⌚️ Apple Pricing

Why Apple's price marketing is one of the greatest strategies implemented effectively.

🍎 My Love for Apple

If you have ever been following my posts, you might know my love for tech products and Apple is one of my favourite tech firms that always inspires me in product designs and with their marketing strategies.

With just said that I recently went through the pricing strategies of Apple, and guess what, I was really amazed at how effectively they have been using their financial leverage to gain a high gross margin on each product.

⚓️ The Anchoring Effect

Steve Jobs is an exceptional marketing genius in my opinion. Even though he didn't code even a single line of code in Apple, his prominent strategies made Apple stand out from the rest of the competitors.

One such marketing mix strategy was the pricing of the Apple iPad. He used the Anchoring effect which basically is a cognitive bias which plays with human psychology where an individual's purchase decision is based on a reference point or Anchor ⚓︎.

So Steve Jobs, at the launch of the iPad, priced the iPad at 999$ initially and then later ended up with the final price at 499$.

Look how much he speaks about 999$ anchoring price for a long time with the rate being displayed on the screen. This gets into our brain subconsciously with a strong notion that the iPad is a luxury tech product (dropping the anchor in the brain).

But all of a sudden when he reveals the original price, watch how beautifully it is established with a glass breaking sound and the price falling to 499$. And unanticipatedly, the iPad now not feels like a luxury product. It feels like an affordable tech product. However, 499$ is still a high price which individuals ignore unwittingly.

🏷️ The Price Skimming

Another awesome pricing strategy is Price Skimming. To set some context, Price skimming is a very risky strategy which can be implemented only by brands with great brand image and equity.

So basically price skimming is all about launching the product at a high price and gradually lowering the price as new products/competitors enter the market or when the demand for the product declines.

The graph could be quite intimidating, hence let me explain in layman's language.

So, Apple initially launches its iPhone 14 at a very crazy higher price. This is done to capture the high margins from people who are willing to pay whatever price iPhones are at. But over a time period, when Apple start to feel that the demand is now declining or when they are about to launch iPhone 15, they will eventually reduce the price of 14. This is how they ride down the demand curve and also by doing this they can quickly liquidate the iPhone14 models before they can launch the 15.

🤫 The Rebate program

The next is like an extended strategy of price skimming.

What happens to the customers who bought iPhone 14 at a very high price and over the due course the price has reduced? Doesn't it really hurt the customers' perception of Apple?

Therefore, Apple came up with this great customer retention strategy - The Rebate program, which allows customers to claim a refund amount of what they had paid extra when compared to the skimmed price after a time period, i.e if you bought an iPhone 14 for 1k$ when it was launched but now the price has reduced to 0.6k$, you can claim the 0.4k$ through the rebate program after 14 calendar days of the changed price.

But how does this benefit Apple? 🧐

Well, it seems like only 10% to 15% of the customers who bought at the launch price are benefiting from the rebate program, while Apple enjoys the extra leverage.

Also, Apple enjoys the interest amount till customers ask for a rebate.