's products, even though they're much more expensive than competitors' offerings?

Yesterday, Apple announced a new series of its popular iPod MP3 player that will include touchscreen technology on even the smallest versions, as well as front-facing cameras on some models for video conferencing. The products come in three prices: $229, $299 and $399.

According to Ben Kunz at BusinessWeek, compared to the $399 "decoy" model, the $229 iPod seems like a great deal - even considering that the iPhone 4, which does everything the iPod can, plus more, costs just $199 with an AT&T contract.

Apple also attracts customers by releasing products for high prices, then dropping those prices rapidly, creating a reference point that makes the cheaper price seem like a steal. "You may be on the fence for a $499 iPad," Kunz writes, "but if it drops to $399 by Christmas, won't you feel better?"

In addition to its new line of iPods, Apple also released a new version of its media player, Apple TV, as well as an updated version of its popular iTunes media download center, iTunes 10.