Diversifying from the premium segment
Apple has been the symbol of luxury as a device maker for the past few decades. This public image has led to particular pricing on its products, but analysts are now claiming Apple may be taking the route of underpricing on latest products.
Analyst Neil Cybart has talked about the underpricing strategy as a method of encouraging more individuals to explore their options with some of the Apple products. This is what Apple has done with the newly lowered prices on the AppleWatch and the AirPods.
Cybart states this kind of strategy may have been unimaginable for the firm to carry out several years ago. During the previous years, Apple has been accused numerously of putting an exorbitant price tag on their products and has been referred to as the ‘Apple Tax’.
Cybart provides evidence with the AirPods pricing at $159 which is more affordable than some of the competition including Motorola’s $249 VerveOnes plus the headphones. He also claims the entry level pricing on the AppleWatch as $269 is substantially cheaper as compared to the alternatives like the Samsung Gear S3 and the Fossil Fenix 5 which retail at $350 and $599 respectively.
The other example is the Apple Watch Series 1 models. At the current pricing of $269, it is already one of the lowest priced smart watches that is available in the market. Even the Apple Watch Series 2 is a good example considering is has a price tag of $349. The biggest competition for this device would be the Fossil Q Founder that sells for $275 and the Samsung Gear S3. Everything else within the range has been priced higher.
Cybart states the attractive pricing on the Apple Watch was a major factor resulting in record sales of the devices in the past holiday quarter. He is also of the belief the underpricing strategy is an attempt by Apple to capture the entire smartwatch market.
Apple Underpricing: Diversifying from the premium segment
The pricing on the Apple Watch and the AirPods show that the firm is looking to diversify from the premium market segment of the wearable’s and accessories market, but also the middle-income market share. The firm’s pricing on a lot of the hardware products has been a topic of debate for a number of years.
Apple itself has the belief that the high priced items it provides the market, such as the iPhone and the Mac, deliver enough value so they can justify their exorbitant price tags. Of course, not everyone believes that and relates the prices to the aforementioned ‘Apple Tax’.
The Mac Pro is one of the best examples of this. The device was designed for graphic designers and others that would appreciate high-end computing power. The most economical model of the Mac Pro costs $2,999. Though the Mac Pro has not been updated for a number of years and the components are outdated as compared to the newer predecessors and the graphics chips.
At the same time, the clients that buy high-end desktops using other PC vendors may pay hundreds of dollars less for the machine. As such, the Mac Pro is underpowered and it is also overpriced.
Underpricing as the way to go
Apparently, with this underpricing strategy, the firm is endeavoring to provide a new meaning for luxury by giving reduced prices on the luxury brand. Analysts believe this is something that other firms within the same niche are going to have issues trying to keep up with.
However, there are still other expensive options that the firm has not ruled out on the product section such as the ceramic Apple Watch Edition which has been priced at $249 compared to the $269 price tag for the entry level watch.