A. Initial Pricing Strategy: When iPhone was firstly released in 2007, the price was as high
as $599 for an 8GB unit. According to some estimation, it was nearly $330 higher than the
margin price of each iPhone (The Apple IPhone). According to a survey which was done in
2008, 75% of iPhone early adopters were previous Apple customer (Perez). Obviously,
Apple Inc. was targeting most of those iPod users who had experiences with Apple
products. At the same time, the survey also revealed that half of users are under thirty, and
fifteen percent are students (Perez). Thats because young people like to try new products
like iPhone, and they were also technically sophisticated since they went to adopt this new
technology. In this way, Apple Inc. set up an image of high quality with a relatively high
price level product. So people who were really fashion at that time would line up to get the
new product which they had never used before.
B. Apple Inc.s decision on price drop and offer rebate: Two months right after its releasing,
Apple Inc. made another huge decision. They stopped supply 4GB version of iPhone, and
dropped $200 for each 8GB unit (The Apple IPhone). In my opinion, Apple Inc. must see
the huge success for releasing iPhone at that time. For the first weekend only, they sold
270,000 units (The Apple iPhone). With the decrease of the price, more 1 people would be
able to afford the new iPhone. At the same time, Apple Inc. had given people the image of
high quality and high level of price for iPhone in the first two months. Decreasing price
will attract more potential consumers to buy the high quality products in consumers mind.
Thats because the previous price was so high that normal people couldnt afford. However,
one major issue came up with the price dropping strategy. Previous buyers were super
unsatisfied, because the value of their phone had dropped $200 after two months or less
time of using. In order to comfort those early buyers, Apple Inc. issued $100 store credit
cards to those earlier buyers. As far as Im concerned, though dropping price will result in
more consumers buying iPhone, potential consumers might also be skeptical about the
price for fear that it will suddenly drop after several months. Even today, Apple Inc.
decreased the price of older version iPhone when there is a new version coming out. I
