Before heading to our closest Apple store, like shoppers on Boxing Day in Melbourne, let’s take an instant to reflect on why the reduction in price of iPhones. Do you think that, there is a diminution in the quality of Apple’s products? Highly impossible to the average fan. Then why, a giant company like Apple, is lowering its prices when customers are happy to pay an exclusive price for any item?
On the 21st March 2016, Apple made a new breakthrough. It introduced on the globe market its “cheapest” iPhone, targeting to emerging markets such as India, Middle East and African countries. Its new strategy is about price and not advances in technology.
Welcome to the world of iPhone SE, the most powerful 4-inch phone ever !!! The result is an iPhone that looks small. But lives large. Has a beloved design, great display, the only camera one will ever need, advanced security at one’s fingertip, excellent software performance, along with an easier and more secure way to pay (Apple 2016). It is all supported by evidence from the specifications highlighted below.
What is the power of the iPhone SE at its lowest price?
By selling the 4-inch iPhone SE at the lowest price tagged, that any of Apple’s iPhone has ever had, the buyers’ perception is that, the phone is not as high quality and innovative as previous models. Critics also point out that, iPhone SE cannot do anything previous iPhones have not been able to do (Leswing 2016). The phone has a smaller screen size and more lightweight, but still projected by Apple experts to be the best phone under the 4 inch range (Apple 2016). Do you think price tags influence customers to judge whether the product will be a good one or not? Let’s take a moment to reflect on this.
It seems as though Apple has utilised some psychological strategy to suit the pocket of all customers. By setting a price tag, the first impression that buyers have towards it is that:
- The product is affordable.
- The product is upgraded and pricey.
One way, a buyer values a product is by looking at prices; and the perception varies from buyer to buyer. Very often, consumers use a product’s price as a measure of product quality. For example, if the product is priced low, one may think it is of inferior quality or a fairly good deal. Likewise, if the price is set too high, one may consider the item to be unique or overpriced. Price does act as a “cue to quality” (Obermiller & Wheatley 1984, p. 454). Though, research has revealed that, no correlation exists between quality and price for most of the items, buyers still believe that a connection does exist (Shugan 1984, p. 629).
In china, iPhone SE has already surpassed 3.4 million of pre-orders by third party retailers; indicating a surprise hit of the season for iPhones (Lovejoy 2016). Recently, Apple seems to be shifting its gear from developed to developing countries due to market saturation. It has its eyes set on India – their most important anticipated growth area for the coming decades. The Indian market is proven to be dominated by cheap Android smartphones (See figure below).
Apple has launched a new way of doing business; whereby existing iPhones are finding a second life, after being exchanged and refurbished. It is projected that, India would have a serious appetite for this new business (Rajan 2016).
Apple as a double sword
Apple’s strategy has been two fold. On one hand, while lowering the price of iPhones, it has raised the price of iPads, thus making it compete as a top laptop alternative. This can be illustrated by the coming of Apple’s new 9.7-inch iPad; which is rumored to carry a starting price of $599, a $100 increase over the traditional new iPad entry point.
“To some extent, it seems as though Apple has applied the concept of systematic biases in fixing its price for the iPads”. Studies reveal that, buyers prefer prices ending in 99 as they tend to be more attractive (Simester & Anderson 2003).
Iphone SE in India
Initially, sale of iPhones SE in the Indian market was slow. To help improve the selling rate, Apple increase the prices of iphone 6, 6s by as much as 29% all over India (Jonnalagadda 2016). Apple seems to be playing the pricing game under this scenario, and the penetration pricing method has been applied to stimulate the sales rate, encourage trials and trigger word of mouth for iPhone SE and thus gaining higher market share.
Good brands have a relatively low price sensitivity; and this is the case for Apple’s products with its existing fans and potential customers.
Name :Natasha Gunness; Student Id: 21534819
List of References
Apple 2016, iPhone SE, Apple, retrieved 26 April 2016, <http://www.apple.com/au/iphone-se/>.
Jonnalagadda, H 2016, Apple increases prices of iPhone 6, 6s by as much as 29% in india, iMore, retrieved 25 April 2016, <http://www.imore.com/apple-increases-prices-iphone-6-6s-much-29-indiag >.
Leswing, K 2016, The iPhone just got its first real price cut, Business Insider Australia, retrieved 28 April 2016, <http://www.businessinsider.com.au/the-iphone-just-got-its-first-real-price-cut-2016-3?r=US&IR=T>.
Lovejoy, B 2016, iPhone SE a big hit in China, with 3.4M preorders through retailers-CNBC, 9TO5Mac, retrieved 24 April 2016, <http://9to5mac.com/2016/03/28/iphone-se-preorders-china/>.
Obermiller, C & Wheatley, J 1984, ‘Price effect on choice and perceptions under conditions of experience, information and beliefs in quality differences’, Advances in Consumer Research, vol. 11, no. 2, pp. 453-458, retrieved 27 April 2016, <http://www.acrwebsite.org/volumes/6296/volumes/v11/NA-11>.
Rajan, N 2016, iPhone SE has a new price, but analysts still see India opportunity for Apple, The Indian Express, retrieved 29 April 2016, <http://indianexpress.com/article/technology/mobile-tabs/apple-iphone-se-price-india-launch-specs-features-availability/#sthash.DYHXQ382.dpuf>.
Shugan, SM 1984, ‘Price quality-relationships’, Advances in Consumer Research, vol. 11, no. 3, pp. 627-632, retrieved 28 April 2016,<http://www.acrwebsite.org/volumes/6320/volumes/v11/NA-11>.
Simester, D & Anderson, ET 2003, Mind your pricing cues, Harvard Business Review, retrieved 27 April 2016, <https://hbr.org/2003/09/mind-your-pricing-cues>.