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Apple Price and Promotion

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Apple Price and Promotion

Apple Inc. is one of the most revered and profitable brands in the world. Operating in the

consumer technology industry, Apple has revolutionized mobile phones, computers, and the like

as well as changing communication as the world knows it. Individuals still line up outside of

stores for phone releases and eagerly anticipate them and other products even though the brand

has been criticized for its lack of creativity in recent years, especially after the death of co-

founder and chief executive officer (CEO) Steve Jobs. Nevertheless, Apple is still one of the

most revolutionary brands in the world and its internal strategies have all played a part in its

success. For all of its popularity, Apple is an expensive brand and its products retail at a

minimum of $300, extending into the thousands of dollars for larger and more advanced pieces

of technology. This coupled with its unorthodox promotion strategies have made for unique

branding for the company.

The most common pricing strategies are premium pricing, promotional pricing,

penetration pricing, economy pricing, and psychological pricing. Each of these are used in a

firm’s pricing strategy to determine its place and future within its respective market. Apple is

known to employ a premium pricing strategy which is evident in the high price points for its

smartphones, especially. Current chief executive officer Tim Cook told Bloomberg Business in

2013 that Apple has “never had an objective to sell a low-cost phone” (Grobart, 2013), instead

focusing on providing the ultimate consumer experience; price was not the priority. Promotional

strategies for premium pricing are done to convince the consumer that the price is reflective of

higher quality and other intangible characteristics. In this case, customers are not only paying for

a high technology phone, but the brand name behind it that has changed the world since its

inception. Apple targets consumers who are not price sensitive in its promotional strategy. The
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focus in both Jobs’ and Cook’s leadership at Apple is to make the best phone, irrespective of

price, and “focus on the high end” and making people eager for new products. Specifically,

Apple uses a minimum advertised price (MAP) retail strategy. This prohibits resellers from

selling a brand’s products below a certain minimum price. Apple offers mass merchandisers like

Walmart, Target, and Best Buy wholesale discounts, but these discounts do not amount enough

to give consumers a discount at those stories, so buying an iPhone or other Apple product will

not yield significant cost savings, if any. Ensuring a high-quality customer experience is endemic

to Apple’s brand. For firms that employ premium pricing, it is imperative that the offerings

justify the price. However, with criticisms of Apple and its declining quality and innovation in

recent years, the saturation and competition in the markets could put Apple at risk of losing its

iconic status. Its promotions take the same minimalist approach that its product design does. Its

billboards and television advertisements have limited verbiage and spoken word, instead

focusing on summarizing its features and letting the product speak for itself. Apple understood

the importance of this early on in its busines and took out lists of features, special effects, and

even the price. However, Apple’s sales have fallen; this has caused critics to posit whether or not

the company has cannibalized itself. With higher quality smartphones comes a long life and less

of a need to replace them. For Apple, who releases a phone yearly, customers are not finding the

new phones to be worth investing in or justifiable of an upgrade (Bursztynsky, 2019). Apple’s

recently released iPhones have had good responses, but in a highly competitive smartphone

market it remains to be seen how Apple will fare.

Penetration is used by businesses to enter the market and attract customers to a product or

service by offering a lower price initially. This helps the business gain a customer base and, at

times, it may only be for a certain amount of time. Promotional strategies reflect the firm’s need
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to increase profit and win market share. This is a long-term strategy that gets consumers to love a

brand’s product, increase their willingness to buy from the brand, and make them a long-time

and satisfied customer. Penetration pricing strategies are employed across several industries

including travel and tourism and consumer product goods. Advertising will typically encourage

customers to buy with verbiage that alludes to limited offerings and short periods of time for

customers to purchase. This creates both urgency and demand for products and services initially.

Penetration pricing is similar to economy pricing in that both set prices low, but the latter keeps

prices at low levels throughout the business lifespan. Economy pricing is volume-based and

helps companies to survive by spending less on production, marketing, and promotion. Generic

grocery store brands are good examples of economy pricing as less expensive name-brand

alternatives that do not spend on advertising and out-of-store promotion. Generic brands are

usually seen next to name-brand products and items. Products and services of firms that use this

strategy are looking to fill a need in a market, especially for consumers with less income to

spend. Economy pricing firms meet the need for demand and the lowest possible cost.

Psychological pricing uses human psychology to boost sales. The best example of this is the 9-

digit effect: pricing something with 9 at the ending to make customers thing it is a good deal, e.g.

$9.99 instead of $10. This is commonly seen in buy one, get one half off (or free) deals by

companies in many industries. These use principles of psychology that already exist in order to

make customers feel like they are saving money or getting more for what they pay. Finally,

promotional pricing strategy is one in which brands reduce the price of a product or esrvice to

attract customers, similar to penetration pricing in that both are for certain periods of time and

look to create a sense of scarcity. Advertising and marketing using the promotional pricing

strategy look similar to penetration pricing and use verbiage and imagery that make customers
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think that there is a small window of time to engage with the brand at a lower price point than

usually. For example, Black Friday and Cyber Monday shopping in the holiday season are

periods of flash sales in which customers can buy their favorite products at much cheaper prices

than throughout the year. These events have created total frenzy in consumer markets with

merchandisers cutting into the holidays in order to bring people in to participate in purchasing

items at steals and deals. Other methods of promotional pricing advertising include coupons,

BOGO deals, and loyalty programs.

The pricing strategies of organizations are meant to reflect the value of the product or

service being sold. For Apple, this has worked despite criticism of the brand in recent years. Last

year, Apple reached trillion-dollar value, so it appears that what it is doing still works in spite of

accusations of a lesser culture and less innovation than under the leadership of Steve Jobs.

Setting pricing strategy can be difficult, but it is important for organizations and the models are

instrumental for helping firms set the right prices and the right goals.
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References

Bursztynsky, J. (2019, September 11). iPhone 11 pricing shows Apple is learning from past

mistakes, analysts say. CNBC. https://www.cnbc.com/2019/09/11/iphone-11-pricing-

shows-apple-can-learn-from-past-mistakes-analysts.html.

Grobart, S. (2013, September 20). Apple CEO Tim Cook's Complete Interview With Bloomberg

Businessweek. https://www.bloomberg.com/news/articles/2013-09-20/apple-ceo-tim-

cooks-complete-interview-with-bloomberg-businessweek.