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Contemporary Management

In: Business and Management

Submitted By Joyce92lee
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Pricing is the value that put to a product or service. The method decided by company to set as a selling price. The price is based on product costs and customer’s perceived price on the product. Price is very important to business because it represent business’ assessment of the value customers see in the product or service and are willing to pay for product or service.
The price of product or service is actually one of the most important management decisions, while product, place and promotion have emotional impact of costs. Price is the only one of the element that stresses up company’s profits. Price can lead to a firm’s survival or demise. The price of product or service is actually one of the most important for management to make a decision for any project.
To adjusting the price has a reflective influence on the business strategy, and depending on the price elasticity of the product or service that provided, it will frequently affect the demand and sales as well and it is too high and one that is too low for limit growth of the product. The improper price can also depressingly effect of sales and cash flow that this company having.
Problems happen if fails then have to set a price to complements the other elements for the business objectives. When a high price has designates the product with the high quality. The word of luxury comes into our mind. However, a company wants to focus itself to a low-cost provider, so it will charge low prices to the customer. When the company just focus with high-end providers, customers know what to assume when they see low prices for the product. This is quite important for a company to sets the right price for their main product. A company's success can depend on it, because it will affect the image of the company. However, there are so many factories consider along with product to be charge to the customer, this is not so easy to do because they are more focus of the profit.
Nowadays, price is a larger factor in purchasing decisions for the products and services. The price that set affects profit margin per unit sold, the higher prices might giving a higher profit per item if get the sales. However, higher prices that lead to lower sales volumes can decrease, because the overhead costs per unit increase with sell small amount units.
One of the most recognizable effects of pricing to a company is an increase or decrease in sales volume is the benefit for the company also. Increasing product prices might lower sales volume only slightly, helping for decreased sales volume with higher total revenue generated by higher margins. However, decreasing product prices can increase sales volume if jump significantly and decreasing overhead expense for each product per unit. This will affects company’s brand, image or position in the marketplace. For example, higher prices tell customer that products have higher quality, or customer wouldn’t be able to charge those prices. Other customer looks for low-priced products and they believe that will get the quality they need at a low price.
Another benefit to company is the price set made more or less competitive in the marketplace, it affecting the share of the market’s volume. Some business using the lower prices temporarily to gain market share from competitors, that who can’t respond to meet the special price. When customer have time to try the product and develop a brand preference or loyalty, it won’t cause them leave even the company had increase the prices to other level.
In addition, the business exists to provide the value. Company provide jobs to individuals to produce the goods and provide the services for supporting themselves and family’s daily expenses achieve their standard living and even pay taxes to promote national economic. All of individual parts total up to providing value in the word that another human being is willing to slap down a bill or the credit card in exchange for the intermingling of parts, time, and ingenuity have cobbled together.
Therefore, price is the only general income from the price strategies. Pricing strategies is targeted to the customers and against competitors. There are premium pricing, penetration pricing, economy pricing and skimming pricing.
No matter what product or service that sell or provided, the price changing will have a direct effect to customers or clients on the success of business. The basic rules of pricing are direct, there are several pricing strategies. Premium pricing is the higher price used as defining criterion. It set all the brand work in segments and industries when it have a strong competitive advantage; Penetration pricing is the price is set artificially low to gain market share in the short period. This will be work when have a new product is being launched, the price will increase once the promotion period is ended; economy pricing is no-frills price. The overhead expense for the product per unit is using very low value; Skimming pricing is getting high price when charged for a product until competitors are allowed the prices can be dropped.
Before setting the price for the product, we have to know the costs of running the business. The most important thing is to add profit in the estimation of costs. If the price for product or service can’t cover the costs, cash flow will cumulatively negative, it will exhaust the financial resources and the business will ultimately fail. To determine how to set the costs to run the business, we have to estimate the costing of property, loan repayments, inventory, utilities, financing costs, and worker salary and commissions. Beside this, we also have to estimate the costs of markdowns, shortages, damaged merchandise, cost of goods sold, and etc. to operating the business.
Apple Inc. was founded in 1976 as a computer company by Steve Wozniak and Steve Jobs. In the last period, Apple has expanded into a complicated company that not just for the computer issues, but more in management. Apple is a consumer product company, and therefore required to understand their product and customers. This is very difficult because Apple involved are different industries therefore had competitors form different companies or industries. Apple understands that they have a very strong base customer are using their product. They understand the customer needed, so in 2001, they break the traditional concept and introduced the iPod as a portable digital music player, in the end in the market of music player it becoming the dominant leader. And in 2007, Apple was joined the phone industry with the iPhone, which this also been great successful.
In the first years of the 21st century, Apple was getting improved as the company stride toward 30th anniversary distributing an unparalleled degree of strength. In the late 2001, apple was introduced their surging growth and branded as iPod, a digital music player was retailing for $399. It represented apple’s skill in designing an elegant and functional product, it become one of the most required from consumer. After iPod, Apply was introduced other products like iPod Mini, iPod Shuffle, and iPod Nano, it together representing a massive new source of profit for the company. By the time the iPod video had been presented and the stock arrived in stores, Apple derived roughly 35 % of its income from iPods. Between 2001 and 2005, Apple most appreciates to the popularity of iPods, because of the sales almost to be tripled, increasing from $5.3 billion to $13.9 billion. In this period, Apple was controlled more than 75 % of the $2.5 billion digital audio player market in the United States.
As the company enjoying escalating sales halfway through the decade, it also distinguished the success of a new dimension to their business. Apple come up to their 30th anniversary in a stronger position than ever before in their history. Start from 2001, their company's well-established ability to develop remarkable products for the digital marketplace promised to deliver impressive growth and motivate the interests of consumers worldwide.
Apple’s product will not have extra discount and even though they can’t legally control prices that charged by resellers. They try to increase market demand for their products through differentiation, which involves make the products in unique and attractive to customers. Their products have always been designed to be in advance of the curve compared to other company. Steve Jobs have set a vision for Apple, there is always to create and charge a premier products and prices. Apple’s cheapest products are usually priced in the mid-range; for sure they will provide high-quality user experience with their features to their customer. They never had an objective to sell a low-cost phone. Their primary objective is to sell an awesome phone and provide a special experience, and they try figured out a way to do it at a lower cost. They always focus on the high end and give priority to profit over market share. Apple has done well in creating demand for their products, innovative advertising, guaranteed brand loyalty, and publicity the launch of new products. Their more focusing on customers willing to pay further to maintain a premium price at the cost of unit volume, Apple also set up an reproduction entry barrier to competitors.
Apple are try to offer a small amount of product to maintain the premium price. And also create a halo effect to make people connecting with using Apple Products. Apple was faced with the problem that all sellers when competitors fragment at their feet from the low-end. The worst response to this problem is to lower the price of high-end products. And there too many companies follow this strategy at their liability. Apple’s pricing strategies use this psychological feature fine. Apple let us think their products are better simply by charging higher prices than their competitors.as for Apple is concerned they have been working so well as it is shown form their products. As Apple is increasing also, those other company are increasing and trying to do something interesting for themselves goods. Apple needs to make a radical change. They don’t need to wait for people buy their products only when they are on sale but need to focus more on the customer support and improve the areas they already have problem.
Apple can solve this problem when their change the product and price along with the brand image of the product to minimize cannibalization of expensive products and avoid harming brand. Before this, Apple solved the problem with offering the older models at a lower price. Therefore, this strategy functioned very well until the competitors copied the skills of the iPhone and offered some of new feature or skills on their own products with lower prices. Apple needed to employ a different solution to the branding dilemma.

1) Graham Jones (June 9, 2014) Pricing Strategies Used By Apple Should Be Copied. [Online] Available from: http://www.business2community.com/strategy/pricing-strategies-used-apple-copied-0901800 [Accessed: February 18, 2015]
2) Learnmarketing (2013) The Marketing Mix Pricing Strategies. [Online] Available Form: http://www.learnmarketing.net/price.htm [Accessed: February 18, 2015]
3) Leigh Richards (2013) Different Types of Pricing Strategy. [Online] Available from: http://smallbusiness.chron.com/different-types-pricing-strategy-4688.html [Accessed: February 18, 2015]
4) The History of Apple Company [Online] Available from: http://web.bryant.edu/~ehu/h364proj/fall_97/hill/happle.html [Accessed: February 19, 2015]
5) Roslyn Frenz (2013) Advantage and Disadvantages of Pricing Strategies. [Online] Available from: http://smallbusiness.chron.com/advantages-disadvantages-pricing-strategies-22271.html [Accessed: February 18, 2015]
6) Premium Price [Online] Available from: http://www.accountingtools.com/premium-pricing/ [Accessed: February 19, 2015]…...

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