Apple’s iPhone Price Cut Consumers’ Reaction

apple Inc. ( apple) was established in Cupertino, California on April 1, 1976, engaged in producing, selling and backup a wide range of personalized reckoners, port able media players, expeditious foretells, computer softwargon, computer hardware and hardware accessories ( apple Store). The phoner is always known for its progress to for delivering immature and improved convergences and find innovative means of commercialiseing and strategies of human resource management. Since its inception, the firm has been enjoying a prominent place among the players in the computer industry with most masteryful marketing strategies and innovative products and serve ups.The company is a US based multinational corporation that foc applys on design and manufacture of consumer electronics and closely tie in software products. The company was established in Cupertino, California on April 1, 1976, engaged in designing, developing, selling and supporting a wide range of personal computer s, portable media players, officious phones, computer software, computer hardware and hardware accessories. Till 2007, the firm opened around 200 retail retentivenesss across five countries and one online inventory by means of which hardware and software products are being sold (Retail Stores).In the year 2008, the firm was awarded the silk hat corporate performer organized by the famous business magazine, Business Week. (Best Performer Award 2008). iPhone A Revolutionary Invention The mobile phone technology made its beginning in the mid twentieth century. In the opinion of Robert Conway (Conway), the head of, Global System for Mobile Communication (GSM) Association Mobile phones are becoming absolutely indispensable in the developing world.It was in Sweden the first mobile swear out introduced in the form of radio telephony which was two-way radio apply in taxis and police cruisers as tested by Swedish police. Then in 1946, first commercial mobile service for exercise in c ommunication devices was launched by Ameri disregard AT&T and South-western Bell. It was only in 1970s the juvenile mobile phones were developed, researched and experimented. There afterwards from 1980s, it attracted more and more consumers as a result the growth in the mobile phone industry was tremendous.In 2003 the number of mobile phone users around the world reached to 1. 52 billion. So the mobile phone technology is experiencing fast growth and making greater sophisticated one. The mobile users were in like manner benefited from security systems and surveillances. Conway withal stated that, The technology is a gravitational force that brings into its orbit a large amount of innovators. The hack in the mobile phones users in the developing nations never showed a negative trend but instead it always showed a positive trend.For estimating the target market in mobile technologies and services, it is needful to have proper knowledge regarding consumers live style and their d emand because as the consumers passes through different stages their concern on levels, usage patterns, spending habits, and brandmark preferences for mobile and other technological products and services uninterruptedly assortments. So a good e. g. to give is iPod a revolutionary model of apple bringing bundle of digital harmonys introduced by the apple company in order to exploit maximum home computer market.With this iPod, the company created user friendly product so that the users could download music from the Internet to the player and used technological expertise to improve their product based on consumer needs. The analyst Richard Jameson, GfK NOP verbalize, Apples history proves that it has the magic raise up when it comes to product development and marketing. There after Apple introduced by totally redesigning iPod a hand any(prenominal) sized that changed the rules for the entire portable music market named iPod nano. This introduction made no changes in the mark et for iPod and continued as Apples monopoly product.As the competition rose between various devices in market, the iPod nano became the most fashionable product of Apple, made a stiff move with many optional accessories including laniard headphones. There was a worth- vacillation in iPod nanos i. e. Its 4 GB version was belld at $149, which was $50 below the bell of online version having a similar memory and the 8 GB version was expensed $199 lower than current model which resulted its success, so the Apple thought of launching iPhone by combining iPod and mobile phone in order to meet its design and user embrasure with consumers and proved to be number one in the market.This gadget was launched on June 29, 2007 and revolutionized the tech-savvy market. It also entered advancedly volatile cell phone market combining telephony, MP3, net surfing and video watching. The iPhone was the most awaited gadget by technology enthusiasts and mainstream media. It wants to reach top d uring pass season of 2007 than the previous years 2121 million units and the way it interacted its consumers succeeded it to reach the top. Exhibit 1) describes the features of iPhone as it has got2-megapixel camera, headset and sound jacks, an iPod dock, Wi-Fi, stereo Bluetooth and a speakerphone w eight-spot is about 135 g little heavier than standard mobile phone but lighter than many devices having QWERTY keyboard its thin design has a touch screen that allow users to use on-screen soft keys to dial numbers, enter web addresses and type e-mails and text messages it makes more appealing to the less tech-savvy users because of touch screen that helps for all menu navigation and data entry from typing messages to dialing phone numbers it can also support digital-music player that syncs with iTunes the Apples voicemail system provides visual interface that allow users to denude messages as the wants to listen finally it has built-in rechargeable battery that allow users to talk u p to eight hours and standby time up to 250 hours but browser sessions on General Packet Radio process (GPRS), depletes its battery rapidly, however if the iPhone is used as an iPod music player by users its life would be shortened.Apple iPhone also possesses unique features that perform its most functions with single contract and able to standby long time. It also has supportive functions of like multi tasking where the user can read a web page while downloading e-mail in the background over Wi-Fi or Enhanced Data rates for GSM Evolution (EDGE). Here interface is unique with large multi-touch display and innovative new software that allows controlling everything by finger on touch screen. It also combined the features of multiple tools into one handheld device to appear as the football field of colorful icons, with the four chief functionsPhone, Mail, Safari web browser and iPodin a separate strip along the bottom.These all sophisticated features made iPhone a much sought after d evice and enjoyed a top position in the market (Exhibit 2) in spite of its a boxe competition from the top mobile players having overlapping features. The combined features of iPod music and video player with mobile telephone, the iPhone was visible(prenominal) through AT&T Wireless Services. But it was locked by the service provider AT&T in its two-year service agreement. The consumers in India could not use iPhones in their home town take down they have purchased from US or UK, because of reloading software. The demand for iPhones rated greater than any other product of Apple. In the opinion of iSuppli, the best-selling handset among the 2, 70,000 stylishness phones and featured phones sold to US consumers during the beginning of month in July 2007 is iPhone.Even market analyst pointed that Apple created a strong brand and customer Market analysts pointed out that Apple had created a strong brand and customer loyalty by following a skimming price strategy and customers are a rrange to purchase highly priced products now and in future with equanimity. iPhone Banking on Pricing The iphone entered the market a month with stock of 3, 00,000 and a manufacturing capacity of 1, 50,000. Their version 8 GB was available for $399 in the US through Apples retail and online stores and AT&T retail stores but 4 GB version were sold cashbox the supplies lasted. To make it affordable to customers, Apple launched more iPhones during holiday seasons.The launching of Apple iPod in October 2001 is a success story which was priced at$349 (as of 2007) for 160 GB lower than a MP3 player and remained popular by gaining high demand till date though there was a price rise in 2005. by and by another product named ipod shuffle with 512 MB, was introduced having unique appeal with a price at $99 and $149 for 1 GB. The analyst at Jupiter Research Joe Wilcox analyzed that the lower-priced iPod is part and parcel of Apples new mass-market strategy, and before September 2007 it valu ed its one-millionth piece to be sold. Similar to the price cut of the iPod, the Apple after two months determination to cut the price of 8 GB storage iPhone from $599 to $399 on September 5, 2007 showed a good answer from many quarters.In accordance to Steve Wozniak, Cofounder of Apple Computers, remarked, Nobody expects a product to drop that much in price in such a short time and criticized Steve Jobs (Jobs) the chief executive of Apple Inc. , for his finis to price cut of iPhone by $200 within 68 days of its launch. He also said that Jobs has received letter on the companys website and complaints from hundreds of customers acknowledging that Apple has disappointed some of its customers through price cut of iPhones 8-gigabyte model. According to Apple executives the plan for price cut was done long ago and hoped it would suffer the iPhones pricing in line with its new iPod Touch. But this price cut suggested that Apple which long lived in a pricing bubble insulated from other personal computer makers was not different from the brutal pressures of the cellular phone business.Van Baker, an industry analyst at Gartner Group said that. My suspicion is that they got to 7, 50,000 really quickly, and thence it started to slow down. This price cut dropped down the share price of Apple by 5% and stood at $136. 76 on September 5, 2007. Protests against Apple went to the extent of consumers filing cases against the company. Dongmei Li (Li) a customer of Apple filed a case on September 24, 2007 in the US District Court, against the company for violating price discrimination laws claiming that it should stop selling the $499 4 GB model. Li had waited for the launch of iPhone and then found that the store only had 4 GB iPhones in stock and had subsequently purchased one.Much to her charging, Apple then emasculated the price of the 8 GB iPhone and stopped selling the 4 GB model. 100s of customers like Li who salaried the full price did not expect the sudden reductio n and complained bitterly. Apple, however, had no financial reason to cut prices, but to gain more customers during the holiday season. By the end of September 2007, Apple had sold 1. 4 million iPhones and also launched the device in the UK, Germany, and France. In Asia and Australia iPhone was scheduled to be released during 2008 (Exhibit 3). While the company was transaction with the price cut controversy, its competitors were working on developing models that could compete with the iPhone.Apples competitor LG was working on iPhone killers, its new product Prada phone KE850 will attempt to offer unbeatable combinations of style, features and price. It costs ?300 ($614). Nokia with its N800 was already a tough competitor to Apples iPhone with a niche market. The iPhone price cut caught the media attention in a giving way and raised questions about the devices continued success. However, there are also some advantages to Apples price cut (Exhibit 5). The price cut has raised the qu estion as to whether Apple needed to stimulate demand as it is the most valued gadget in history, by reducing the price drastically soon after its release. Experts observe that Apple is switching from a price-skimming strategy to market penetration strategy.They felt that it would be able to expand market share more rapidly and competitive barriers could be strengthened through the change in strategy (IPod Factors of Success). In spite of its popularity, the iPhone is said to suffer a few shortcomings. Apple iPhone lacks some features like user-changeable battery, voice dialing, voice recording, video recording, instant messaging, Multimedia Messaging Service (MMS), copy and cattle ranch and common Bluetooth file transfer OBject EXchange (OBEX). It is hard to use the on-screen keyboard because of its small sized surface. Further, the iPhone is available only through AT&T service provider and not through third parties. It comes with a two-year service agreement in the US.In countrie s like India even if iPhones are purchased customers cannot use them, as they have to reload the software to use it. Many users opine that though it boasts of a very complete and sharp screen, Apples user interface is finger driven and the screen rapidly becomes covered in unsightly fingerprints (Ziegler). Apart from these limitations, Apple had to tackle the consequent criticism following the price cut of the iPhone Stephen Hoch, marketing prof at Wharton University, observed, The reversal on Apples iPhone may have been more dramatic because the company has marketed itself as consumer friendly. stack have strong positive feelings about Apple. They feel they are part of the Apple family. When Jobs announced the price decrease, people felt betrayed.According to Wharton faculty and analysts, the iPhone episode reveals the perils of pricing in a marketplace where constant innovation, fierce competition and globalization are changing the rules of the game (Smart pricing boosts revenu e). John Zhang, marketing professor at Wharton University, said, The product lifecycle is short and the market is moving quickly. You dont have a lot of time to come across from your mistakes. You have to price the product right the first time. Jobs, while speaking to reporters, defended his move stating that his price cut was directed to attract new customers in the holiday season with more hostile pricing. He added that it benefits both Apple and every iPhone user to get as many new customers as achievable in the iPhone tent.Jobs observed, even though we are making the right decision to lower the price of iPhone, and even though the technology road is bumpy, we need to do a better job taking tutelage of our early iPhone customers as we aggressively go after new ones with a lower price. Our early customers indisputable us, and we must live up to that trust with our actions in moments like these. Greg Joswiak, Apples worldwide vice president of iPod and iPhone product marketin g, also agreed with Jobs and observed that there was no better time for the price cut and he also added that it was that time of the year that was most important and an opportunity to come into the holidays with a fresh and aggressive product line (Ziegler).Work CitedAaker, Kumar, Day George, and Kumar V. market Research. 2nd Edition, John Wiley Sons, Inc., 2000Apple Retail Store, inner(a) Design of Apple Retail Store in the US, Apple Inc . Apple Inc. 16 June 2009 www.apple.com/retail .Apple Store, Store information Apple Inc . Apple Inc. 17 June 2009 http//store.apple.com/us .Apple Changes Strategies, Apple Changes Strategies for iPhone and iPode Touch Devices, Apple Inc . Apple Inc. 16 June 2009 www.enbite.com/apple-changes-strategies-for-iphone-and-ipode-touch-devices/ . Best Performer Award 2008, Best Performer Award 2008. 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