BUSN_5050_03C, Tooba Masroor, T00737381

Individual written assignment 3 - Pricing, 11/9/2023

Pricing is an integral part of the marketing mix that determines a business’s financial life. The

pricing of a product communicates the value it will deliver to the customers in more ways than

the other. The price of a new product must be decided strategically as it has a direct impact on

the sales revenue, demand, and eventually the profitability of the company (Toni, Milan,

Saciloto, & Larentis, 2017).

Apple uses a price skimming strategy when a new product is added to its smartphone product

line. Apple launched iPhone 11, iPhone 11 Pro, and 11 Pro Max in 2019. The company set the

price of 11 Pro Max just a little higher than the price of 11 Pro. The idea behind this strategy was

to make the consumer believe that they would be getting greater value for the higher price if they

opt for the pricey option. By doing so, Apple made higher profits with a low number of sales

required to break even and also differentiated itself from the competitors (Agarwal, 2021).

Hence, the importance of pricing must not be undermined as the customer’s perceived value is

reflected in the product price. Analysis of consumer behavior can be used by the companies to

price their new products. In this case price skimming strategy was used since Apple is perceived

as a luxury brand and hence this strategy helped it to distinguish itself from the other players in

the industry whilst making huge profits with fewer sales.

References

Agarwal, I. (2021). Slicing the Apple: An analysis of Apple’s pricing strategy. Retrieved from
The St Andrews Economist: https://standrewseconomist.com/2021/11/17/slicing-the-
apple-an-analysis-of-apples-pricing-strategy/
Toni, D., Milan, G., Saciloto, E., & Larentis, F. (2017). Pricing strategies and levels and their
impact on corporate profitability. Revista de Administração, 52(2), 120-133.
doi:10.1016/j.rausp.2016.12.004