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Pricing involves the determination of what the organization will receive in exchange for its products and services. The main determining factors of pricing are market place, quality of the products or services, market condition, competition and manufacturing cost. Pricing is key among the most primary components of the marketing mix because it is one of the four Ps i.e. price, product, promotion and place. In addition, price is the only revenue generating component among the other four Ps while the rest are cost centers (marketingteacher.com). Product positioning, product features, promotion and channel decisions, all are relate to pricing. This explains the importance of pricing, and that’s where pricing strategies come into play. Pricing is very important for organization and aims at maximizing current profit, maximizing current revenue, maximizing quantity, recovery of partial costs, quality leadership; it helps in business survival and to maintain the status quo in business (entrepreneurs.about.com). Apple Inc, one of the companies that use technology to win the price war has successfully experience rapid growth in the market. The company produces and sells different kind of consumer electronics products ranging from personal computers, commercial servers, digital distributor of media content and computer software. The company’s core products are smart phone, iPhone, iPod portable media players, iPod table computers and Macintosh computers. Apple Inc, headquartered in Cupertino, California, has a long history dating back from its formation in April 1, 1976 (apple-history.com). The American multinational corporation has gone through tuff market conditions resulting from financial challenges to stiff competition in the market. By revenue rating, Apple Inc is the world’s second largest information technology firm after Samsung Electronics. The company is also the world’s third largest mobile phone producer after Samsung Electronics and Nokia. Apple Inc has 394 retail stores in fourteen countries and also has online Apple Store and iTune Store. By market capitalization, Apple Inc is the second-largest public commercial firm in the world, with a predictable value of US $ 414 billion. The company currently has 72,800 permanent full-time employees and 3,300 temporary full-time employees worldwide (apple.com). Pricing Strategies
Pricing strategy can focus on three different approaches namely; cost-based pricing which is determined by adding profit part on top of the cost of producing of a product. The buying prices are set by adding a percentage to the rate of manufacturing or purchasing a product. The pricing approach has received critics as an out-dated method of pricing and as a discredited pricing strategy. However, it is still widely practiced by most of the manufacturing firms worldwide. The second approach is the competitor based pricing in which competitor price influences the price set. Customers are always faced with the challenge of choice of who to buy from in a stiff competitive market (entrepreneurs.about.com). The customer may choice to buy for the lowest bidder in the market or from the highest bidder, or perhaps even choice to fall in between and choice the average bidder. However, customers are always careful of their choice bearing in mind that expensive may not mean quality and cheap may not necessarily mean low quality. This approach deletes much power from the organization with regards to price setting. The main slogan of a competitive market is “going rate” pricing, referring to price setting that is in line with the price charges by direct competitors. The delicate part of this pricing approach is that the company will require other ways to attract customers. This includes using non-price methods to effectively compete like offering distinct customer services (sixrevisions.com).
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