Every year Apple releases its iPhones and other devices, and every year, users and experts begin to talk about prices of Apple products. This editorial, however, is not in line with those comments, rants, and appreciations coming from all corners. My primary aim is to discuss Apple’s pricing strategy, which always becomes a talking point post product releases.
There is a common voice of regret from many users, who find Apple devices beyond their budget. For them, sometimes, Apple devices are sour grapes. And for this very reason, they abuse and troll Apple, paying little attention to the fact that they promote the brand Apple.
Despite the avalanche of criticism leveled at Apple for keeping higher price tags, the brand remains nonchalant about this denigration and continues to surprise its users with extraordinary devices.
Apple’s Pricing Strategy
My purpose here is to analyze Apple’s pricing strategy with a specific reference to iPhones. However, I am not at all willing to discriminate against other Apple products in favor of iPhones. While the fair chunk of this article is consumed by iPhones, I will ensure that other products are not put on the back burner.
1. Apple makes strong hardware
From the first iPhone released in 2007 to the latest iPhone Xs Max, Apple has introduced many hardware advancements. Some of the milestones achieved by Apple are iPhone 6 Plus (first large screen 5.5″ diagonal), iPhone 6s (3D Touch), iPhone 7 Plus (dual camera), iPhone X (OLED display, wireless charging), and iPhone Xs Max (6.5-inch OLED display).
Apart from the above enhancements, Apple has made other improvements in camera, display, sound, storage, and others.
You can check the slide below that showcases how Apple’s iPhones have evolved regarding hardware enhancements.
2. Powerful processor every year
Every smartphone’s capacity is measured by its processor. How robust is my iPhone? If you ask this question to yourself, find the answer in iPhone’s processor. Apple spends a lot of time, energy and money on improving its iPhones’ processor every year. So much so that all the processors designed till date have been one or two years ahead of the processors made by Apple’s competitors.
Gradual advancement of the chipset in iPhones (from APL0098 (412 MHz) to A12 Bionic) is a natural growth as other phone makers have also made progress in this area. However, Apple has always left its competitors behind with powerful processors and chipsets.
3. Security – it’s YOU first
Apple is keen to protect user’s privacy and data security. The company firmly sticks to its policies and they never break the promise given to customers. For this strong adherence to the policies, Apple had to lock horns with US and India authorities.
In two famous legal scuffles, Apple remained adamant that the company would not make any compromise with user data and security. In the US, Apple had encryption dispute with FBI, and in India, Apple challenged TRAI’s rule about DND app in the court.
iPhone users know Apple’s strong security system protects their phone data. Whether they access their confidential information on iPhone or Mac, Apple promises security at every level by offering passcodes, Touch ID, Face ID, two-step verification, etc. Note that these security walls cannot be breached or bypassed.
Even when the device gets stolen or lost, Apple ensures that your data is either locked or erased before it falls into the hands of culprits.
4. Vertical Integration: Software, Hardware, and Services Combined
Apple’s monopoly over its software and full control over the manufacturing of devices has created a nearly perfect piece. This vertical integration also includes Apple’s services like iCloud and iTunes.
If you ask any trade analyst, s/he would see Apple as four diverse and thriving companies all wrapped up into one. Apple manufactures hardware, designs software and optimizes it for its hardware, runs web services (iTunes and iCloud), and controls selling by its own retail stores.
Thus, Apple has all four entities working in harmony. On another hand, most technology companies manufacture the hardware (Dell, Toshiba, Samsung, etc.), install someone else’s software (Windows and Android), and third-party services (Google), and sell the products through someone else’s store.
The vertical integration creates a unique user-experience for owners, who use Apple products. Maintaining this ecosystem requires a lot of manpower and maintenance of high-end technology, which again has to be as secure as Fort Knox.
5. Differentiation: customers’ perception of iPhone prices
All the above four points help Apple set itself apart from others, i.e., competitors. Consumers can perceive this differentiation Apple has created.
David Bui CEO and Founder of Saleschase.com made a valid point here as he said, “The most potent weapon in Apple’s pricing strategy is differentiation. Differentiation is what allows Apple to price its products at a premium and compel customers to compare Apple products with other Apple products, rather than with lower-priced products from other reputed marketers. Apple products look, feel and seem very different from competitors’ products.”
Apple has projected itself as a stronger competitor in comparison with other technological companies. As if this was not enough, Apple’s advertising campaigns (“Think different,” “Here’s to crazy ones,” and “If you don’t have an iPhone, you don’t have an iPhone”) made consumers believe that the prices they pay for iPhones and other Apple products are justifiable.
Apple always emphasizes differentiation – from developing a product to upgrading software to marketing everything. Consumers, who proudly own Apple products, are convinced they are using premium merchandise and therefore they are willing to pay the premium price. In the end, they feel they have purchased something best and they believe the best things are always the cheapest.
6. The high price of other Apple products
Apple gives an extensive product portfolio to its consumers, who are loyal to brand Apple. The company knows its loyal consumers would never go out of its eco-system, which is born out of an idea of giving complementary products and services.
When consumers buy Apple products, they know they are entering Apple’s eco-system. Next, they decide to stick to this vertical integration and buy other complementary Apple services and products that keep consumers connected with the entire homogeneous colony of Apple.
iPhone is a market leader in the USA and some first-world countries, and when consumers purchase iPhones, Apple knows they would like to buy other complementary products/services.
To match the excellence of iPhone, Apple must keep its portfolio of products and services up-to-date. This rigorous exercise requires investment, which Apple does and then reaps the benefits.
One may argue that Apple is tight-fisted when it comes to spending the budget on advertising of its products. Since most of its products are promoted through tradeshows and media relations, consumers can expect Apple to lower its product prices.
But as mentioned, Apple spends a lot of its funds on product development. Unlike other Android smartphones made of plastic components, Apple uses premium materials like glass and aluminum.
Combination of strong hardware and software, along with other complementary services makes iPhones pricey. However, Apple users are willing to pay the premium price, as they know they are treated with enviable luxury.
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What is your opinion about Apple’s pricing strategy? Should Apple reduce its prices for iPhones and other products? Share your feedback with us in the comment below.