(Tiểu luận) analysis pricing strategy skimming pricing strategyof apple’s product (iphone 13 pro max)

BỘ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN PRICE MANAGEMENT “ANALYSIS PRICING STRATEGY: SKIMMING PRICING STRATEGY OF APPLE’S PRODUCT (IPHONE 13 PRO MAX)” GV hướng dẫn: Đỗ Khắc Hưởng Group Lê Yến Nhi Nguyễn Thu Phương Nguyễn Minh Hằng Nguyễn Hương Giang Nguyễn Linh Trang 11214543 11219783 11212056 11216931 11215823 TABLE OF CONTENTS I INTRODUCTION About Apple 2 About iPhone 13 Promax (Referred object) 3 About pricing strategy of Apple: Skimming price II APPLE SKIMMING STRATEGY (IPHONE 13 PRO MAX) How Apple applied skimming strategy for new products Cost application of Iphone 13 Pro Max Sales data of iPhone 13 Reasons why Apple succeed with this strategy while lots of companies have failed: Market share of Apple iPhone 13 and Apple iPhone’s position in the worldwide market III THE COMPETITOR: SAMSUNG .10 Samsung’s brief story 11 Comparing some factors between Apple and Samsung .12 Pricing war: Apple VS SamsungSamsung 12 IV CONCLUSION 13 I INTRODUCTION About Apple Apple Inc is an American multinational technology company headquartered in Cupertino, California Apple is the world's largest technology company by revenue, with US$394.3 billion in 2022 revenue Apple was founded as Apple Computer Company on April 1, 1976, by Steve Wozniak, Steve Jobs and Ronald Wayne to develop and sell Wozniak's Apple I personal computer Apple offers numerous products and services A few of its major offerings today include: Mac computer and laptop, iPhone and Ipad, Apple TV and Services such as iCloud, iTunes, iMessage 2 About iPhone 13 Promax ( Referred object) iPhone 13 Pro Max is smartphone designed, developed and marketed by Apple Inc They were the flagship smartphones in the fifteenth generation of the iPhone, succeeding the iPhone 12 Pro and iPhone 12 Pro Max respectively The devices were unveiled alongside the iPhone 13 and iPhone 13 Mini at an Apple Special Event at Apple Park in Cupertino, California on September 14, 2021, and became available ten days later, on September 24 They were discontinued on September 7, 2022, as iPhone 14 and iPhone 14 Pro were announced About pricing strategy of Apple: Skimming price Skimming price is a pricing strategy that sets new product prices high and subsequently lowers them as competitors enter the market Apple has used this strategy for its iPhone products When Apple releases a new iPhone model, it typically sets a high price point to capitalize on the initial demand from early adopters and those willing to pay a premium for the latest technology As the product matures and competition increases, Apple gradually lowers the price to appeal to a wider audience This strategy allows Apple to maximize profits during the early stages of the product's life cycle, while also creating a perception of exclusivity and high quality It also helps to offset the high costs of research and development, marketing, and production associated with launching a new product Overall, the skimming price strategy has been successful for Apple in the highly competitive smartphone market, as it has allowed the company to maintain a premium brand image and generate significant profits II APPLE SKIMMING STRATEGY (IPHONE 13 PRO MAX) How Apple applied skimming strategy for new products To implement the skimming pricing strategy, Apple has applied some steps as follows: + Market Research Before applying a skimming price strategy to a new product, Apple had to thorough market research to assess the product's potential and determine marketappropriate pricing + Launching products at high prices Apple has launched products at a higher price than similar products in the market to create an impression with customers and create expectations + Create scarcity Apple has created scarcity for products by limiting the number of products produced and sold in the market + Reach potential customers Apple has reached potential customers through advertising campaigns and events to create product attention + Gradual discount After creating expectations and capturing the attention of customers, Apple lowered prices gradually to increase sales and recoup initial investment costs ⇒ Apple's implementation of the skimmed pricing strategy has been successful and has made its products the most popular in the market 2 Cost application of Iphone 13 Pro Max ( As Apple does not public its detailed information, every cost below is estimated) Illustrative pie chart of Iphone 13 Pro Max’s Cost Application  Production cost: 567$ Including: Display: $70 A15 Bionic chip: $40 5G modem: $55 Camera system: $70 Battery: $12 Others (such as memory, sensors, connectors, and assembly): $320 => The total estimated component cost for the iPhone 13 Pro Max is $567, which is about 51,59% of the device's retail price of $1,099  Labor cost: Apple pays around $25 to $30 per iPhone ( 2,73%)  Logistics and distribution cost: estimates suggest that the logistics cost per device could be around $15 to $25 (2,27%)  Patents and licensing cost: 60$ (5,46%)  Profit margin (25%)  Other costs (R&D, S&M,G&A, ): (12,95%) - Apple’s pricing strategy relies on product differentiation, which distinguishes a product or service from competitors Apple has been victorious at differentiation, thus creating demand for its products and devising a unique customer base Their success at differentiation, combined with their brand loyalty, allows the company to have power over their pricing By establishing a loyal customer base and keeping their prices high, Apple has set up an artificial barrier to entry for their competitors Sales data of iPhone 13 Price of iPhone 13 pro max through times: 128GB Launching period: 24 $1099 256GB 512GB 1TB $1199 $1399 $1599 Sep, 2021 After year launching, $834 (-$256 $878 (- $939 (- $1066 (the new iPhone come out: compared to $321) $460) $533) 22 Sept, 2022) original price) Current price $785 (-$314) $852 (- $908 (- $1050 ($347) $491) $549) - The first period: Launching period + The ultra-premium segment increased sharply driven by the launch of the iPhone 13 series (including iPhone 13 Pro Max) The iPhone 13 Pro Max earned huge sales globally Within the US, the demand for the iPhone 13 Pro Max and Pro was higher than the usual iPhone 13 during the first few days of the launch +The appearance of the 13 series has attracted a lot of attention at that time and became the most highly-anticipated phone models of the year 2022 Samsung’s share declined in the premium segment, as it faced stiff competition from Apple Document continues below Discover more from: Pricing Management Đại học Kinh tế Quố… 20 documents Go to course 409036640 Bai Tập Quản Trị Gia Pricing 100% (1) => By using the skimming price strategy, Apple has created a positive financial Management push, helping to maximize revenue and profit for the company when demand is high and competitors have not yet appeared - The second period Love-and-belongingHowever, when the market is gradually saturated, besides 1-1 Apple there are the price will have to very strong competitors such as Samsung, Xiaomi, etc., Pricing decrease to be able to reach the popular segment with the mid-range customer None Management group Chapter-1 + chapter + chapter Pricing Take a look at the above data table, just year after the launch of the 13 series and None Management when Apple is about to launch the iPhone 14 series on September 16, 2022, we can see that the price of the iPhone 13 pro max has significantly reduced, ranging from about $256 to $533 depending on the version, 20%-30% off the original price Company valuation Though, A study from retailers has shown that the iPhone 13as-result-of-risk-… pro max is the best- selling phone in Vietnam in the first half of 2022, before 17 Apple launches its next Pricing product, the iPhone 14 series, at the end of September None Management ⇒ It can be seen that the skimming pricing strategy is a very wise strategy of Apple not only with the iPhone 13 series but also will be highly effective with the next phone lines of the company Till now, when the 14 series appeared, the price of 13 Thi-QTG Sample - đề pro max was only ⅔ compared to the original price when it launched, the release of thi mẫu quản trị giá iPhone 14 definitely led to a decline in sales However, there still be a large market for the iPhone 13 Pro Max, especially among those who are looking for a more Pricing None Management affordable option or are not interested in upgrading to the latest model Coca Cola Market Segmentation Pricing Management None Reasons why Apple succeed with this strategy while lots of companies have failed: Strong brand image: Apple has a strong brand image and loyal customer base that is willing to pay a premium for its products This allows Apple to set high prices without losing customers Innovation: Apple is known for its innovative products and features, which creates a high demand for its products This demand allows Apple to set high prices and still sell a large volume of products Marketing: Apple invests heavily in marketing and advertising, which helps to create a perception of exclusivity and high quality for its products This perception allows Apple to set high prices and still attract customers Control over supply chain: Apple has tight control over its supply chain, which allows it to keep production costs low and maintain high profit margins Overall, Apple's success with the skimming price strategy is due to a combination of factors, including a strong brand image, innovation, marketing, and control over its supply chain Market share of Apple iPhone 13 and Apple iPhone’s position in the worldwide market The iPhones series is one of the most popular and well-known smartphones in the world, and it has a strong position in the global market Apple has consistently been one of the top smartphone manufacturers in terms of market share, and the iPhone is often seen as a status symbol and a high-end device The iPhone's popularity is due in part to its sleek design, user-friendly interface, and powerful hardware and software features Additionally, Apple has a strong brand reputation and a loyal customer base, which has helped to maintain the iPhone's position in the market Despite facing competition from other smartphone manufacturers, the iPhone continues to be a popular choice for consumers around the world => iPhones generally reached its highest market share at the end of each year (4th quart) since this is the time when the newest Apple iPhone’s series was released At the rest of the year, the Apple iPhone was in 2nd place, which varies between 1423% market share, following Samsung Apple’s iPhone 13 was the best-selling smartphone of 2022, contributing 28% of iPhone sales It was the best-selling smartphone in major markets such as China, US, UK, Germany and France Further, the iPhone 13 remained the number one smartphone each month from its launch in September 2021 till August 2022 The iPhone 13 sales were two times more than that of the iPhone 13 Pro Max, the second best-selling Counterpoint’s Model Sales, Dec 2022 smartphone in 2022 Smartphone Market Summary: + The global smartphone market declined by 19% YoY to 302,64million units in Q4 2022 + Apple replaced Samsung as the top smartphone player in Q4 2022, driven by the recent launch of the iphone 14 series + Samsung’s shipments declined by 16% YoY and 9% QoQ to 58,3 million + Apple and OPPO were the only top-five smartphone brands to grow QoQ, with shipments increasing 42% and 4% respectively + The 2022 annual global smartphone shipments declined by 12% to 1,2 billion units, the lowest since 2013 III THE COMPETITOR: SAMSUNG Apple has very innovative products which ‘delights’ (Marketing91, 2019) their customers Apple is superior to its competitors (Samsung, Huawei, LG), most of the Apple products have premium pricing E.g MacBook, iPad, iPhone, iWatch are all premium products (Marketing91, 2019) One of the main reasons Apple is using the premium price policy is because of the technology they are using in their products With so many Apple fans around the world and with the brand value that Apple has, Apple needed premium pricing for all products Apple is the market leader in the UK with 52.05% market share, and its major competitors are Samsung, Huawei, Motorola, Xiaomi, and Google It is well ahead of competition in this market Needless to say that an epic war is at play between Apple and Samsung Long ago, Samsung was a supplier of Apple; however, it decided to challenge the latter This infuriated the then Apple boss Steve Jobs who announced launching “thermonuclear war” on Android, the operating system used in Samsung phones (Cain, 2020) However, it seems that Samsung is undeterred and its remarkable ability and efficiency to produce superior hardware extremely swiftly has played a big role behind its success Therefore, it is having a neck and neck competition with Apple in many countries Samsung’s brief story Samsung is a South Korean multinational conglomerate headquartered in Samsung Town, Seoul Samsung was founded by Lee Byung-chul in 1938 as a trading company Over the next three decades, the group diversified into areas including food processing, textiles, insurance, securities, and retail Founded in 1969, Samsung Electronics Co., Ltd is headquartered in Suwon, South Korea The company’s offerings include home appliances such as TVs, monitors, printers, refrigerators, and washing machines as well as key mobile telecommunications products like smartphones and tablet PCs Comparing some factors between Apple and Samsung This table provides a brief overview of the competitive factors between Apple and Samsung However, it is important to note that this is not an exhaustive list and there may be other factors that could influence the competitive landscape Pricing war: Apple VS SamsungSamsung  Apple: Apple has very innovative products which ‘delights’ (Marketing91, 2019) their customers Apple is superior to its competitors (Samsung, Huawei, LG), most of the Apple products have premium pricing E.g MacBook, iPad, iPhone, iWatch are all premium products (Marketing91, 2019) One of the main reasons Apple is using the premium price policy is because of the technology they are using in their products With so many Apple fans around the world and with the brand value that Apple has, Apple needed premium pricing for all products  Samsung: Because Samsung has a wide range of products, the company uses many price strategies For instance, some price strategies used by Samsung are Skimming price and Competitive price (Marketing91, 2019)  a) Skimming price – Samsung’s smartphones are like Apple’s, one of the best in the market, and they are the market leader in terms of the features and USP’s that they provide Samsung uses skimming price for these products wherein it tries to get a high value from the start before competitors catch up Once a product is getting old, not in trend or any competitor has launched a similar product, Samsung immediately drops the price to attract customers (Marketing91, 2019)  b) Competitive pricing – this strategy is used for products other than smartphones This competitive pricing is used for products like televisions, air conditioners, refrigerators, like other competitors Panasonic or LG which sells similar products as Samsung products Samsung is known as a great brand but it is not greater than LG for home appliances Thus, Samsung keeps competitive pricing in various categories to beat the competitor (Marketing91, 2019) IV CONCLUSION In conclusion, Apple's pricing strategy is a key factor in the company's success By offering premium products at premium prices, Apple has been able to maintain a strong brand image and appeal to a loyal customer base While some may argue that Apple's prices are too high, the company's continued success suggests that its pricing strategy is effective Overall, Apple's pricing strategy is a key component of its overall business strategy and has played a significant role in the company's success The end