There are many pricing tactics used to tweak price and incre

There are many pricing tactics used to “tweak” price and increase short-term sales. Briefly describe three that might work to increase sales for the iPhone.

Would you expect the demand for the iPhone to be elastic? Explain. How does the availability of substitutes affect this elasticity?

Solution

The iPhone is a smartphone made by Apple that combines a computer, iPod, digital camera and cellular phone into one device with a touchscreen interface. The iPhone runs the iOS operating system (OS), and as of 2017, there were 2.2 million apps available for it through the Apple App Store, according to Statista.   Avoid Price Wars by Emphasizing Your Unique Value Proposition   

Many entrepreneurs believe – falsely – that they have to compete on price. Nothing could be further from the truth.

In fact, competing on price can actually hurt your business – and Apple knows this and has never wavered on its pricing strategy.

Dropping prices and competing on price leads to a “race to the bottom.” For example, if you’ve ever looked at job boards for freelancers, you might see some strange things. For some sites, the going rate for a blog post is $10, or even less! Keep their Marketing and their Products Simple   

Apple understands that technology consumers often get overwhelmed. That’s true of other niches and industries, as well. Overwhelm can create a confusion in a marketing mix.

Apple helps reduce that consumer confusion by simplifying their web and sales copy. They completely eschew jargon or industry terms. Instead, they use simple, direct words and they continually stress the benefits that consumers absolutely need and will be thrilled by. This is part of their brilliance in content marketing; high tech without high tech terms.

This approach doesn’t confuse their customers with too much information. As Leonardo da Vinci said,    Design a Better Customer Experience

The “Apple experience” includes elements from every aspect of the purchasing process – comparing different product versions, trying out products in the retail store, actually buying the item, receiving it, unwrapping (sorry, unboxing) it and setting it up…

Each of these elements doesn’t just happen by chance. They were all carefully crafted, revised and refined to appeal to the consumer’s every sense.

Take installation, for example. One of the things Apple fans truly appreciate about Apple’s computers is the ease with which you can set them up. It’s literally as simple as opening, plugging in, turning on and, voila – it all just works.   

The most important factor that influencing the elasticity of demand is the available of

substitutes. In general, the more substitutes, the more elastic the demand will be. Unique

product like iPhone usually is inelastic because there are no substitutes.

Amount of income available to spend on the good is the second factor that affecting demand elasticity. This mean to total a person can spend on a particular good or service. If the price increases while no change in the amount of income available, consumers typically reduce their quantity demand.

Finally, the third influential factor is time. If consumers have more time to adjust their

behavior, elasticity will be greater over the long time.

In the case of iPhone, demand always high because of consumer\'s requests, so although the price is high, still Apple cannot supply enough for all.

In fact, demand of iPhone just inelastic at the first time, because this is a unique phone with a lot of functions could attached audients at that time, that was lead to why the price was went too high but demand still increase. After three months, Apple was decreased the price, because of the affects of demand: pricing, ad-on services, and the rise of competitors in themarketplace. Apple was reducing the price of iPhone several times from $599 in 2007 to $199 in 2009 (Apple.com). Demand decreased so demand line would shift to left. However, when the iPhone\'s price went down, consumers raised the demand of iPhone again, then the demand line was become flatter and more elastic, prices decreased but quantity demand increased. As demand is price elastic, a rise in price will lead to a reduction in total consumption on the phone and hence a reduction in the total revenue of producers.

About the supply, price elasticity of supply measures the relationship between changes in

quantity supplied and change in price (Sloman 2007). Factors may influent the elasticity of supply contain the possibility to switch to other products, the ability to drop out of business, or the ability to use other resource inputs and the amount of time available to react price change.