Four Ps of Marketing Assignment - Module 4: Promotion

Running Head: APPLE’S PRICING STRATEGIES 1

APPLE’S PRICING STRATEGIES 2

Week 2: Apple's pricing Strategies and Revenue Models

Edina Purser

University of Mary

BUS 610 Marketing

Ronald Semarge

22/10/2020

Apple Inc's., Pricing Strategies and Revenue Models

Apple is among the planet's most diversified firms and, as such, has a unique pricing strategy. Pricing refers to the element of a marketing mix with the product's price ranges. Apple's pricing strategies mainly outlines how it links its prices and operational activities to the various market forces and the prevailing environment within the IT sector (Zhau, & Gupta, 2019). Therefore, its pricing strategy and revenue structure include multinational operations within the IT market, internet services, and the consumer electronics market, among others, including digital content distribution. This implies a highly diversified business whose pricing tactics focus on stiff competition, mainly from Samsung, Sony, Lenovo, Amazon.com, and Google (Zhau, & Gupta, 2019).

Operating in one of the most competitive markets, Apple has created a positive public image that has promoted good demand for its products over the years. As such, Apple's brand image influences its pricing strategy. Mainly marketing its products as premium goods, Apple ensures product exclusivity and thus can manage premium pricing and other pricing strategies as deemed necessary depending on completion and other market forces. Below are the various pricing strategies applied by Apple Inc.

Premium pricing- Apple mainly utilizes a premium pricing strategy. This strategy primarily focused on providing products at a premium, an amount applied in addition to the original price. Apple's use of this strategy makes its product prices higher than its competitors. For instance, despite having almost similar features and designs, Apple's products retail higher than Samsung and Sonny (Zhau, & Gupta, 2019). Apple's pricing strategy, therefore, allows it to maximize its profit margins thus can compete effectively. Despite Apple's pricing strategy being regarded as a weakness, the combination of premium pricing and product exclusivity allows for competitiveness that makes Apple business more viable than its competitors (Zhau, & Gupta, 2019).

Skimming pricing strategy- Apple applies this strategy when launching new products. The skimming pricing strategy is most favorable when introducing new products believed to have superior features. Thus they are above the market competition. This strategy works by allowing a firm to charge higher prices on new products but gradually reduce it when new products are introduced into the market or until there's enough competition (De Toni et al., 2017). Given Apple's superior brand image, it can effectively apply this strategy while introducing new products. For instance, when Apple launched the iPhone 8 series, they originally retailed as high as $150.55-120.00. When Samsung introduced the Galaxy series, its prices declined to as low as $67.99 in Amazon and Target (Zhau, & Gupta, 2019).

Minimum Advertising Pricing (MAP)- This is a pricing strategy that prohibits third-party retailers, suppliers, and other re-sellers from marketing, promoting, and advertising Apple's products below its originally stated standard minimum cost (De Toni et al., 2017). As such, this pricing strategy protects the producers from price competition, especially by third party retailers. This strategy further promotes Apple's premium-pricing system as it allows various retailers, for instance, AT&T or Wal-Mart, a minimal marginal wholesaler's discount. This discount enables just as adequate as possible savings by retailers to ensure that they don't offer consumers higher discounts than set initially by Apple; thus, all third party retailers retail at the same price initially set by Apple price (Wu, 2017). Facing stiff competition, some retailers may opt to retail Apple's brands at higher discounts; Apple manages this situation by offering higher incentives and discounts that ensure adequate savings, thus compelling the retailers to sell at its fixed prices (De Toni et al., 2017).

Captive pricing- This pricing strategy is mainly applied by firms who produce complementary goods; products or services whose usage require other product/services. This strategy involves lowering the main product prices but highly pricing the captive products (De Toni et al., 2017). As such, the clients will be drawn to the product's minimal price but forget the additional products' high costs. Apple uses this strategy as all of its products require specific software and gadgets that can only be acquired on Apple Stores and Apple App Store or the iCloud (Wu, 2017).

In conclusion, Apple operates in one of the most diversified and competitive markets. Therefore, its pricing strategy must include specific designs meant to alleviate competition, emphasizing premium branding while encouraging a positive brand image for better sales. Therefore, Apple pricing strategies must give much power to a stronger brand image provided that its marketing mix is mainly linked to premium pricing.

References

De Toni, D., Milan, G. S., Saciloto, E. B., & Larentis, F. (2017). Pricing strategies and levels and their impacts on corporate profitability. Revista de Administracao (Sao Paulo) 52(2), 120-133.

Wu, C. H.. (2017, July). Pricing strategies and decisions in a Bertrand competition with Markov process. In 2017 6th IIAI International Congress on Advanced Applied Informatics (IIAI-AAI) (pp. 41-45). IEEE.

Zhau, L., & Gupta, S. M. (2019). Marketing Research and life cycle pricing strategies for new and remanufactured products. Journal of Remanufacturing, 9(1), 29-50.