Pricing Decisions on Apple Iphone

CLC: Pricing Decisions

Pricing is a complex task for any product or service. There are so many variables that go into the pricing process and most are dependant on future trends as well as current marketplace conditions. Other pricing conditions include government regulations and various legal requirements. One of the most daunting managerial tasks may very well be the constant monitoring of marketing trends via supply and demand. If consumers are not willing to buy the product at current prices, then changes must occur quickly before the product becomes functionally obsolete and will not sell at any price. Managers must first conduct a market research study, then investigate the competition, and finally, make sure they are technologically advanced and knowledgeable enough to keep costs down for maximum profitability. Apple (NASDAQ:AAPL) is one of the pioneers in smart cell phones and continues to be a fierce competitor in the free market.

The cell phone market is very competitive, there are many types of cell phone companies out there and they all offer a comparable product. To determine the appropriate price for a product, the demand of the consumer must be taken into consideration. The more of the product that can be produced, the lower the cost to produce it, which will ultimately affect the consumer's price. Another aspect of pricing to consider is the competition. When the market is saturated with other similar products, consumers may decide to replace one product for another which also affects pricing. Apple iPhone is considered by many to be the most successful smart phone company in the US. If we were on the board of this company and we had to devise a strategy to determine a price for the new iPhone, it would encompass the ideology listed above. There are two strategies that we can use, a market based pricing approach or a cost based pricing approach. Market based pricing is based on existing market conditions, cost based however is a formula that takes into account the cost of producing a product and the margin of each product. As a company we would choose the market based approach. It will give us the opportunity to price different segments of the market, what someone may be willing to pay in the US, may be different from what another person is willing to pay in Russia. Consumers know what they are expecting to pay for a cell phone, and if Apple had decided to make its phone very expensive because of what it might cost to make, they would have lost many customers. Market based pricing allows Apple to be flexible and it enables the company to adjust its pricing based on what its' consumers are willing to pay. More often than not, people pay a lot more than they should for what they want. If we are in the business of making money this is the right approach.

The Apple iPhone has become a trend to where individuals wait in massive lines just to purchase