TOPIC 15: PRICING DECISION OF APPLE

Factors affects on Apple’s Pricing Decision

1. Cost:
Jobs’ vision for Apple was always to create a premier product and charge a
premium price. Apple’s cheapest products are usually priced in the mid range,
but they ensure a high-quality user experience with their features. The hardware
and user interface are designed to provide a lot of value for the price, which
keeps profits high. However, a company can charge a premium price as long as it
has a competitive advantage.
2.Image of the firm:
Apple’s focusing on high-end products with high quality and small numbers kind
of its products. This made Apple one of the most successful high-tech company
until now. Everytimes, we hear people talking about Apple’s products, which
makes us suddenly think about the fashion, light and easy to use products. Every
products with logo Apple it makes the price higher, for example, the earphones
collaboration with Beats by Dre. It costs nearly 3 times more for normal
earphones.
3. Competition:
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.
II. Factors that company considers when setting price:
The final price for a product may be influenced by many factors which can be
categorized into two main groups:
Internal Factors:
1. Cost:
Cost and price of a product are closely related. The most important factor is the
cost of production. In deciding to market a product, a firm may try to decide what
prices are realistic, considering current demand and competition in the market.
The product ultimately goes to the public and their capacity to pay will fix the
cost, otherwise product would be flapped in the market.
2. The marketing objectives:
While fixing the prices of the product, the marketer should consider the
objectives of the firm. For instance, if the objective of a firm is to increase return
on investment, then it may charge a higher price, and if the objective is to
capture a large market share, then it may charge a lower price.
3. Image of the firm:
The price of the product may also be determined on the basis of the image of the
firm in the market. For instance, HUL and Procter & Gamble can demand a higher
price for their brands, as they enjoy goodwill in the market.
4.Marketing Mix:
Marketing experts view price as only one of the many important elements of the
marketing mix. A shift in any one of the elements has an immediate effect on the
other three—Production, Promotion and Distribution. In some industries, a firm
may use price reduction as a marketing technique. Other firms may raise prices
as a deliberate strategy to build a high-prestige product line. In either case, the
effort will not succeed unless the price change is combined with a total
marketing strategy that supports it. A firm that raises its prices may add a more
impressive looking package and may begin a new advertising campaign.
External Factors:
1. Competition:
Competitive conditions affect the pricing decisions. Competition is a crucial
factor in price determination. A firm can fix the price equal to or lower than that
of the competitors, provided the quality of product, in no case, be lower than that
of the competitors.
2. Consumers:
The marketer should consider various consumer factors while fixing the prices.
The consumer factors that must be considered includes the price sensitivity of
the buyer, purchasing power, and so on.
3. Government control:
Government rules and regulation must be considered while fixing the prices. In
certain products, government may announce administered prices, and therefore
the marketer has to consider such regulation while fixing the prices.
4. Economic conditions:
The inflationary or deflationary tendency affects pricing. In recession period, the
prices are reduced to a sizeable extent to maintain the level of turnover. On the
other hand, the prices are increased in boom period to cover the increasing cost
of production and distribution. To meet the changes in demand, price etc.
5. Suppliers:
Suppliers of raw materials and other goods can have a significant effect on the
price of a product. If the price of cotton goes up, the increase is passed on by
suppliers to manufacturers. Manufacturers, in turn, pass it on to consumers.
Sometimes, however, when a manufacturer appears to be making large profits
on a particular product, suppliers will attempt to make profits by charging more
for their supplies. In other words, the price of a finished product is intimately
linked up with the price of the raw materials. Scarcity or abundance of the raw
materials also determines pricing.
Factors affects on Apple’s Pricing Decision
1. Cost:
Jobs’ vision for Apple was always to create a premier product and charge a
premium price. Apple’s cheapest products are usually priced in the mid range,
but they ensure a high-quality user experience with their features. The hardware
and user interface are designed to provide a lot of value for the price, which
keeps profits high. However, a company can charge a premium price as long as it
has a competitive advantage.
2.Image of the firm:
Apple’s focusing on high-end products with high quality and small numbers kind
of its products. This made Apple one of the most successful high-tech company
until now. Everytimes, we hear people talking about Apple’s products, which
makes us suddenly think about the fashion, light and easy to use products. Every
products with logo Apple it makes the price higher, for example, the earphones
collaboration with Beats by Dre. It costs nearly 3 times more for normal
earphones.
3. Competition:
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.
III. How marketing objective and marketing mix strategy affect its
pricing decisions
1. Marketing Objective: The main objectivive is to bring product with high
branding power and unique design to its customers.
=> The price Apple set to its products is high since the marketing objectives is
suitable for high-end market
2. Marketing mix strategy: Pricing decisions are basically decided on the basis
of Cost of the product. So for example, you have a penetrative pricing strategy.
Then you will have to keep the cost of the product very low. On the other hand, if
the price has to be skimming price, then promotions need to go up so that more
customers can be attracted and brand equity can be built. Thus, the affect of
marketing mix on pricing can be decided by considering each of the following
elements.
- Product:
Apple expand its product mix such as
+ Iphone
+ Mac (Mac mini, MacPro, IMac, Macbook, …)
+ Ipod (Ipod Classic, Ipod Nano,…)
+ AppleTV
+ AppleWatch
+ Software
All Apple products is "Beautiful". The details are almost perfect and eye- catching
from the design and packaging
The design is simple, not sophisticated but delicate, luxurious and fashion
Products’ names are easy to remember
Apple has many product lines and many types of products to serve a variety of
customers
Apple products are of high quality, modern technology, leading in many fields.
Apple also regularly upgrades its products.
All apple products have their logo: a bitten apple =>Symbolizes the power,
discovery and noble
beauty. Steve Jobs said that Apple has not really perfect. He wanted to treat it as
a reminder that
employees must be creative
Apple is the best aftermarket and customer care company in the industry, with
phone support, online support, and problem solving.
- Price:
Apple is a premium electronic brand that does not attempt to compete with its
competitors’ pring. It uses price skimming on products, whereas the intial price
of the products gets reduced over time. All products are premium price which is
working well to Apple, as they are moderately affordable.
The product life cycle affects the pricing, as there is a new version/generation of
each product released every year. As those products age, they become less
popular, hence their price reduces and updated versions are released. When
those updated versions are released, the price of the new product is usually the
same initial price of the old product.
=> So the more innovative the Apple product is, the higher the price will be.
- Place:
Apple products go from the manufacturer, to the wholesaler and then finally to
the retailer which is either an Apple store, a certified retailer such as JB Hifi,
Harvet Norman,… and online retailers such as Ebay, Amazon,… Apple products
are sold direct to the customer at retail price.
Apple headquarters is located in California and there are hundreds of stores
located globally. Apple stores and certified retailers are usually located in
shopping centers near more upmarket retailers. Apple shops themselves are
usually located in a city’s central business district as there is more foot trafic
heading in that direction and most people work closer to the city or in the city.
Being aimed to targer those with higher income, apart from being located in
Central Business district of cities, Apple retailers are located in upmarket areas of
cities and built-up areas.
- Promotion:The major factor due to which marketing mix affects pricing
decisions is promotions
Apple promotes their products primarily through television advertisements,
online ads, and on billboards. Most Apple products are advertised through
numerous different ads. They aim to make an ad that appeals to mose segments
of the market. Their ads promote different aspects of their products, just like
these Iphone ads. They pick out certain part of Iphone that can really help sell
the phone, and then make a fun ad on it.
Apple also have their product set up in their stores for customers to trial and see
how their products work before they make up their minds in buy the product.
Although Apple do not have “sales” they have some offers throughout the year,
or when it comes to the end of the financial year.
=> Apple sell the product with higher cost and collect higher margin than the
competitors
IV. 5 product mix pricing decision
- Product Line Pricing is when management must decide on the price steps to
set between the various products in a line. In other words, the firm must
determine the price steps between various products in a product line based on
cost differences between the products, competitors’ prices, and, most
importantly, customer perceptions of the value of different features. Example: A
good example of this is Apple’s Ipads. The basic Ipad with wifi and limited
storage costs $500. The next Ipad is one with 4G and the same limited storagem
but it costs somewhere around $650.
- Optional Product Pricing is the pricing of optional or accessory products
along with a main product. In many cases, you can buy optional or accessory
products along with the main product. However, for the company, pricing these
options is not easy. They must decide carefully which items to include in the base
price and which to offer as options.
Example: A variety applications that are usable on the iPhone and iPod touch can
be only purchased directly from Apple's App Store. If a user wants to legally
download certain mp3 songs, albums and video files, they can download those
files from Apple's iTunes Store. Users can also customize the hardware of their
Macbooks and Macbook Pro's; they pay extra for upgrades in hard-drive space,
Random Access Memory (RAM), processors and much more.
- Captive product pricing
Captive products are strategically used to maximize revenue. Sellers generally
follow a product-mix pricing strategy when pricing captive products. Low price
are offered for the core product, but high prices are placed on captive products.
This attracts customers to the core product with a low price but allows sellers to
make a profit off the captive products, which are necessary to use the product.
Captive pricing must be done carefully, for the pricing of a core product could
affective the value of a captive product, and vice versa.
Example:
- By-product Pricing:
By Product Pricing is a pricing strategy in which the by products of a process are
also sold separately at a specific price so as to earn additional revenue from the
same infrastructure and setup. By product is something which is produced as a
result of producing something else ( the main product). Usually, the byproducts
are disposed off and have little value.
But in by product pricing, the by product has significant value and the
manufacturer can gain competitive advantage by reducing the price of the main
product or recovering some of his expenses by selling the valuable by product.
Example:
- Product bundle pricing
In a bundle pricing, companies sell a package or set of goods or services for a
lower price than they would charge if the customer bought all of them separately.
Example: The company might decide that to sell more iPhones, it should offer a
product bundle of an iPhone and a laptop computer for a discounted single price.
When a consumer goes to buy either a laptop or iPhone, he might be enticed to
purchase the bundle when he would not have purchased the two products
separately.
V. General pricing approaches. How does the company apply value-
based pricing and cost-based pricing?
- Customer perceptions of the product’s value set the ceiling for prices. Product
costs set the floor for prices.
 In setting its price, the company must consider several internal and external
factors, including
competitors’ strategies and prices, the overall marketing strategy and mix, and
the nature of the
market and demand
- There are three major pricing strategies: customer value-based pricing, cost-
based pricing, and competition-based pricing.
+ Customer value-based pricing: Setting price based on buyers’perceptions
of value rather than on the seller’s cost. When customers buy a product, they
exchange something of value (the price) to get something of value (the benefits
of having or using the product). Value-based pricing means that the marketer
cannot design a product and marketing program and then set the price. Price is
considered along with all other marketing mix variables before the marketing
program is set. Furthermore, Apple always focuses on what people do with their
products and not what their product does -- deliver real value instead of just
merchandise.
For example, Amazon is offering the Apple iPhone 6, for $ 755 with a 29%
discount include it. This price might be too high for a low income customer who
might perceive no benefit in making such a purchase. However, those customers
that are able to afford it, and see the new device’s features as a solution to their
problems, the price would be irrelevant and they will not miss the opportunity to
purchase it. The strategy uses for the iPhone 6, is based on the valued-
added pricing, which object is to differentiate Apple’s products and services
throughout attaching value-added features to the new iPhone6 that justify its
high price in the market. A consumer may consider and Apple iPhone 6s Plusa
better value than an Apple iPhone 6 Plus.Although the products are virtually the
same, theconsumer may view the iPhone 6s Plus as the product that provides
greater value.Thus, theconsumer is willing to pay more for the product.
Apple employs value-based pricing throughout its product line-up. However, even
Apple is not immune to price resistance when it exceeds the boundaries of
consumer expectations. When it first launched the iPhone, it was priced at $599.
Apple realized the price was too high and dropped it to $399, offering store credit
to early adopters. Apple eventually found the “right price,” but it could have
avoided a PR nightmare had it known the true customer value before it launched
the product.
Generally businesses use value-based pricing as a means to a higher profit
margin. In the consumer market, customers are often willing to pay more than a
cost based pricing model, especially with emotional purchases. Customers may
assess one company's product to be of greater value than a competitor's for
many reasons including brand image, design, packaging, marketing, warranties,
previous experiences and word of mouth. Apple, for example, has traditionally
been able to achieve a higher profit margin because of the perceived cachet of
its products and brand
What does the IPhone really cost?
$198.70 was the price we came up with for the iPhone 5s for parts and assembly,
and it seems that Apple is pushing the boat out a little bit more with its recent
upgrades. According to Time, the Apple iPhone 6 cost $200.10 to build, while the
iPhone 6s is pricier still, coming in at $211.50 according to IHS Technology's
estimates. The iPhone 6s Plus costs $236 to make.
+ Cost-based pricing: Setting prices based on the costs for producing,
distributing, and selling the product plus a fair rate of return for effort and risk.
Costs set the floor for price, but the goal isn’t always to minimize costs. In fact,
many firms invest in higher costs so that they can claim higher prices and
margins (think about Steinway pianos). The key is to manage the spread
between costs and prices—how much the company makes for the customer
value it delivers For instance, companies—such as Apple, BMW, and Steinway—
intentionally pay higher costs so that they can claim higher prices and margins.
The key is to manage the spread between costs and prices—how much the
company makes for the customer value it delivers. The cost-based pricing
company uses its costs to find a price floor and a price ceiling. The floor and the
ceiling are the minimum and maximum prices for a specific product or service;
they serve as a price range.
+ Competition-based pricing involves setting prices based on competitors’
strategies, costs, prices, and market offerings. In highly competitive markets,
consumers will base their judgements of a product’s value on the prices that
competitors charge for similar products.
Moreover, in assessing competitors’ pricing strategies, the company should ask
several questions. First, how does the company’s market offering compare with
competitors’ market offerings in terms of customer value? If consumers perceive
that the company’s product provides greater value, the company can charge a
higher price. Second, how strong are current competitors, and what are their
pricing strategies? If the market is already dominated by large, low-price
competitors, the company may be better advised to target unserved market
niches with value-added products and prices.
VI. Pricing strategies of Apple. Reasons why the company choose that
strategy when launching a new product.
Market-Skimming Pricing
Market skimming makes sense only under certain conditions. First, the product’s
qual-ity and image must support its higher price, and enough buyers must want
the product at that price. Second, the costs of producing a smaller volume
cannot be so high that they can-cel the advantage of charging more. Finally,
competitors should not be able to enter the mar-ket easily and undercut the high
price
-Market-skimming pricing(price skimming): Setting a high price for a new
product to skim
maximum revenues layer by layer from the segments willing to pay the high
price; the company
makes fewer but more profitable sales.
 This is often used for the launch of a new product which faces little or no
competition – usually due to some technological features. Such products are
often bought by "early adopters" who are prepared to pay a higher price to have
the latest or best product in the market. Many innovative company including
Apple use skimming price strategy. This strategy is used when a product is just
launched in the market and it is sold at a relatively high cost because of its
unique features, benefits to consumers or new product design. However, slowly
the prices are dropped as the product lifecycle comes to an end and the product
is brought at competitive price. This strategy is generally used for technological
products which is new to the market, has consumers willing to pay a premium
price, it is far ahead of the competition.
 Good examples of price skimming include innovative electronic products, such
as the Apple iPad. Apple frequently uses this strategy, called market-skimming
pricing (or price skimming). When Apple first introduced the iPhone, its initial
price was as much as $599 per phone. The phones were purchased only by
customers who really wanted the sleek new gadget and could afford to pay a
high price for it. Six months later, Apple dropped the price to $399 for an 8GB
model and $499 for the 16GB model to attract new buyers. Within a year, it
dropped prices again to $199 and $299, respectively, and you can now buy an
8GB model for $99. In this way, Apple skimmed the maximum amount of
revenue from the various segments of the market.
 When Iphone 5 was launched in the market 4 years ago, it had a premium
price. Only few could actually afford an iphone. Gradually, few years later, prices
of Iphone have been slashed down with time, such that, everyone could now
afford an Iphone 5. A few months ago, Iphone 6s was introduced in the market.
Before that Iphone 6 was launched. Both these Iphone were sold at very heavy
price and in large quantities. Now people are waiting to buy the much awaited
Iphone 7. Presumably, the current generation of Iphone will have a price cut prior
to the release of new Iphone. This strategy apple uses here is called skimming
pricing strategy.
-Despite its relatively high price, it has still not reduced its sales, instead, it is
actually more robust the high-end image of Apple in the minds of consumers,
and get a magnificent sales in themarket, at meanwhile bring a lot of loyal
customers. However, just at the time of the sales is still running well and the
market has not saturated, Apple has started to develop the latest generation of
products, the old products begin to reduce the price. As a result, before the latest
product is not yet available, the current product has become hot products,
market coverage has reached a considerable height, it opened up a broader
market for the advent of new products. In the latest product comes out, their
price is even higher than the previous generation, but its sales are still good.
That’s why the Apple’s skimming pricing strategy can obtain a good result.
There are several reasons that why Apple are adopt the skimming pricing
strategy.
1.High price = High profit
Development of new products at higher prices, it can get profit as large as
possible in certain sales, conducive to get rapid return on the initial investment
of new products, and to provide capital to further expand the scale.
2.High price base on the product positioning
Apple’s target market is the high-end consumer, thus this market position is
supported the product pricing.
3.Suppress competitors.
The new product priced higher could prevent several new competitors entering
the market in a certain extent.
4.To meet the psychological needs of consumers.
Apple chose this pricing strategy, its most fundamental essence lies in its
consideration of the psychological needs of consumers.
-Market-penetration pricing:Setting a low price for a new product to attract a
large number of buyers and a large market share.The fundamental objective of
such an approach is attracting consumers to the product in the hope that the
consumer will establish a fondness or a need for the product. As a consequence,
organisations use this strategy as a means to ultimately gain a higher market
share for a particular product or service. Once this has been achieved,
organisations hope to increase the price.
VII. Price adjustment strategies. Factors influence the price of Apple’s
products in different
countries.
The price adjustment strategies relate to all the strategies implemented by an
organization that takes into account the differences between customers and
rapidly changing. There are seven price adjustment strategies:
DISCOUNT AND ALLOWANCE PRICING
Several companies offer discounts and bonuses in their basic price to reward
customers for their specific responses. Discounts can take many forms, such as
cash discount which give the buyer a discount if paid before the due date of
payment. Similarly there is a quantity discount on the purchase of products in
large quantities.
SEGMENTED PRICING
Companies use segmented pricing to charge different prices to buyers on the
basis of differences in customers, products and places. Some of the major forms
of price fixing are targeted customer segment, the shape of the product price,
location, etc. Low price pricing segment of customers, firms charge different
prices to different customers.
PSYCHOLOGICAL PRICES
Many people judge the quality of the commodity price for taking a higher price
as a sign of good quality. Sometimes customers do not have information on
actual prices of products as judging the quality of the product by its price. This
type of behavior requires sellers to increase prices of their products despite the
fact that real prices are low. Customers also lead to prices in their minds, these
prices are known as reference prices. In order to obtain higher profits, sellers
have to influence the reference price of the customers.
PROMOTIONAL PRICES
Many organizations try to promote their products by cutting down the prices of
their products below list price or costs. These promotional pricing helps
merchants to attract customers in a short period of time. However promotional
pricing can be dangerous for the organization, because it can ruin the reputation
of the organization. Just as these practices are easily copied by competitors and
help organizations build their brand in the long term.
DYNAMIC PRICING
Dynamic pricing, also called real-time pricing, is an approach to setting the cost
for a product or service that is highly flexible. The goal of dynamic pricing is to
allow a company that sells goods or services over the Internet to adjust prices on
the fly in response to market demands.
Changes are controlled by pricing bots, which are software agents that gather
data and use algorithms to adjust pricing according to business rules. By
collecting and analyzing data about a particular customer, a vendor can more
accurately predict what price the customer is willing to pay and adjust prices
accordingly.
GEOGRAPHIC PRICING
The companies also charge different prices are the customers who live in
different parts of the country or the world. If customers are living in remote
areas, companies have to charge higher prices to cover the cost of delivery, but
this will result in the loss of customers to competitors. Therefore it becomes
difficult for the company the possibility to apply uniform prices across the
country price or charge according to the geographical conditions in which the
customers live.
INTERNATIONAL PRICING
Many organizations operate in different countries, because they have to decide
whether to charge uniform prices or sell products according to the situations of
the countries in which organizations operate. There are several factors that
affect the pricing decision of companies such as consumer perception, economic
conditions, law and order, the marketing objectives of the company, etc. These
factors help organizations be able to charge similar prices or different throughout
the world.
PRICE-ADJUSTMENT STRATEGIES OF APPLE
Apple applies psychological pricing. The higher prices of Apple's products
compared to its competitors triggers signals to consumers; exclusivity, high-
quality, uniqueness, coolness factor, etc. They also incorporate psychological
pricing in a different way. As stated previously, the different variations of the iPod
Touch retail at different price points. While applying product-line pricing, I also
believe this strategy also urges its consumers to step up to the next model and
pay more for a higher model.
For example, the $399 iPod touch yields the best value because the price per GB
is $6.23 ($399/64) while the $199 yields a price per GB of $24.88 ($199/8).
These cues could lead to a purchasing decision that a customer did not
anticipate (ie wanting to purchase the 16gb initially, but ended up purchasing
the 32gb or 64gb model).
FACTORS
Economy condition
World economic condition is also becoming one of the factors that influence
Apple Inc business process as this company is recognized internationally.
Inflation, recession and currency exchange rate are three important economic
factors that Apple noticed. For example, during inflation period in the U.S. the
purchasing power of all the people will decrease and sales of Apple’s product in
U.S. will also decrease. As U.S. dollar has lost in value, to minimize the effect of
inflation Apple Corporation has purchased itself foreign currency. By doing so the
revenue of their product in international market will increase.
As Apple Inc. already go international the U.S. bad economy condition, which
take a longer time to recover compare with other country will not be a problem
anymore.
Political factor
Political factor gives a heavy influence to Apple Inc decision-making process as
they have established many companies all over the world.
However, Apple Inc could not control the political factor. Since 2007 until 2009 it
is reported that more than a half of sales of their products comes from countries
other than America. To reduce their operating cost Apple also spread their
product manufacturing to different companies outside America. Cork, Ireland,
Korea, China and Czech Republic are some of the other states where Apple
placed their company. Bad international relations, wars, terrorism, and public
health issues between U.S. and these states might give a negative impact that
may damage the Apple Inc reputation as well as their business process.
For example, when there is political instability between US to states where Apple
operates their business, a business delay could be occur and as a result the
image of Apple Inc could become bad to its customers and retailers. According to
that information we can see that political relationship between U.S. and other
states where Apple Inc placed will be very important as it affects the Apple Inc
decision-making process.
Taxes and Import Duties
One of the major factors that affects the prices of goods is the difference in taxes
and import duties across countries. Brazil, for example, has an extremelyhigh
import duty of 60%, which makes imported goods such as cars and phones so
much costlier there. Many products are cheaper in Japan thanks to lower
importtaxes and better wholesale prices.This will significantly affect the prices
paid by the consumers.
Regulations
When setting prices in other countries, companies must research all national
regulations relevant to their product, as many countries set price ceilings as well
as price floors on certain products. Others require Value Added Tax (VAT) and
other taxes that must be considered during the pricing decisions
Social concern
Globalization, Virtual World, and Lifestyle are a social factor that gives a huge
impact to Apple Inc business development.
One of important factors is that cultural variations. Company must do with how
members of certain cultures perceive the value of certain products, which in turn
affects how much they are willing to pay for them. A product may have a higher
perceived value in one country compared to another country. A common brand
may have a perceived high value in one country and could be sold as a premium
brand there, enabling the company to charge a higher premium. Even the cost of
doing business in a country can affect prices. Hiring employees and setting up
stores will not cost the same in every country.
In addition, there are several factors influence the price the company charges in
different countries:
The supply chain cost
The actual physical location of production plants.
The price that the international consumer is willing to pay for the product.
The manufacturer's business objectives.
The price that competitors in international markets are already charging.
National Market Size: For larger countries with the potential for more sales, this
price may be set lower; for smaller countries, the price may be higher.
APPLE
Hungary is the most expensive place in the world to buy Apple's new iPhone 7,
with people paying up to 44 per cent more for the handset than those in the US
for the entry-level model.
The price of the latest iPhone in the UK has risen by £60 from last year, although
the entry level memory has been increased to 32GB - the iPhone 6s was 16GB .
For the last few years the price had remained stable, if not decreasing slightly.
However, despite the price rise - blamed on the falling pound in the wake of the
Brexit vote - the UK is one of the cheaper countries to buy the iPhone 7 in
Europe. Apple books its sales in dollars, so when currencies fall against the US
currency it leads to a price rise in many countries.
Consumers in Europe face the highest prices in the world for the latest Apple
phones, with Hungary selling the iPhone 7 for 256,058.64 Ft (£700), followed by
Italy and Norway. The cost is hundreds of pounds higher than our neighbours
across the Atlantic. In the US, the same 32GB model starts at $649 (£487.75)
and in Canada at $899 (£521.75).
However, the picture is complicated slightly by sales taxes. Apple's prices for the
UK and the majority of other countries include sales tax, but prices in the US and
Canada don't include it due to state-by-state variations. New York, for example,
takes 8.875 per cent so the iPhone 7 will cost over $700, but in other states
there is no sales tax.
Of course, the country-by-country differences are based on a lot of factors:
Foreign exchange rate
Labor and land costs
Import tariffs
Supply chain costs
=> When and how did the company change its price?
Apple set high initial prices for price of new product in order to skim revenues
layer by layer from the market. before each generation of new products come
out, they had already stirred up the consumers’ psychology infinite curiosity and
expectations, then when a new product start sales in the market, its quite high
price makes a lot of consumers stay away. When it introduced the first iPhone, its
initial price was rather high for a phone. The phones were, consequently, only
purchased by customers who really wanted the new gadget and could afford to
pay a high price for it. despite its relatively high price, it has still not reduced its
sales, instead, it is more robust the high-end image of Apple in the minds of
consumers, and get a magnificent sales in the market, at meanwhile bring a lot
of loyal customers. After this segment, had been skimmed for six months, Apple
dropped the price considerably to attract new buyers. Within a year, prices were
dropped again. Thus, before the latest product is not yet available, the current
product has become hot products, market coverage has reached a considerable
height, it opened up a broader market for the advent of new products.
In the latest product comes out, their price is even higher than the previous
generation. Apple likes to maintaining products price the same every year, when
establishing a new product in any line, the old model production will be
discontinued and the price the old model will decrease for $100 to clear stock.