THE APPLE WATCH’S BIG PRICING PROBLEM

A Case Study Presented to

Mr. Rhede Manulat
Faculty & Chairman of the Marketing Department
College of Business Administration and Accountancy
Mindanao State University – Iligan Institute of Technology
Andres Bonifacio Ave., Tibanga, Iligan City

In Partial Fulfillment of the Requirements of

Pricing Strategy (MKT 103)

Submitted By:

Andaloc, Mary Gold

Avenido, Mary Grace
Dy, Lloyd Martin
Lumpaz, Jan Paolo
Ramirez, Joshua
Somulung, Sitti Zaima

MARCH 2019
i. TIME CONTEXT

The Apple watch’s big pricing problem was first observed on a Friday, 10 th

of April 2015 when the company began to accept pre – orders for its new

product. Consequently, the company was able to make their watch available to

the public on Friday, April 24, 2015.

ii. POINT OF VIEW

The study will be set according to the point of view of the company’s

Pricing Manager for the reason that he/she is the one who’s knowledgeable

regarding this matter, given the fact that the Pricing Manager has the ability to

determine pricing schemes for a company’s products and services. As the

company prepares to roll out new products and services, the Pricing Manager

evaluates them to set policies on pricing. This includes coordinating with

production departments to learn how much they cost to make, as well as working

with staff in marketing on appropriate campaigns and promotions.

I. STATEMENT OF THE PROBLEM

Based on the provided case, there’s a person who, in this condition and

situation, can be a potential buyer of Apple’s Watch Series. On the other hand,

the person talking in the provided case seems to have a problem with regards to

how the watches were being priced which according to him is too wide and

garishly expensive. He also addressed other concerns such as issues on

upgrading the product and how can it be a hurdle for them to achieve long – term

success.

With that being said, it ought to answer the following questions:

1) How should Apple price their Watch Series in an effective way?

2) What should Apple do to create a design that would make the watch

look timeless and worth the price?

II. AREAS OF CONSIDERATION

The following are internal and external factors to recognize and scrutinize

to further evaluate the state and condition of the Apple Watch Series:

A. STRENGTHS

1) The Watch Series is a product created by an American multinational

technological company, Apple Inc. – a company who has already established its

reputation and name in their chosen field of industry.

2) An innovative product – A decade ago, the way smartphones started

their journey, Apple is again trying the same by giving people a reason and a

product to look forward to the next big thing through this watch.

3) The existing software is supporting the new product – The Apple OS is

same and is supporting the watch which can be used to better integrate multiple

devices.

4) The watch has a variation of styles which means that consumers has a

lot of options to choose according to their own fashion and style preferences.
 B. WEAKNESSES

1) The watch’s price range is too wide and is loudly costly.

2) The watch can eat up Apple’s own products in long run – This is a

possibility since the objective of the watch is to bring capabilities of a phone in

the watch which can directly ruin the already set market of a product like iPhone.

3) Do customers really need this watch? – this is one such product where

Apple has not been very sure whether customers are ready to use this product or

not. This uncertainty keeps the product in a hang and if that stretches too long, it

can prove fatal for the watch.

C. OPPORTUNITES

1) High brand awareness – The kind of brand value Apple enjoys is the

dream of industry leaders. This gives them an opportunity to experiment the

product in different ways and geographies to make sure it reaps benefits for

them.

2) Having Apple products indicate status and it became a global trend–

Any product of Apple becomes a status symbol in no time.

3) Consumers who want to try the product over its existing competing

brands.

4) The needs of next generation – The new generation is demanding

different and more innovative products. The kind of proposition the Apple Watch

is trying to make may fit somewhere there. Just need to hit the right spots of the

market at the right times with the right product.

 5) Customer preferences are fast changing - Driven by rising disposable

incomes, easy access to information, and fast adoption of technological products,

customers today are more willing to experiment or try new products in the

market.

6) Accelerated technological innovations and advances are improving

industrial productivity. This can help Apple Watch to significantly innovate and

make their product better than ever.

D. THREATS

1) Competition in innovation – This innovative technology industry is

competitive like anything. The competition can come from any side of it –

watchmakers, phone makers, none of them. This makes it all the more important

to be on the top of the product at all times.

2) Cheaper watches but has an excellent quality and is already well known

in the business industry of watches like Patek Phillipe.

3) Consumers who prefer to purchase the usual watch over the Apple

Watch.

4.) The influence of the loyal consumers of the usual watch towards other

consumers (can be a family member, a close friend, or a public figure) to

purchase the usual brand over Apple’s Watch.

III. ALTERNATIVE COURSE OF ACTIONS

 These course of actions are ought to answer the dilemmas declared in the

statement of the problem.

Problem 1. “How should Apple price their Watch Series in an effective

way?”

Alternative Course of Action 1.1 Even though there are people who are

against how expensive the Apple Watch is, the company and its Pricing Manager

would still stick to its original price.

Alternative Course of Action 1.2 Because there are people who are

against the Apple Watch’s price, since the product is still new to the market (in

this case) and Apple already had enough and sufficient funds from the income

that they were able to generate from their famous products (like iPhone), it would

be better if the company, together with its Pricing Manager will agree to narrow

down the price range to $239 to $1,999 that will surely knock out other competing

brands and will also offer a monthly payment plan. The buyer can avail a

payment plan and can pay it for of $19.9 per month in a year to make the watch

more affordable and accessible to everyone.

Alternative Course of Action 1.3 Because there are people who are

against the Apple Watch’s price, the company, together with its Pricing Manager

will agree to make the price rate higher than its original price.
 Problem 2. “What should Apple do to create a design that would make the

watch look timeless and worth the price?”

Alternative Course of Action 2.1 Instead of producing watches with

unnecessary ornaments, details and watch cases made of authentic and real

gold, brass, etc., Apple should just stick to the materials that they’ve used with

their previous gadgets (like iPhone, iMac, etc.) for it provides its buyers a more

aesthetically appealing and timeless approach with its minimalistic, sleek and

clean design. With that being said, the price of the timepiece wouldn’t be so

expensive since it wasn’t adorned with gold and other costly materials that would

just add up to the watch’s price.

Alternative Course of Action 2.2 To make the watch more attractive,

aside from the 18 karat gold case, Apple should also add ornaments and intricate

details made from authentic gold and silver which can add elegance and class to

the timepiece.

Alternative Course of Action 2.3 Apple t will not take action about this

matter since they only care about their loyal consumers who can afford their

products regardless of how it looks like and how expensive it is.

IV. DECISION CRITERIA

There are two alternative courses of actions which need to be

adopted by the company and should be implemented as soon as possible. For

that reason, Apple’s top level management must immediately take action to

resolve the issue with regards the company’s Watch price.

 The following are ACAs being chosen; the Alternative Course of Action 1.2

and the Alternative Course of Action 2.1. It is important to note that these two

alternative courses of actions should go hand in hand for it to achieve its creative

purpose. These two courses of action must go together to manufacture a

powerful, concrete and solid fix towards the dispute and that is through fixing the

lapses of the watch when it comes to pricing and its overall look.

VIII. RECOMMENDATIONS

After an intensive and careful assessment, the Alternative Course of

Action 1.2 was the chosen solution for the major problem while the Alternative

Course of Action 2.1 was chosen on the other hand for the minor problem. These

two courses of actions are highly recommended to be performed immediately for

the very reason that these two provide the exact and realistic solution that would

be the answer to the occurring dilemma.

As per Alternative Course of Action 1.2, it should be the answer to the

major problem since the main dilemma here is the watch’s costly price which is

further complicated by the technology component of the Watch. Most of the

consumers nowadays are already meticulous and practical when it comes to

these things. When a particular consumer sees prices ranging up to $17,000,

they would normally believe that they’d just spend the money somewhere around

the midpoint ($8,500 for example) to get a watch that has a good quality and has

almost the same characteristics as the Apple Watch. Aside from that, they should

really consider the fact that they’re still new in the market realm that they entered

(fashion industry). Apple should always remember that they’re not the only one

who’s selling watches that have numerous competitors with so much to offer too

that could possibly reach the level of their product in an affordable price. On the

other hand, the Alternative Course of Action 2.1 was chosen to make the watch

look timeless and worth the price that will make the timepiece a lot easier to

compete with other competitors. The truth is the watch’s purpose is the same no

matter what the price. With that being said, the price differential is only based on

the expensive various metals and adornments being put in the watch which are

obviously not necessary. Apple should just stick to the materials that they’ve

used with their previous gadgets (like iPhone, iMac, etc.) for it provides its buyers

a more aesthetically appealing and timeless approach with its minimalistic, sleek

and clean design.

 Therefore, to sum up and end, it is important that both of the alternative

courses of action must be utilized in order to successfully solve the company’s

problem.