Value creation

iPhone is a high-end smartphone towards true perfectionism

Right from the beginning of the idea or starting to make the first iPhone, Apple
always thought that it would have to perfect a smartphone in the top-class segment that
no competitor could match in terms of quality,…
Apple sells at a very high price and makes a lot of money. But the amount of
capital they have to spend to buy materials, manufacture, assemble, and research is not
small or economical at all. Simply because poor materials will not be able to create a
high-end and prestigious iPhone like today.
Analyst firm IHS iSupply has calculated the cost of components that make up
smartphones in general. When you put an iPhone and a popular high-end Android phone
against each other, almost every component that makes up an iPhone costs more right
from the original purchase, including hard drives, memory, screens, sensors. ... That has
partly explained the question of why the iPhone is always considered "more expensive"
than its competitors.
Apple Ecosystem: A complete environment and satisfying experience
When you buy an iPhone, you don't simply have a shiny, sturdy smartphone case
and the apps it contains, but you're also a tool to join the complete ecosystem that Apple
worked so hard for. out. Millions of apps are waiting for you to download at any time on
the App Store, enjoy unique services only available on iOS such as iMessage, FaceTime,
iCloud... Above all, long-term benefits in the process of using The application is always
guaranteed, like stable and fast updates for even older iPhone models.
It is the cost of researching and developing this vast ecosystem platform that has
been included in the individual cost of each iPhone. Therefore, the synchronization when
you use Apple products is always appreciated because of its perfection between devices.
Expensive iPhone is an understandable law of the market
Another reason for the high iPhone price is not directly in Apple, but in shoppers
around the world. As mentioned, Apple spends a lot more time preparing to be a
perfectionist about everything before releasing an iPhone than its Android rival.
Therefore, Apple's total shipments are often not as fast and as many high-end Android
devices in the rest of the market.
Meanwhile, it is clear that the reputation and customer preference for iPhone is
higher than Android and shows a significant advantage. So what does this mean? The
supply is low but the demand is high - pushing up prices will be an inevitable result of the
market economy.
 Price structure
1. Offer configurations (icloud, apple music,...)
The Individual plan saves customers $6 compared to purchasing each service
separately, while the Family plan offers $8 per month savings. The highest-tier Premier
plan saves customers $25 per month and includes the greatest number of services. The
Premier plan is the only plan that offers access to Apple Fitness+, Apple's new fitness-
based video lesson service that is set to launch in late 2020.
Instead of offering a price structure with a seperate price for each features, they
combine them all to encourage their customers to buy these bundles. Moreover, the lack
of choice in the Family plan annoys the customers if they want to use all and even share
with family members. Apple, then, creates a better option - the Premier plan. Not only
does that open the market for what may be some customers who only value the package
elements separately. => create a positive effect on Individual buyers (boosting their
buying behaviors).
2. Price metrics
As you can see that in the old days, a CD with a song will cost for an a price.
However, now with the same value (a song), customers may pay for a smaller ones when
they using itunes. This is because producing a CD requires raw material, distribution
cost,..
3. Price fences
This picture is an example for the price fence among Iphone generations. We can
see that, the price’s going up from the old ones to the more current ones. Through every
new-launched products, Iphone has upgraded the whole things.
Value Communication
1. Iphone in all it communication has tried to communicate three things:
‐ Show customers the value rather than the price of the product: The value
proposition is all that answers the customer's question: "Why should I choose you over a
competitor?" Apple is consistent with its own pricing even though it is many times higher
than its main competitor because it has a strong value proposition and is focused on
promoting its unique value.
‐ Not only creating products but also creating experiences for customers: To
create an experience that customers remember is partly related to the art of storytelling to
evoke emotions and add sensory aspects to the entire experience journey. When
customers have had a memorable and engaging experience that will keep them coming
back again and again. That helps customers immerse themselves in what they're doing,
not just buying a product.
‐ Focus on customer emotions: Apple doesn't use jargon and complicated
explanations that dazzle potential customers. They approach customers by thoroughly
researching their target audience, understanding how they interact and chat on social
networks. Focus on communicating the aspects they care about most about your products
and services, using the language they'll use. Apple ads often show happy people having a
great time with their IPADs and IPHONEs instead of focusing on memory or battery life.
2. The economic value communicated through:
‐ By selling individual products and bundled products (đưa một số sản phẩm
vd)
‐ The value and advantage of iOS software.
‐ Launched many Iphone products, always upgraded as well as created new
models according to market demand.
3. The psychological value communicated through:
‐ The "luxury" factor: We're talking about the popularity of the iPhone
among celebrities, actors, musicians, athletes, and all sorts of other public figures. Apple
has become a "must use" brand not only for the creative world, but also for sports people,
entrepreneurs, and so on. What these people have in common is that if we know about
them, it means they must be successful in some area, and this is what gives the iPhone
"aura" of luxury.
‐ The appearance of the device is beautiful: Besides the richness of versions
and forms, the iPhone product lines are also available in all colors for customers to
choose from.
‐ Information security: the need to protect personal information is always
concerned. With the feature of "locking" multi-layered information, the iPhone is favored
by users because it understands basic human rights.
‐ Smooth and stable operation: Apple's smartphone is commented by many
people as easy to use. iOS has an intuitive interface layout with application icons and
physical buttons on the iPhone are also minimized. Apple products continue to show
stability and smoothness when they can open many applications, do not need to restart
the device to free up memory.
Pricing policy
Pricing strategy for Apple had four pillars:
 • 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 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. Apple reserves the right to change prices for products displayed at the Apple Store
at any time, and to correct pricing errors that may inadvertently occur.
Price setting
Apple uses a premium pricing strategy for iPhones and they have a good, better,
best lineup. In the company’s view, the iPhones are superior to competitor offerings, and
customers prefer the Apple phones. For that, customers are willing to pay a premium.
Recognizing that some customers are more price-sensitive than others, the company
offers a range of iPhone generations, and within each generation a range of models.
According to Macworld, Apple maintains its high-priced products’ popularity by
only offering retailers such as Walmart or Best Buy a marginal wholesale discount. This
small percentage in savings isn’t enough of a profit margin for retailers to offer big
discounts on Apple’s products. Therefore, customers end up paying a price close to the
manufacturer’s suggested retail price. However, a retailer could give up this small profit
margin and offer products at a discount to attract more customers. Apple prevents this
scenario by offering monetary incentives to retailers to sell goods at the MAPs fixed by
the company.
This pricing strategy is effective, as it prevents retailers from competing directly
with Apple’s own stores. It also ensures that one reseller doesn’t have an advantage over
another. Apple is thereby able to keep its distribution channels clean while making more
money on its direct sales. Macworld also noted that iPhones weren’t under a strict pricing
model. They are sold at a lower price with wireless contract deals, as retailers gain a
commission from carriers.