Price Consultancy


Situation Brief

In the pricing of technology products such as smartphones, laptops and televisions require strategic approaches that ensures their target market is able to acquire the products at affordable price while at the same time maintaining both wholesale and retail distributions profitable and sustainable. With reference to high pricing strategies that have been observed with some companies such as Apple on their products, a correlation with an increase in competition is observed. In the case of Apple, the company has been using the price management strategy which ensures that retailers do not have large discount margins to offer to their customers. Through this approach, Apple has created a business culture around its retailers and the customers which associates the high prices with high-quality and low bargaining opportunities. However, the pricing strategy has had a backlash on the company’s profitability and volume of sales through the invitation of multiple smartphone manufacturers into the industry. With the same features that Apple offers in its products, Apple management as observed that other brands offer the same features at a lower price which is more compatible with the middle-class customer. 

While the price control approach of Apple worked before more companied joined the industry, the strategy is no longer viable because of the many alternatives that customers have in the tech market. Through the changes in market saturation by other products and changes in customer purchasing trends influenced by inflation and income generation, customers are aiming for more affordable products which offer the same range of features as Apple products. As a result, it is the duty of Apple to seek pricing consultancy to ensure that the challenges it is facing in terms of pricing its products and competing with the new entrants does not continue to negatively affect its profit margins and its sustainability within the industry. In addition, Apple should also consider matching its prices with products from other brands who manufacture with the aim competing with quality of Apple products at a market-friendly price. In this regard, the challenge that Apple is facing is the availability of other quality and affordable products that rival the superiority of Apple’s products.

Pricing Policy

There are various pricing strategies that companies can adapt to ensure that their products attract enough customers to sustain revenue generation and the future of the firm. However, some of the pricing strategies work in specific situations while others do not work in the same manner (Taleizadeh, Soleymanfar, & Choi, 2017). For the case of Apple’s pricing issues which have led the company to lose significant market share, abolishing of price control strategy should be a starting point where Apple should consider stakeholder value of investment to prevent the company from incurring further demand losses as it has experienced currently. While Apple was the pioneer of the smartphone, various other companies have gained momentum in the industry, placing themselves as barriers to Apple’s market domination. Through the availability of multiple alternatives to Apple devices, the right pricing strategy should be a diversified pricing, approach that favors the company, the retailers, and attracts the customers to the products (Li, Xu, & Li, 2013)

Price Setting Process

The price setting process has a variety of considerations to take into account. Among these strategies include process of formulating the pricing policy like the consideration of the competitive situation.  The competitive situation of Apple products’ sales is accounted for by the nature of the market, imperfect and perfect competition, where in the latter, manufacturers have no control in the pricing of the products (Taleizadeh, Soleymanfar, & Choi, 2017). In addition, sales and profits’ goals require the organization to merit the maximization of profits while taking care of the long-range welfare of the company by devising pricing strategy is not significantly high to influence to entry of more investors into market (Shivan, n.d.).  With lower competition, a company like Apple is able to generate more profits by setting lower prices that prevent new entries into the market who can further affect the prices negatively. However, the current situation calls for Apple to lower its prices to guarantee a long-range welfare of the company (Li, Xu, & Li, 2013). With reference to economic differences within various established markets, a company like Apple is required to determine a price that is sensitive to the economic conditions of target region. This in return enables the company to provide customers with products at varying prices based on changes in economic conditions (Shivan, n.d.). 

The pricing of products is not an end process but rather a means to an end. The overall scope of an organization’s goals determines the pricing of its products. The goals of an organization are determined by objectives such as the rate of growth, control maintenance, and market share with the aim of making profits (Li, Xu, & Li, 2013). With reference to changing times, such as in the case of Apple, the pricing strategy should be sensitive to the changing environment while at the same time allowing customers to choose between brands based on other factors other than price since the quality-price strategy of Apple has been emulated by other brands (Nagle, Hogan, & Zale, 2016).

Pricing Considerations

When setting the prices of its products, Apple should account for pricing considerations such as the development of specific objectives which influence and sustained growth of the company. There are a variety of considerations that relate to objectives that Apple should take into account in developing a fair pricing policy. Among these include, price profit satisfaction which takes into account the interests of the firm to keep being stable prices, regardless of changes in demand and costs. (Shivan, n.d.) Additionally, sales maximization and the rate of growth are essential considerations in the setting of company-wide objectives and requires the setting of price that maximizes sales of any specific products and in the long run influence the sale of all products with the production line (Taleizadeh, Soleymanfar, & Choi, 2017). However, that under consideration takes into account the requirement of the company to make money and help whether an example is been one of those companies that take advantage of the special position in the industry to sell their products at premium prices making quick profits in a short duration (Shivan, n.d.). This approach is, however, influenced negatively by the availability of cheaper alternatives which have the same features as Apple devices and the requirement to change the pricing policy. Ideally, Apple is responsible of preventing competition from gaining momentum in acquiring more of its market share and therefore must ensure that it the plays a crucial role in setting a price that prevents new entrants from accessing the market that is already considered Apple’s share (Li, Xu, & Li, 2013). As a result, Apple must ensure that its prices nearly match the market’s equilibrium price to prevent other premium brands from operating slightly below Apple and attracting some of Apple’s market share (Nagle, Hogan, & Zale, 2016)

Other considerations include the market share and survival of the company. The market share of the company is comprised of a portion of all customers of the products and services offered by Apple and competitors and these provide the revenue expansion rate of the company (Taleizadeh, Soleymanfar, & Choi, 2017). The revenue expansion rate of any company considers the growth of sales from the current customers while growth rate is a measure of how the company grows both in revenue and customer base of its products and services (Shivan, n.d.). In this regard, studies point out that many managers consider revenue maximization a recipe for profit maximization and growth in market share in general. On the other hand, survival is considered a management responsibility which accounts for sustainability and applicability of pricing strategy to the objectives of the firm (Shivan, n.d.).  Additionally, the welfare of the firm depends on a strategic pricing policy which ensures that the operations of the company are sustainable in the long run and manageable in the short run (Wang et al. 2016).  On the competitors, Apple’s pricing strategy should take into account issues that are raised by the competition among them lower prices for quality products and the changes in innovative development of products (Shivan, n.d.).

Challenges of Updating Pricing Policy

Some of the challenges that face Apple in updating its price policy include the possible loss of premium customers or association of high prices with good quality. In addition, Apple’s approach of encouraging retail pricing through minimum advertising price policy, has influenced retailers in adapting homogeneous prices in markets where Apple products are available and on a result of changing the pricing policy would be affecting the retailers negatively in terms of revenue generation (Nagle, Hogan, & Zale, 2016).  Apple is responsible for maintaining good relationship with its distributing agents who are comprised of wholesalers & retailers and other stakeholders within the supply chain and therefore, when taking account of the needs to lower its prices and differentiate wholesale and retail prices ensuring their profit margin is not too high for the average middle-class customer with the potential of acquiring a product in Apple’s range of consumer goods (Nagle, Hogan, & Zale, 2016).

Incremental and Avoidable Costs

The incremental cost that is associated with Apple’s high pricing strategy in its products includes high churn rate which is a measure of how many current customers quit a product within a specified period. In order to ensure that these incremental cost does not continue to affect Apple’s sustainability in the long run, the company will reduce its current prices to match the market equilibrium as more alternatives are being developed by other brands and in the process taking up Apple’s market share (Taleizadeh, Soleymanfar, & Choi, 2017). In this regard, some of the avoidable costs include the management of pricing policy to achieve a sustainable revenue expansion and in attracting more customers to the brand. The impact this approach will have on the Apple’s profit sustainability will be the avoidance of further churn rate (Taleizadeh, Soleymanfar, & Choi, 2017).

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  1. Li, Y., Xu, L., & Li, D. (2013). Examining relationships between the return policy, product quality, and pricing strategy in online direct selling. International Journal of Production Economics, 144(2), 451-460. 
  2. Nagle, T. T., Hogan, J., & Zale, J. (2016). The Strategy and Tactics of Pricing: New International Edition. Routledge. 
  3. Shivan, N. (n.d.). Pricing Policy: Meaning, Objectives and Factors. 
  4. Taleizadeh, A. A., Soleymanfar, V. R., & Choi, T. M. (2017). Optimal pricing and alliance strategy in a retailer-led supply chain with the return policy. Information Sciences: An International Journal420(C), 466-489. 
  5. Wang, X. S., Xie, Y., Jagpal, H. S., & Yeniyurt, S. (2016). Coordinating R&D, product positioning, and pricing strategy: A duopoly model. Customer Needs and Solutions3(2), 104-114. 
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