Pricing the iphone is one way in which Apple will communicates to the public the value of its mission, vision, objectives and core competencies (Silber & Kearny, 2009). According to Silber & Kearny (2009) if the pricing strategy for iphone is right Apple will produce appropriately high profits for the company and on the other hand if the pricing is wrong the company can cause uproar. Silber & Kearny (2009) continue to say that pricing the iPhone should not be a trivial matter.
The best pricing strategy for the iPhone will be perceived value pricing. Silber & Kearny (2009) established that “perceived value pricing method involves focusing not on the costs of the products but rather on the value the target market attaches to the product” (p. 123). Since the iPhone is good looking and has advanced functionalities, it trumps all other qualities in the eyes of the target market. The iPhone has a leadership as a result of its quality. In this context Silber & Kearny (2009) said that the company will focus on higher although not the highest price for iPhone because of its high quality.
The alternative pricing strategy that Apple can use to price its iPhone can be going rate pricing (Silber & Kearny, 2009). Using this strategy the Apple will also focus on the prices that competitors are charging and therefore the price of the iPhone will be such that the iPhone’s will stay within a certain percentage of those prices (Silber & Kearny, 2009). Silber & Kearny (2009) continue to say that using this strategy “the company will pay less attention to the costs of producing the iPhone” (p. 126). Using the going rate pricing Apple can decide to charge the iPhone same as competitors, less than they do or more based on the pricing objective.
In order for the company to achieve the best price for its iPhone Silber & Kearny (2009) says that the company should follow the steps which include; selecting the pricing objective of the iPhone, determine the demand of the iPhone, estimate its costs, analyze the competitors prices and offers and the finally select the final price of the iPhone. Nagle & Holden (2002) concluded that costs are central considerations in pricing. As a result the company should identify which costs of the iPhone are incremental and avoidable in order to serve its market profitably.