Apple seems to have upset many of its customers by recently dropping the price of the iPhone by a couple hundred dollars a mere couple months after its introduction. Is this outrageous behavior on Apple's part?
Let's look a little deeper.
Price skimming is a well-known pricing strategy whereby a product is introduced and the company charges the highest possible price that buyers who most desire the product will pay. Demand for products tends to be inelastic during the introductory stage of the product life cycle--especially if the product is unique with little competition.
Not only does price skimming strategy help offset development costs that might not be recovered if the price is set too low, but it can also help companies keep demand in line with their initial production capabilities. Also, once competition enters the market, prices will be driven downward making it even more difficult to recover development costs.
Apple knows that it has a powerful brand whose loyal followers will rush out to purchase just about any product they launch (at just about any price). These loyal customers understand that they are not rushing out to buy the product out of absolute necessity, rather they are fulfilling a desire to be trendy and have bragging rights because they are one of the first to own the hot, trendy, new Apple product. Yes, they even understand they are paying a premium to own the product a few months before the rest of the masses.
To those iPhone users who now complain about the recent price drop I say this: You are not unhappy that you overpaid. I saw you standing in those long lines to happily plunk down your $600. You aren't upset that you had the phone before the masses either. You are simply unhappy because you think the masses will now catch up too soon.
Don't get upset with the Apple brand. Just examine what the brand means to you and be happy that you are able and willing to pay for that feeling that obviously makes you feel so good.
No comments:
Post a Comment