Marketing with mon
Every year, Apple comes out with new phones but usually keep them at the same price as the previous models phone. For example, when a 5S first came out, it started at $199. When the 6 came out, it also started $199 however the 5S price was lowered. They start the new models at higher prices in a strategy known as penetration pricing. Companies initially set their new models/products at high prices to cover for marketing and start up costs. The new watch is another example of penetration pricing. The picture on the left is an 18-karat, $17,000 watch from Apple. Things you can also do with $17,000: buy a car, pay off loans, pay a full year of rent, buy a boat, place a deposit on a house, or travel comfortably for at least 2 years. That's actually besides the point. The point is that yes, the fact that the watch is 18-karats plays a role in that $17,000 but Apple set a huge price tag on it to compensate for the watches they might not sell, marketing costs, and production costs. Nobody really seems to know how the watches, all and any of them, might sell so by setting a high price, if Apple notices a small response, they have room to lower the price without hurting their pockets too much. Other examples of products and services that use penetration pricing are: real estate, tablets, fashion, and televisions. At some point all of these will most likely go down in price. People usually set their houses at the highest price that an appraiser thinks it could be sold at but they quite often will accept the best offer. TV's and tablets somehow always go out of style when the next model comes out, so companies ask retailers and wholesalers to lower the price. Clothes will always lower in price. If they don't sell at the main stores, they're shipped to an outlet and offered at a discounted price. To wrap this up, if you're really thinking of splurging and buying an 18-karat digital watch from Apple, maybe wait a little. Chances are the price will drop. Since the watch is a first generation of the product, you should always assume there are going to be glitches. So wait a little, buy the 2nd generation and maybe save some $$$$'s.
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Monica AndreaniJunior at Saint Michael's College, MJD major, Business minor. Here to teach you the basics of Marketing. Archives
April 2015
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