PRICING

Pricing Report of Apple-iPhone

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PRICING OBJECTIVE

Pricing Objective

Apple attempts to increase market demand for its products through differentiation, which entails making
its products unique and attractive to consumers. The company’s products have always been designed to
be ahead of the curve compared to its peers. By focusing on customers willing to pay more and maintaining
a premium price at the cost of unit volume, Apple also wants to set up an artificial entry barrier to
competitors.

Selection of Objective

Team's ABC, the economist claims that practicing an income maximization approach allows
maximizing overall profit. He seems to have a particular math structure to anticipate sales. The idea is that
a company should be able to classify a certain price that maximizes profit if it can develop a mathematical
model that collects all selling and profit information. The biggest problem with this method is that a
functioning mathematical model is very hard to develop. Albert will be forced to ensure that his design is
precise (Lombardo n.d.)

RECOMMENDED INTRODUCTORY PRICE OF YOUR PRODUCT

The expense of manufacturing the iPhone of 64 GB necessitates about $370.25 to manufacture. The
principal items are the display costing $110 per mobile phone and the real depth camera required for face
ID.

Face ID, the leading upgrade to the iPhone X, also adds to the higher phone price. This costs Apple $16.70
a package, and this True Depth Camera system, comprising of components such as an infrared camera
and a dot projector for detecting a person's face's three-dimensional shape.

The study by Bloomberg was based on an analysis by the research company IHS Markit. (Gurman 2017)

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PRICING STRATEGY

A "Minimum cost advertised (or MAP) marketing approach was used. The minimum price plans that are
marketed prevent resellers or retailers from advertising products below a certain minimum price for
producers. MAP is generally imposed by marketing grants offered to its resellers by a manufacturer

As per a Macworld article, it is only sold by stores such as Wal-Mart or Best Buy that our brand maintains
the success of its high priced items. That small percentage of the reduction does not serve to give
customers large discounts on Apple products, which ensures that clients pay a price below the retail price
offered by the distributor (or MSRP). Nonetheless, a distributor might sacrifice this petite interest margin
to sell cheaper goods to draw customers. This situation is avoided by Apple supplying merchants with
monetary incentives to sell goods at the companies developed MAPs. (KARABELL 2018).

It is competitive to discourage competitors from directly competing with Apple's own outlets and also
means that no supplier has an edge over the other. The pricing policy is successful. Apple is therefore
capable of maintaining its revenue streams and make more money from direct sales. The Macworld report
also found that iPhones were not subject to a rigid price model as they sell wirelessly at lower prices
because retailers earn a fee from the carriers.

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REFERENCES

Gurman, Mark. 2017. Apple's iPhone X Parts Cost $115 More Than iPhone 8, IHS Says. Technology,
IHS Markit, Bloomberg.

KARABELL, ZACHARY. 2018. Apple Is Ditching the Mass Market and Focusing on Rich People.
March 11. Accessed November 27, 2019. https://www.wired.com/story/apple-abandons-mass-
market-as-iphone-turns-luxury/.

Lombardo, Jennifer. n.d. Pricing Decisions: Profit-Oriented, Sales & Status Quo. Accessed November
27, 2019. https://study.com/academy/lesson/pricing-decisions-profit-oriented-sales-status-
quo.html.