Will Apple’s Premium-Price Strategy Still Work in 2009?
Dec 16th, 2008 | Category: Featured Articles, NewsBy Jimmy Vu
Apple Inc has been known for long of its premium-price strategy. “We don’t know how to make a $500 computer that’s not a piece of junk,” Steve Jobs, Apple’s CEO, said in October implying the wave of affordable, reduced-size notebooks, often called netbooks, flooding the market this year.
The strategy proves working really well for the company bringing in close to 20% profit margins in comparison with 6% or less for its competitors. And until October, Apple had enjoyed a successful year with over 30% sales growth in average, four or five times higher the growth rate of the overall market.
Needless to say hundreds of times about how hard the economic downturn is hitting consumers, all know that price has come a big concern today. Right after Mr. Job’s claim, in November the retail sales of Mac computers felt sharply according to data from NPD, a research firm, marking the first time Apple’s PC sales was (1 percent) lower than the same period last year while industry-wide PC sales still rose 2%.
It is obvious that after the holidays sales will slow as customers pull back and some analysts has cut their estimate for Apple’s 2009 profit warning a difficult year the company is going to face when consumer demand will further wear off.
However, Apple appears not want to cut prices of its products. In this holiday season, the company reluctantly offered only 5% to 10% discounts for its MacBooks while its competitors like HP, Dell dropped prices by as much as 50%.
Some analysts still believe in Apple’s strength expecting 10% increase in company’s sales next year despite the rest of the industry is predicted to fall 5%. But the number and trend seem not tell the same story unless the company introduces a pricing innovation soon.