The recent iPhone maelstrom vividly illustrates the complexities of pricing strategy. As you know (hopefully not from personal experience) Apple slashed the price of the iPhone to $399 from $599 just two months after its release. In response, Apple shares dipped by 5%, early iPhone customers cried foul and one customer is suing Apple for $1 million. “My love affair with Apple is officially over,” wrote one iPhone owner on the Unofficial Apple Weblog site according to the New York Times.
Apple marginalized early technology adopters, a key consumer segment. For this influential group, the intangible benefits of purchasing an iPhone---status and leadership---are a reward for the risk (higher price, product problems) and inconvenience (standing in line, etc.) of being an early purchaser. By abandoning their usual strategy of gradual price reductions, Apple made many early purchasers feel foolish. BTW, do you think these influencers will be more or less likely to recommend Apple products to technology followers?
Clearly, sales objectives, competitive analysis, market demands, costs, etc., all play critical roles in price strategy development. But pricing strategy must be developed within the context of brand as well by evaluating the impact to key consumer segments.
Photo from Apple.com
Comments