Apple’s products all give people a sense of being superior to other brands, such as LG, Acer and Amazon. These products are often described as being lighter, thinner, greater looking and contain more functions. People appreciate these qualities and they are willing to pay a much higher price to buy Apple’s product than other similar products with different brands. However, in such a competitive market of technology, how can Apple keep such a high selling price and still generate a much greater profit than other competitors?

According to the article of “How Apple Sets Its Price“, Apple uses four retail strategies: House advantage, carrot and stick and when good discounts go bad. First of all, Apple employs a strategy known as price maintenance in its house advantage. In other words, Apple takes an advantage by limiting the way other retailers could advertise their products due to its strong popularity. Apple tries to reduce the wholesale price to other retailer, and therefore, those retailers have little or no room at all to have a discount on the Apple products or earn a lot of revenue. Thus, Apple could firmly grasp all the customers to its own Apple stores since it is considered to be more trustworthy and there is almost no price difference in the other retailer stores. Secondly,carrot and stick is an interesting term to indicate that Apple is only willing to give a little bit more wholesale discounts if the retailers can advertise their products above the minimum advertised price (MAP). I believe this is very efficient because not only Apple can reduce competitions from low price offered by other retailers, but it can also prevent any retailer to establish a strong market position and can have advantage in negotiations in the future. Lastly, many retailers such as Rogers and Tellus offer cheap iPhone but with a long-term contract in order to compensate the high costs. However, a big discount is actually bad for Apple since the market for retailer is also very competitive. If one retailer store lower the price, other retailers would do the same thing to attract customers.

Overall, Apple’s retail strategies help it control the whole distribution channels, reduce its competitors, prevent the drop in price and maximize its profits. Customers are very satisfied with Apple’s selling price since its quality deserves this price and there is no variability in the price in different retail or its own stores.

Resources:

http://www.macworld.com/article/2024257/how-apple-sets-its-prices.html