Theories behind Pricing Strategy As Applied By Apple Company Research Paper

Theories behind Pricing Strategy As Applied By Apple Company - Research Paper Example Regardless of whether or not a company’s product is the best in the market in terms of quality, the company must set a price that convinces the ordinary consumer of the quality of the product. This implies that the price of the product must match the quality of the product sold. In setting a price for a product, a company must take into consideration the nature of the market in which it operates. This includes analyzing the prices charged by competitors in the market. This is because regardless of the quality of the product that a company intends to introduce in the market, consumers will always compare the prices of all the companies in the industry and match them with the quality in arriving at a decision on which company to buy from. In this regard, marketing experts argue that for a company to attract customers, it must ensure that the prices charged are not too high or too low compared to those of its competitors (Griffin, 2013). Secondly, an effective marketing strategy that a company adopts must take into consideration the cost. As such, in setting a price, a company must first calculate all the cost incurred in the development of the product and subtract it from the revenue sources. This helps in determining the minimum profit margin that a company needs in order to break even. The price at which a company will break even should always be the list price at which the product may be priced (Landsburg, 2011). Thirdly, a good pricing strategy must take into consideration the consumers and the demand for the product to be introduced in the market in order to calculate the maximum price that the consumers may be willing and ready to pay for the product. Once this has been determined, the next step is to use the profit margin goal and competitor information to choose the best price to sell the product (Griffin, 2013). Apple’s Application of Pricing Theory Product prices are determined in three different ways namely cost-based, competition-based, or demand-based. In cost-based pricing, the price of a product is fixed based entirely on the cost of production and the desired profit without factoring in the demand aspects. In competitive-based pricing, the prices are set based on the competitor prices for a similar product. In demand-based prices, the prices are fixed based on the price rage that consumers are willing and ready to pay (Griffin, 2013). Apple is one of the electronic companies that have succeeded in the electronic industry. The company is known for quality phones such as the iPhones and other electronic products. Many people have often wondered how Apple has managed to achieve so much successes despite the stiff competition it faces from other giant companies such as Samsung, Nokia, and LG. An analysis shows that apart from the quality of the products it sells, the company has also succeeded due to the pricing strategy that it adopts. In this regard, the analysis shows that Apple adopts a cost-based pricing strat egy, which is purely based on its cost of production and the desired profit margin. According to the company, its prices are not fixed with the demand aspects in mind. Rather, they are fixed with the profit margin that it intends to generate in mind. This explains why the prices of Apple products are relatively more expensive than those of its compactors. Apple is a company that