Last week, we highlighted theinconsistencies in Apple's product pricing with the very low price for the Apple AirPods. However, this pricing seems to become increasingly consistent, with both the Apple Watch and now the new iPad supporting this pricing strategy. At just $329, it's definitely among the cheaper options on the market.
One theory behind this move is that Apple is trying to win new customers at an early age. And as we know, young people typically has a much lower willingness-to-pay. But as the saying goes "Once you go Mac, you never go back", and that's exactly what Apple is hoping to do: Acquire young customers by offering low prices, and cash in through retention and selling high-margin products to them later in life. Generally speaking, Apple enjoy great brand loyalty, and a fair share of their customers would not consider buying alternatives to Apple products. Such loyalty takes time to build up, and by offering lower prices for some of its product, Apple can reach young, price-sensitive customers and nurture them so that when they gain significant purchase power, they have a preference for the Apple products.
This strategy is also evident in Apple's education pricing. Not only do they aggressively establish partnerships with universities around the world, they also offer significant discounts to both students and university staff (In the UK you can get as much as £431 off your MacBook!). Note this discount also applies to the university staff, despite their willingness-to-pay is sufficiently high to pay the full price. At first sight, Apple is leaving a substantial amount of money on the table: but it comes with a reward. Not only does it increase students' exposure to Apple products, but it also encourages university professors to use OS-compatible software in their teaching; a significant measure used by Apple to gain and retain customers as a lot of software is only compatible with either OS or Windows (think Xcode and Freeway).
While it seems Apple are leaving their high-margin pricing strategy behind, this is unlikely to be the case. Apple is and always will be about offering top-notch products and it is impossible to target such products at all consumers. More so, the lower pricing is simply a mean to getting new customers in the fold, so they can become loyal Apple customers and buy high-margin products in the future.
Readers of this blog will find a wealth of articles about price optimization, price research and willingness-to-pay analysis. PriceBeam's offers scientific as well as fast and cost-effective price research.