Chapter 2: Analysis of marketing strategy
2.2 Pricing Strategy
2.2.1 Factor affecting pricing decisions (type of market)
iPhone4s is a product from Apple which sells in oligopoly competition market. As we know, the characteristic for oligopoly competition market are product differentiation, few sellers but many buyers in the market, high barrier market entry and exit, price maker in the market and spend money in advertisement. It has a few of competitors, such as Samsung Galaxy S2 (RM2099), HTC One X (RM2099), Motorola Rarz (RM1999), Sony Xperia S (RM1899) and Nokia Lumia 900 (RM1799). To enter oligopoly market, it has a high barrier. Therefore, Apple is the price maker. Their products are inelastic which means that the products price change would not make a big difference in the quantity demanded as customers will still buy the iPhone4S because of its superior value, benefits and features it provided to the customers. Apple Smartphone always has more function than its competitor. For example, iPhone4s have unique function for their own brand which is Siri Voice Assistant, the voice-activated personal assistant exclusive that other company phone does not have it. Samsung Galaxy S2 has excellent keyboard dictation software, but its do not have the same system-level integration Siri does. With Samsung Galaxy S2, you will need apps like Vlingo or Jeannie to help you with answering questions but they are still not half as good as Siri. Apple used their unique function to attract their customers .Apple are using value-added pricing strategy to attract customers instead of cutting price. Product differentiation is a process of creating real or apparent differences between goods and services and a differentiated product has close but not perfect substitute. For example, the substitutes of our chosen product are Samsung Company’s product which is Samsung Galaxy S2. There are a lot buyers and sellers in the current market. They are also known as price maker in the market power, therefore the sensitivity of demand to changes in price are inelastic, which means the demand of the product slightly changes varies to the change of price. Apple manage to improve the quality, durability and graphic of the Apple product successfully attract the customer on Apple’s product. 2.2.2 New Product pricing strategy
For the new product strategy, Apple practice the market skimming pricing strategy on their products, iPhone4s sets a high price for their products, Apple as to ‘skim’ revenues from different level of segments which target from the top, the one who willing to pay high price. As by practicing this strategy, Apple might just make fewer sales in the market but they gain more profitable sales. When the iPhone4s once launched in the market, the selling price is RM2199 (16GB), RM2599 (32GB), RM2899 (64GB). Subsequently, a year later, when a newer version of iPhone has announced, iPhone5, apple decided to lower down iPhone4s price to be RM1799(16GB). The price has relatively decreased RM400 for iPhone4s (16GB) because they have earned a big sum of revenue throughout the year of the launching of iPhone4s. The iPhone4s price will continue to fall gradually in the market when apple continue releasing new version of the iPhone to the market each subsequent year. It is done so hoping to attract new buyers who are not willing to pay RM2000 and above for an iPhone, therefore, they have to skim the price of each older version of phone to attract those potential buyers and the targeted buyers who are willing to pay more will get the newest version of iPhone. Samsung also practice the market skimming pricing strategy as they set a high price on their product so as to ‘skim’ revenues layer by layer from the market, however the price set for Samsung Galaxy S2 lower, RM2099 (16GB). This mainly because iPhone 4S has higher quality compared to Samsung Galaxy S2 in term of packaging, software, and special design and features. Apple iPhone as a market...
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