To set a competitive pricing strategy, a company must set the initial price and then implement a well thought out plan to chance prices in the future.
The pricing of a product usually stems from the following three factors:
- Fixed costs such as the cost for raw materials
- Variable costs such as sales tax import and export duties
- The profit that the company makes
Apple is a well-known household name today and most all households own at least one Apple device. In 2013, Apple’s CEO Tim Cook told Bloomberg Businessweek, “We never had an objective to sell a low-cost phone. Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”
Steve Job’s original strategy for apple was founded on the following four principles:
- Offer a small number of products
- Focus on the high end
- Give priority to profits over market share
- Create a halo effect that makes people eager for new Apple products
Apple’s pricing strategy relies on product differentiation, which focuses on making products unique and attractive to its consumer base. Apple has been successful at differentiation and thus creating demand for its products. This combined with their brand loyalty, allows the company to have power over their pricing. By establishing the loyal customer base and keeping their prices high, Apple has set up an artificial barrier to entry for their competitors.
Apple utilizes a minimum advertised price, or MAP, retail strategy. This strategy prevents retailers from pricing their Apple products below the MAP. By ensuring the price for Apple products never drop below a specific price, Apple can maintain their product popularity. This enables Apple to keep its distribution channels clear while ensuring their profits don’t see a decrease. This all lends hand to keeping Steve Job’s original strategy in place, which was creating premier products that sell for premium prices.
Source 1: https://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/
Source 2: https://medium.com/macoclock/the-story-of-apples-pricing-strategy-7eb475f3e257