Apple Price Strategy Essay

iPhone4s is a product from Apple which sells in oligopoly competition market. As we know, the characteristic for oligopoly competition market are product differentiation, few sellers but many buyers in the market, high barrier market entry and exit, price maker in the market and spend money in advertisement. It has a few of competitors, such as Samsung Galaxy S2 (RM2099), HTC One X (RM2099), Motorola Rarz (RM1999), Sony Xperia S (RM1899) and Nokia Lumia 900 (RM1799). To enter oligopoly market, it has a high barrier.

Therefore, Apple is the price maker. Their products are inelastic which means that the products price change would not make a big difference in the quantity demanded as customers will still buy the iPhone4S because of its superior value, benefits and features it provided to the customers. Apple Smartphone always has more function than its competitor. For example, iPhone4s have unique function for their own brand which is Siri Voice Assistant, the voice-activated personal assistant exclusive that other company phone does not have it.

Samsung Galaxy S2 has excellent keyboard dictation software, but its do not have the same system-level integration Siri does. With Samsung Galaxy S2, you will need apps like Vlingo or Jeannie to help you with answering questions but they are still not half as good as Siri. Apple used their unique function to attract their customers . Apple are using value-added pricing strategy to attract customers instead of cutting price. Product differentiation is a process of creating real or apparent differences between goods and services and a differentiated product has close but not perfect substitute.

For example, the substitutes of our chosen product are Samsung Company’s product which is Samsung Galaxy S2. There are a lot buyers and sellers in the current market. They are also known as price maker in the market power, therefore the sensitivity of demand to changes in price are inelastic, which means the demand of the product slightly changes varies to the change of price. Apple manage to improve the quality, durability and graphic of the Apple product successfully attract the customer on Apple’s product. 2. 2. 2 New Product pricing strategy

For the new product strategy, Apple practice the market skimming pricing strategy on their products, iPhone4s sets a high price for their products, Apple as to ‘skim’ revenues from different level of segments which target from the top, the one who willing to pay high price. As by practicing this strategy, Apple might just make fewer sales in the market but they gain more profitable sales. When the iPhone4s once launched in the market, the selling price is RM2199 (16GB), RM2599 (32GB), RM2899 (64GB). Subsequently, a year later, when a newer version of iPhone has announced, iPhone5, apple decided to lower down iPhone4s price to be RM1799(16GB).

The price has relatively decreased RM400 for iPhone4s (16GB) because they have earned a big sum of revenue throughout the year of the launching of iPhone4s. The iPhone4s price will continue to fall gradually in the market when apple continue releasing new version of the iPhone to the market each subsequent year. It is done so hoping to attract new buyers who are not willing to pay RM2000 and above for an iPhone, therefore, they have to skim the price of each older version of phone to attract those potential buyers and the targeted buyers who are willing to pay more will get the newest version of iPhone.

Samsung also practice the market skimming pricing strategy as they set a high price on their product so as to ‘skim’ revenues layer by layer from the market, however the price set for Samsung Galaxy S2 lower, RM2099 (16GB). This mainly because iPhone 4S has higher quality compared to Samsung Galaxy S2 in term of packaging, software, and special design and features. Apple iPhone as a market skimmer, the competitors would not be easy to enter market and undercut their price. iPhone4s built-in rechargeable 1420 mAh capacity lithium-ion battery with a talk time 14 hours and Standby time is up to 200 hours.

Samsung Galaxy S2 added a rechargeable 1650 mAh capacity lithium-ion battery with talk time 8. 6 hours and Standby time is up to 168 hours. Although the capacity of iPhone4s is smaller than Samsung Galaxy S2, but its talk time and Standby time is more than Samsung Galaxy S2. That is one of the reason why Apple able to standardize itself with the top competitor Samsung which have produces Samsung Galaxy S2. 2. 2. 3 Product Mix Pricing Strategies 1) Product Line Pricing For product mix pricing strategies, iPhone4s use the product line pricing strategies to set its prices for its product.

For each product of the company have different range prices. Company usually develops product line rather than single product. In product line pricing, management must decide on the price step by step between the various products in a line. For example, under Apple iPhone line, iPhone 5 has just released with new features and benefits that are compatible with the current technology which is coming to Malaysia therefore, the price of iPhone 4 8GB has relatively decreased from RM1799 to RM1449 and iPhone4s 16GB from RM2199 to RM1799.

So when Apple iPhone product line launch different type of version each subsequent year, hence, they will be selling at a different price ranging from low to high according to its feature. Basically it means that customers will get what features in the phone relative with what amount they are willing to pay for. For example, Apple have first launched iPhone 3G and started to improve the phone quality and came out with iPhone 3GS, iPhone 4, iPhone 4S which have a better and improved features such as RAM, processor and storage in each subsequent product.

The iPhone4s is selling higher than the iPhone 4, iPhone 3G S,and iPhone 3G due to the fact that iPhone4s comes with an unique function which is Siri Voice Assistant. The design of the iPhone4s is also aesthetical and unlike other products produced by itself. Since customers are able to evaluate the different features of each product, they will inevitably come to a conclusion that the price for the iPhone 4s is reasonable due to the performance of the Smartphone as well as the satisfaction the product delivers to the customers.

Apple is setting a lower price to its iPhone when a newer version is introuduced in order to keep and grow their customers as their competitor; Samsung is lowering down the Galaxy S series of phone when each new product is announced. Samsung Galaxy S2 has recently dropped from RM2199 to RM1999 and now is selling at RM1499 only when Samsung Galaxy S3 and Samsung Galaxy Note 2 are launched. 2) Optional Product iPhone4s have many different price that set by the mobile communications company in Malaysia which is Digi, Maxis, Celcom and U Mobile with their plan. The telecommunication company in Malaysia has makes many different lan for iPhone 4S for every different customer’s data usage rate. For example, Celcom have i68, i98, i148 ,i248, the Digi have iDigi88, iDigi138 and iDigi238, Maxis telecom have ivalue 1, ivalue 2, ivalue 3 and ivalue 4, U Mobile have u28, u58,u88. Consumer can get the iPhone 4S there with a cheaper price than outside if they buy the plan that provide by the telecommunication company. They have different price based on what they offer in their plan. (Refer to Figure1. 5) For example, iDigi 88 offer the 1GB internet Data, 200 minutes voice calls, 200 SMS and 20 MMS with the monthly payment RM55 and the contract is 2 years. )

Product Bundle Pricing Besides buying the products that have to be used together with the iPhone4s separately, Apple also enables consumers to buy a complete package of the iPhone4s, equipped with Dock connector to USB, RM119, Apple earphones with remote and microphone, RM109, USB Power Adapter, RM69. (Refer to Figure1. 6) Customers will be able to get iPhone4s, dock connector, earphone and power adapter with just RM2199, RM2599 and RM2899 only. This mix pricing strategy will help appeal to users who see an opportunity to buy more of the Apple products at a slightly lower price. . 2. 4 Price Adjustment Strategies There are a few price adjustment strategies used by Apple to sell its iPhone4s. The strategies are segmented pricing and psychological pricing. 1) Segmented Pricing Apple products are sold segmental according to product form and location pricing. The different types and series of iPhone sold by Apple are charged differently since they upgraded their features that are not present in the old version. Some series are priced higher than other because of additional functions which are not present in older version.

Other series of iPhone by Apple only targets one specific segment of consumers for each particular product. The location for each product also varies in different locations. The prices of the iPhone4s sold in different countries are different than the ones sold in Malaysia. (Refer to Figure1. 7). This is due to the different locations whereby the cost of shipping as well as the tax imposed by the government significantly affects the selling price of the product. 2) Psychological Pricing Consumers usually perceive products as having a high quality if the prices at which they are sold are higher.

Since the iPhone4s is selling at a high price, the consumers will automatically perceive the product to be of high quality. The unique function for their Apple Iphone4S which is Siri Voice Assistant also helps consumers justify the high prices psychologically and thus, perceive an impression that the product is of a high quality. iPhone4S have A5 chip delivers up to 2x faster performance, 8 megapixel iSight camera,1080p HD video recording, iCloud stores your music, photos, documents, App Store can browse more than 500,000 apps, etc (Refer to Figure1. 4) .

Therefore, customers are willing to pay RM2000 and above for a smartphone, iPhone4s with these interesting, user-friendly and high productivity features rather than a nokia 3310 which cost only RM150 but can just send SMS and call. 3) Discount and Allowances pricing iPhone4s have make some discount and allowances to reward the customer. Apple Company are cooperated with many communication company by offering with the packaging, they do make the discount seasonal. For example, during the 2012 Hari Raya, Celom provide the 16GB iPhone 4s can be as low as RM268.

Celcom also offer great benefits to subscriber which is ZERO upfront payment, Up to 6GB data, 6000 MINUTES of FREE CALLS within network, Commitment fee from as low as RM98 a month and 10% DISCOUNT on accessories. Next, Apple provides a Reuse and Recycle Program to reward the loyal customers. Customers could recycle their old iPhone to receive a gift card in order they can get iPhone4s at a discounted price. The gift card credit is differ according to the lifespan, series, and outlook of the iPhone.

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