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Pricing Strategy – Apple’s Case

Pricing strategy is one of the most important business strategy. The wealth of your business in much will depend on that pricing strategy and customers perception about your prices.

I am Apple’s iPhone user nearly one year, and now I am close to make a decision to buy an iPad. In the same time, my future considerations are firstly to buy a Mac and after that to transfer my operating system on all my equipment from Windows to Mac. I don’t know why, but I feel that I am starving for their products. It’s probably connected with their so successful product launch strategy for each of their products.

I know that Apple is a very good at product launch strategy when they encourage starving, but I didn’t even think about their pricing strategy at all. Last week I read really good post from Ben Kunz about Apple’s pricing strategy on Bloomberg Businessweek on msnbc.com.

Look at these two points about Apple’s product prices that the author mention in the post:

The popular iPod Touch media player has been revamped at three price points – $229, $299, and $399 – all costing more than the iPhone, which does everything the Touch can plus make phone calls.

The current iPad costs $499 in its lowest-powered configuration vs. the Archos 7 Home Tablet ($189) or the Dell Streak ($299 with a two-year AT&T contract). And competitors are rushing to offer more functionality for hundreds of dollars less; the Streak tablet throws in a videocam and phone, which iPads don’t yet match.

To succeed in this pricing strategy the business must have much more than a product or the technology. This need combination of different business strategies that can be used to increase overall business potential.

First I must think that all products are brilliant. After that I will look at prices of iPod Touch and compare it with the iPhone and probably will choose to buy iPhone because it is reasonable thinking. The iPad features and all that buzz around it will make me to starve about a device like that and probably will buy after some period of time. My mind is prepared that for such a product, I will pay $500. Meanwhile if it became cheaper with launching of next generation of the product I will be more satisfied. And at the end with all of that Apple’s products in my hands I will purchase some songs, buy some applications and rent some video.

That’s the whole cycle in that pricing strategy.

And at the end the author advise is:

Watch Apple, and you can learn pricing tricks for your own business.

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  • Aleksandar

    Would you agree that the creation of starvation buzz for their products is largely artificial and based more on perception and less on actual need for such priced technology, which in the case of the IPad doesn't even match the competitor offerings? What I find interesting and sometimes I consider even amazing (and I found this to be the case with some of my college professors) is the effects such campaigns have even on people that are fully aware of the somewhat manipulative approach of these brands but still decide to go for their products. That shows how effective these buzz creating launch campaigns can be on everybody, not just on the average consumer, regardless of how informed and aware he/she might be.

    • http://www.entrepreneurshipinabox.com Dragan

      Yes Aleksandar I agree that as a first step in the process is more on perception and less on the actual need for such a product. However, after first purchase (for example, example one product – iPhone I find the ways that increase my productivity) and finding every day more and more benefits I become the fan of the brand. In the last several days, I've been working on a project where presentations, meetings and decision making are the crucial elements. What is interesting is that now I cannot imagine my life without that product. If the person finds benefits from the first purchase it is more probably that it will continue with purchasing of another product with higher price.