Amidst fierce competition CEO Tim Cook is steering Apple towards eternity. Cook wants Apple to last for thousands of years. We ponder, how? Adopting an unconventional pricing strategy, can Apple last for thousands of years?
From the inception of the journey, Apple Inc. uncompromisingly brought quality technology products. Apple fans didn’t think twice to pay out the Apple Tax. For the fans, buying a product from the “technology’s luxury brand” is always exciting. Atypically, the giant reduced its products’ prices recently which hints they might bring a strategic change.
Apple way of Pricing
Apple was famously at the center of the criticism because of its fanboy fee. People accused the brand of expensive pricing. Despite the extravagant price, customers don’t abstain from buying Apple products. In fact, Apple is a name of lifestyle. Calculating a simple math of supply and demand the brand successfully harvested a large pile of profit for the time being.
Reduction in Pricing
Recently, Apple’s price reduction surprised everyone. One can buy a fast, beautiful iPad only at $329. Buy AirPods only at $159 which makes it the cheapest wireless headphone in the market. Likewise, the brand reduced its Apple watch price to $269.
Such price reduction will not only increase the sales but also dominate each product category regardless of brands.
The way Apple reduces price
High demand for Apple products let Apple manufacture a large scale of products. In fact, large-scale production decreases overall production cost including operating and administrative costs.
On the other end, the company is taking control of production process. Now, it owns silicon and core technologies. Moreover, the company is increasing vertical integration to minimize different costs. For the similar long-term purpose, Apple sued Qualcomm over royalty issues. Once Apple gets into the baseband [BBP] business production cost will reduce further.
Reason behind price reductionSeveral reasons might cause such price reduction. One of the most noticeable reasons is Apple wants to enlarge its customer base. Beside loyal Apple fans, it wants more people to buy Apple products. In fact, price reduction for entry level products will bring more people into Apple’s customer circle.
On top of that, the cheaper the products get, the more accessible it becomes to the middle-class tire. As a matter of fact, the number of middle-class people is increasing. According to Pew Research Center, Middle-income people in the US are 51%. Reaching them will increase the company’s revenue.
Interestingly, Apple is only decreasing the complementary or entry level product prices. It is not decreasing prices of its main products like Mac or iPhone. The game is simple yet smart. Reducing prices for Apple watch, iPad, and AirPod will actually beef up key products (iPhone) sales.
Additionally, the strategy will subconsciously push people to buy more Apple products from different product lines. It is Apple’s old way to cement its credibility as a lifestyle technology brand. Furthermore, the company thinks individual products are the key to making the company last for an eternal time.
Apple is pricing its products in two different ways. It set the almost lowest price in the entire market for the entry-level products. Oppositely, it prices its high-end products expensively. When Apple watch price starts from $269 it goes till $17,000. Likewise, the entry level iPhone price is $399 while the upcoming iPhone will probably be as expensive as $1000. Distinctly, such unconventional pricing shows the iPhone maker redefine the concept of luxury for mass marketing.
Maneuvering to Eternal- Luxury- BrandFrom 702 A.D. Nishiyama Onsen Keiunkan strictly followed its credo (core belief). Sticking at the main mantra made the company the oldest existing successful company on earth. Apple has stuck to its core value from its inception. It’s also vivid in the new vision of the company by Tim Cook. He said, “…we…focus on…(projects) that are truly important and meaningful to us”.
We sorted out some important parameters that play vital roles for any ambitious companies that want to live a thousand years. Predicting future, keeping up with the current competition, and innovating in line with consumer necessities.
Predicting Future & Focusing on Future Technology
Augmented Reality is in the center of the discussion when future technology is the concern. This technology might make other hot techs archaic. Utilizing AR, necessary information will be available in the blink of an eye. For any capable company, AR is a big thing. As Apple CEO signifies, “I regard (AR)… a big idea like the Smartphone. The Smartphone is for everyone, we don’t have to think the iPhone is a certain demographic, or country or vertical market: it’s for everyone. I think AR is that big, it’s huge. I get excited because of the things that could be done that could improve that a lot of lives”.
However, believing in AR, Apple embraced the technology. The Apple Watch presents contextual alerts on your wrist, while the wireless AirPods put the Siri virtual assistant straight into your ear.
Artificial Intelligence (AI)
Big tech corporations’ intensive concentration on AI proves its significance. Keeping up competing with IBM, Amazon, Microsoft, and Google, Apple Inc. plays hard about AI too. In fact, the tech giant (Apple) continuously develop its AI tool, Siri.
iCloud is the substitute of iPhone
People familiar with the matter expect that Apple will traverse its iPhone era. In addition to that, the new center of everything will be iCloud and other Apple services.
The robust foundation Apple has built is powerful enough to keep its consumers within the Apple vibe ecosystem.
Keeping the demand high, while bringing more consumers
In the technology sector, maintaining an air of elegance as a brand is difficult while competition is so intense. Nevertheless, Apple found its own way to remain technology’s luxury brand while attracting new users.
People always welcomed Apple’s quality products. Recent, price decrease made Apple products more appealing. As a result, entry-level products are getting more attention like never before. Doug Clinton from Loupventures said “AirPods are more important for Apple than the Watch, but it may take some time for it to show. IDC data shows that Apple sold 8.8 million Watches in CY16. We expect 10 million in CY17. By comparison, we expect Apple to sell around 8-10 million AirPods in CY17… We expect over 20 million AirPods in CY18 vs 12 million Apple Watches”.
All these events hint Apple is growing in a new fashion. We style it a two-dimensional growth of a single luxury brand. It is growing as a tech luxury company while releasing attractive low priced products. In fact, such growth seems to be effective. It will aid the brand to outperform others. Reinforcing its earned supremacy in the premium segment, the company will rule the entire sector.
All in all, Apple has an eye-popping robust balance sheet. Additionally, it comes as no surprise that the iPhone maker’s 231.5 billion Apple cash pile can be the talisman of its future success.