Apple, iPod, and Pricing Integrity

Pricing integrity is essential.  This week, we saw a classic example of a signficant mistake by a company that, until now, had built up a huge group of core / passionate customers.  Apple and Steve Jobs have always been arrogant.  It’s in their DNA and it’s what has helped them create the following they have in the world of personal computers.

We all know what happened:  a few months ago Apple released the iPod phone for $599.  The price was high, but they were confident and their good story of saying it was both a phone and iPod all-in-one supposedly made the price a smart move.  Fast forward to now:  they cut the price by $200 and, in so doing, they make everyone who bought an iPhone out to be a fool for paying $200 more.  Apple responded in its wonderful, arrrogant way only after an outpouring of complaints by granting their customers a $100 in-store credit.

In this simple action, Apple and Steve Jobs demonstrated a complete lack of pricing integrity.  This is a great example as to why it is essential to establish a price and stick to it.  The action by Apple tells their customer base that the next time they come out with anything new, wait and buy it after they do a price reduction.  This action also undermines the confidence of their employeess.  Finally, the action harms the price / value relationship that the company has worked so hard to establish.

I can’t think of a better example of why it’s so important to have pricing integrity. I’m also very confident that with this action, Steve Jobs has created a great business school case study that will be used for many years to come.

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