Apple’s pricing strategies and product differentiation.

apple

Tech giants Apple have been selling their line of products such as the Iphone, the Ipad and the Ipod for about a decade now. Their strategy for pricing and marketing is that of differentiation. they make high quality items that their competition would find hard to mimic and sell at a lower price for the same benefits. There is also a strong vertical integration of software, hardware and services which makes Apple have a very competitive and functional ecosystem that it operates in. lets talk about some of these advantages shall we?

Firstly, Apple has a very strong vertical integration. Apple owns its chip manufacturers, it sells its products in retail stores that are owned by Apple, and its software controls are really strict. There’s also the services such as Itunes and Apple store which sell apps and music on the go. these services are competed by google with their services of Google music and Playstore. This is important as Apple dominated this market by a majority share of 63% over 37%. This majority share makes it easier for Apple to retain its previous customers and increase loyalty as the customers can import their music playlists from their Ipods to their Iphones.

Googles strategy to acquire Motorola and Microsoft’s strategy to acquire Nokia were to do the same thing Apple did and vertically integrate.

cheaters

Now, getting back to the prices of Apple products, their Ipads range from US$500 to US$600, their Iphones range from US$400 to US$500 and their Ipods range from US$200 to US$300. These higher prices are set by Apple as they have been in the game for a really long time and have established a target demographic. which is consumers from the upper middle class to the high class spectrum of society. they can afford to set a higher price than that of their competitors as the products continue to be of great quality and have a long lasting life and the consumers know this.

the main differences that Apple provides is that :-

  • never introducing a price ceiling with any Apple product that’s actually being launched in the market. this ceiling could result in Apple having to cut down on prices when it comes to the long run.
  • Apple tries to prevent its rivals from developing lower cost and lower priced items that have the same features as their products. the success of the Iphone is a clear cut example of Apple making it difficult for other competitors to imitate their products and setting a lower price.

The problem with this strategy is that Apple can charge a premium price as long as they maintain a competitive advantage over their competition. however, with the advent of Android and the windows phone the company is losing its competitive advantage as these new companies provide the same features as an Apple product but at a much lower price and due to this Apple risks becoming restricted to be known as a high end niche company.

This has started tot become evident as Apple’s chief competitor, Samsung has a majority market share in the smartphone industry. this is due to the fact that in most countries Apple products are considered vary expensive and the consumers generally opt for cheaper phones which offer the same features at a much lower price, for example, android phones manufactures by google, motorola  and Samsung.

Even though Apple still carries its brand name and a very strong presence in the market. it is slowly being taken over by Android as the leading smartphone software due to its cheap prices and similar features. the next 5 years will be crucial is deciding Apple’s fate as a smartphone company and see how they decide to compete with Android and Windows.

Sources

http://www.businessinsider.com.au/price-of-apple-watch-is-insanely-smart-2015-3

http://www.supplychain247.com/article/is_apples_supply_chain_really_the_no._1_a_case_study

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http://joshuacollins-media.deviantart.com/art/Apple-Logo-Wallpaper-124545557

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