1. a). A higher introductory price is simply part of life in the technology line
The words of Steve Jobs imply that the iphone market as well as the rest of the electronics markets should be ready to support better products in the future since the pace of technology has to be set higher through marketing dynamics such as pricing. The actual implication of these words is to prepare the market for future products with the same excitement as previously experienced. Perhaps, this was a marketing technique or strategy to condition the consumers of the Apple products for continued innovation such as the smart phone technology well established by Apple (Kunz, para. 2). Apparently, marketing strategy can be very phenomenal in the establishment of a gigantic market share such as the one that Apple has, amid unprecedented technological competition from the mobile phone market such as Blackberry, Samsung, Huawei and Nokia among many others. Psychological conditioning achieved by the delivery of these words to the market can only be the explanation of the marketing technique that Steve Jobs anticipated.
b) Price of a newly introduced product may not only include the exchange of value
Pricing strategy adopted for entry of new products into the market can be used to make a marketing statement. In terms of brand image and value, the marketer stamps authority in the market by creating the impression that the brand name is worth more in price than competitor brands. In line with brand image and its value, the marketer generates prestige and market differentiation. As an illustration of the prestige element, some products may be completely similar but due to the market target as outlined in the marketing strategy such as segmentation may result to different prices for different consumers. Quality products and service offered by the marketer attracts customers who would be willing to part with a little more money than uncertain competitor products, which enables the marketer to charge for this trust.
2. a). Role of product demand in the pricing of the iphone
Apparently, high demand attracts high prices for products due to the direct relationship that demand dynamics have on price. In view of the anticipation created by Apple for the iphone among its consumers, the demand is generally high with figures of orders always surpassing the units in supply. As a result, Apple may be forced to push the prices higher to keep in touch with the forces of the market. Changes in price are not likely to affect the quantity demanded in the short run as the technology keeps advancing and Apple shifts the attention of the market to better products. This cycle has attracted a close following by the customers who are willing to buy the products at the prices that Apple sets.
2. b) The influence of high introduction pricing followed by reduced prices two months later
Apple is a market winner in the pricing game since the introductory price is always simulated at a relatively higher level, which is a strategy that is referred to as setting higher reference price. The reference price is not the genuine price of the product and the entry price is set at a relatively higher price to create the impression that the resumption of the genuine prices is a treat to the customer. As an illustration, the initial price may be set at $100 to familiarize the market with the reference price, which is actually set $25 higher or even $50. After the first few introductory months, the price is adjusted to the normal level creating a pleasant response from the market (Kunz, para. 13). This attracts extra attention of the customers as a marketing advantage at Apple.
3. Availability of substitutes affects the elasticity of demand for Apple products
Smart phones have been entering the market than anticipated by Apple, causing concerns for the marketing strategy particularly regarding pricing. One negative effect of substitute products in the market is that the market fraction that is not a fan of the Apple pricing trap can cause changes in the future patterns of consumption. Changes in prices upwards at Apple for its products is likely to elicit significant reductions in quantities demanded since the market will be assured of similar products at relatively lower prices from the competitor. Changing prices downwards such from reference introductory prices may also experience little increase in quantities demanded since the competitor may still offer better prices for the smart phone.
4. Relationship of price to quality for apple products influences consumers’ perceptions for Apple products
Consumers pay higher for the quality tag attached to the Apple products than it is with the rest of the competitors’ products. Assurances from of Apple’s senior management such as from the CEO have captured consumers’ interest to such an extent that they continue buying the available products and anxiously wait for new products launches, despite a relatively more valuation than the competitors. The use of price decoys at Apple makes the market to keenly follow the technological advancements and the products they offer. Price decoys are intangible points that the marketer retains by assuring subsequent products will be better, thereby establishing a reference point to take the market at ransom (Kunz, para. 8). The author reckons that the consumers are poor in making decisions on product value and the stronger the perception created by the marketer, the better the marketing and pricing strategy such as Apple’s.
Work Cited
Kunz, Ben., “How Apple Plays the Pricing Game,” last updated 6 September 2010. Web. HYPERLINK “http://www.msnbc.msn.com/id/38980367/ns/business-us_business/t/how-apple-plays-pricing-game/” www.msnbc.msn.com/id/38980367/ns/business-us_business/t/how-apple-plays-pricing-game/ (accessed 27 October 2010)
