Apple is the most valuable brand in the world. They are worth 87% more than the second most valuable brand, Google. To say Apple is in a class of their own might be an understatement. They have been ranked the most valuable brand every year since Forbes started evaluating the richest brands in 2010. If you’re wondering how Apple does it you only need to look at E. Jerome McCarthy’s four Ps of marketing and how they apply to Apple. Show Here is a short overview of McCarthy’s four Ps:
Apple’s Marketing Mix: ProductsApple products are innovative because they are designed after thorough customer research. Apple likes to think it knows what customers want and for the most part, they do. The following are Apple’s core product lines:
Apple’s Marketing Mix: PriceApple uses premium pricing for their products. Because of the innovation and technology in their products customers are fine with paying a higher price compared to some other brands. Apple typically doesn’t have sales on their products and the price is usually standard and doesn’t drop until a new model is released. This premium pricing strategy attracts middle to upper-class consumers and helps maintain Apple’s high-end image. Apple’s Marketing Mix: PromotionApple promotes their products through commercials and print ads, focusing on how their products are different from competitors. Commercial ads run when a product is first launched and print ads will run throughout the product’s life. Ads usually follow the same style using either white backgrounds to contrast the stylish black of their products (iPhone, iPad, etc.) and logo, or an inverse with black backgrounds and white text with a white logo. Ads are simple and to the point, usually focusing on one key feature of their product. One big component of Apple’s promotion is their yearly keynote speeches. These events themselves are not only part of Apple’s overall promotion, but have become a part of their brand and image. They keep fans interested and provide information on upcoming products. Apple Marketing Mix: Place (Distribution)Apple has strict guidelines as to who is allowed to sell (distribute) their products. To ensure control over distribution, Apple authorizes certain stores to sell their product. This creates exclusivity which might limit reach, however it also reinforces the high-end image of their products. Because of this exclusivity, Apple has lower distribution costs and is able to invest in other areas such as product research. Apple product distribution includes:
There you have it. The 4 Ps of marketing in regards to Apple, the most valued brand for the past 6 years according to Forbes. Great products which are worthy of their price create a high-end image that exclusive distribution and well thought out promotions reinforce. If your business can accomplish this then perhaps you can follow in Apple’s footsteps. Easier said than done right? Check out some of our other blogs: Search Engine Optimization: A Starter Guide 5 Marketing Campaigns or Videos That Went Viral and Why All of our Blogs.
Apple has always focused on increasing the market demand for its products through differentiation, making a unique product backed by aspirational marketing that is attractive to customers. The company’s focus has always been designing a product ahead of its peers, but this can be debated by looking at the innovation in their iPhone models over the last few years. Despite high competition, Apple has succeeded in creating demand for its products. Setting the price of a product is a crucial task in the launch of a product. Hence, in my first article, I would like to talk about the Pricing of a Product and give my logic behind Apple's pricing strategy for their latest iPhone 12 lineup. Pricing Strategy:  Image Source: https://globalmarketingprofessor.com/pricing-strategies/ Price is the one revenue-generating element from the traditional marketing mix(4p’s), and the price commanded by a product also reflects on the brand value of the company/product line. This article by Allie Decker explains a lot of nuances in pricing strategies and how a company can go about pricing their product. It all starts with consumer’s price perception, prices let consumers categorize the price of the brand, how firm or flexible the price is based on how deeply or frequently it is being discounted. There is a mental map of price vs. quality in most of the customers' minds, and there is a range of acceptable prices in a given price tier called the price band, which marketers can use to their advantage and decide the pricing of the product. Setting prices: I would like to highlight two of the most widely used pricing strategies and give one example of a brand banking on their brand equity to command premium pricing based mostly on their brand value. Value-Based Pricing Strategy: Consumers perceived value of the product is essential for determining their willingness to pay for the product. And for this reason, many manufacturers go with a value-based pricing strategy, attempting to sell the right product at the right price to meet consumer wishes. Many firms now apply value-based pricing for setting prices and everyday low pricing policy to determine their discount pricing policy over time. This article by Andrew Bloomenthal, sets the right context to understand value-based pricing. Competition Based Pricing Strategy: But when it comes to the tech world, where the market is getting more crowded, every day and innovation keeps a company going, the most common pricing strategy is Competitor based. This article by Will Kenton can help with the understanding of the strategy behind competition-based pricing. Talking about the Smartphone market, it is saturated with many players with a huge market chunk. Every manufacturer is trying to compete with each other to gain as much market share as possible, and the pricing strategy followed mist commonly is the competition-based pricing strategy. There is one exception to this rule, though, and that is Apple. Pricing Strategy behind the new iPhone Lineup: Image Source: https://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/ Apple is a company that makes most of its revenue from the sale of iPhones. In terms of innovation, it is argued that Apple is lagging behind the competition but still has a good enough brand equity to command a premium. Here are my views on how Apple went about setting the prices for the new iPhones. Details about the lineup: The screen sizes will be 5.4”, 6.1”,6.1” and 6.7” respectively, with a 120HZ XDR OLED display for the Pro models. The Pro models will have a triple camera setup, whereas the non-Pro models will only have dual cameras. All the prices are for the base 128GB models. Competitors: OnePlus 8/Huawei P30 Pro and Samsung S20+ are the iPhone 12 and iPhone 12 Pro competitors, respectively. OnePlus eight retails for $699, Huawei P30 Pro retails for $599, and Samsung S20+ retails for $899 Solving it like a case, I would look at the pricing strategy through three lenses: 1. Customer’s willingness to pay 2. Competitive pricing 3. Cost-based pricing First, I’ll start looking at the product from the customer’s perspective. The customer will look for the best alternative to our product or find a substitute product. Negotiators call it BATNA or the best alternative to a negotiated agreement. Here I would call it the customer’s willingness to pay. In the iPhone 12, the next best alternatives are prices at $599 and $699. This gap of $100 is something Apple can think about playing around in. An OnePlus device's perception is that it’s a good product but the cost doesn’t justify the high premium they are asking for their brand. When it comes to Huawei P30 Pro, the brand image is not that of a premium smartphone but a Chinese manufacturer. If Apple priced the iPhone at a cost lower than that of the Huawei P30 Pro, it would give out the perception that the iPhone 12 is just a cheaper version of the superior Pro models. That would be detrimental to the iPhone 12 as a standalone phone. Hence it is logical to cost the iPhone 12 more than $599. Apple also needs to consider the screen size of the iPhone 12. At 5.4” the iPhone 12 would be significantly smaller than the OnePlus 8. In mass consumer markets like India, the perception is that the bigger the smartphone screen the more premium and desirable it is. Hence pricing the iPhone 12 at a cost higher than the OnePlus 8 would hit the sales severely in such markets. Hence it is suggested that the iPhone 12 be priced between $599 and $699. The iPhone 12 Pro model, its Competitor, the Samsung S20+, retails for $899. We also need to consider the bigger iPhone 12 Pro Max model. It would be better to have a Pro model iPhone, which costs higher than Samsung’s flagship model. The bigger iPhone 12 Pro Max model is always the best that Apple offers which can command a premium over other competitors' flagship. Pricing Apple’s flagship iPhone 12 Pro Max higher that all the other competitors will help in two ways- 1. Help maintain Apple’s brand image of being the most premium smartphone and it's always a statement to carry an iPhone. 2. It would help to skim from the top and tap into the super-premium/luxury smartphone market. Final Pricing: Image Source: https://www.youtube.com/watch?v=n2zTzxJ01yk For the iPhone 12 model, I would suggest to cost it at $649. This would help undercut the mass popular OnePlus 8 while preserving the iPhone’s brand name by not becoming a cheap phone or being compared to the Huawei P30 Pro. This can help sell more quantity of iPhones and the revenue would be driven by the surge in demand for the apple accessories, app store licensing fees, and other services like apple music and iCloud storage that iPhone provides. The larger of the non-Pro models, the iPhone 12 Max can be priced at $749 as a better alternative to the iPhone 12 and seem superior to the $699 priced OnePlus8. Here I would suggest that the iPhone needs to preserve its premium brand image coming to the Pro series of phones. Even if Samsung comes up with a more expensive series of phones before the next cycle of Apple iPhones, the iPhone 12 Pro cost should be at least on par with the flagship phones from other manufacturers. Hence I would suggest pricing the iPhone 12 Pro model $100 over the Competitor price. There is always a cheaper non-Pro series for a customer with a smaller budget. The iPhone 12 Pro Max, being the flagship product offered by Apple, commands a premium for the larger screen over the standard pro model. Hence I would suggest to price it at $1099. Summarizing it The iPhone 12 should be priced at $649, the iPhone 12 Max should be priced at $749. The Pro models would charge a significant premium, partly because of the technology used in them and partly because of Apple's flagship offering. Hence, the iPhone 12 Pro should be priced at $999, and the iPhone 12 Pro Max should be priced at $1099. References: 1) Nielson, S. (2020). Apple’s Premium Pricing Strategy, Product Differentiation. Retrieved 21 November 2020, from https://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/ 2) The Apple Pricing Strategy Marketing Essay. (, 2020). Retrieved 21 November 2020, from https://www.ukessays.com/essays/marketing/the-apple-pricing-strategy-marketing-essay.php 3) Pricing Strategies - Global Marketing Professor. (, 2020). Retrieved 21 November 2020, from https://globalmarketingprofessor.com/pricing-strategies/ 4) Decker, A. (2020). The Ultimate Guide to Pricing Strategies. Retrieved 21 November 2020, from https://blog.hubspot.com/sales/pricing-strategy |
What kind of pricing strategy does Apple typically engage in with the new release of iPhones explain?
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