Apple's Pricing Strategy for iPhone in the US | Marketing Management Case Studies

Details

Case Code : CLMM036
Publication date : 2009
Subject : Marketing Management
Industry : Consumer Electronics
Length : 04 Pages
Price : Rs. 100

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Key words:

Pricing, premium price, market skimming strategy, early adopter, public relations fiasco, iPhone, Apple, Steve Jobs, iPod, iPod Touch, telecom, AT&T, Apple Retail Stores, Nokia, Motorola

Note

1: This caselet is intended for use only in class discussions.
2: More comprehensive case studies are priced at Rs.200 to Rs.700 (US $5 to US $16) per copy.

Abstract:

In 2007, Apple Inc. raised many eyebrows by reducing the price of its much hyped iPhone by one-third within 10 weeks of the launch. While some analysts felt that adoption of such market skimming strategies and subsequent price cuts by companies selling technological devices was nothing new, others felt that Apple's decision to reduce the price so drastically just a few weeks after the launch was a public relations fiasco. As a section of the early adopters of iPhone voiced their resentment, Apple went into damage-control mode.

Issues:

  » Pricing (pricing decisions, market skimming, etc)
  » Public relations
  » Product adoption and diffusion

Introduction

On September 5, 2007, Steve Jobs (Jobs), CEO of Apple Inc. (Apple), announced a steep price cut for its much hyped iPhone. The price cut which came within 10 weeks of the launch of the product angered the early adopters who had bought their handsets at a premium price. Some of these customers had waited in queues before Apple stores for days to buy the phone as soon as it was launched...

Questions for Discussion:

1. Critically analyze the pricing decisions that Apple took for its iPhone. What led the company to reduce the price so drastically?

2. What, according to you, could be the possible ramifications of the iPhone price cut? Do you agree with critics that Apple's decision was nothing short of a PR fiasco? Give reasons for your answer.

3. Discuss how the Apple's pricing decisions regarding iPhone was expected to impact the early adopters of the phone.