Apple’s New Product Development and Pricing

Product Overview

New products and services are coming into the market as the business world continues to become increasingly innovative and competitive. Both the services and manufacturing sectors are coming up with innovations in the market. Therefore, new product development may involve real goods being entered into the market or service.

There are some cases where the product or service may not be new, but the market itself. For this case, there will be a new product being presented into the European Market. This new product is the iPad with the iOS 6. The iPads have been gaining prominence in different markets globally. This paper shall focus on the introduction of the new iPad with iOS6 (Clegg, 2011).

The iPads are technological products that are manufactured and distributed by the Apple Company. This is a company that is based in the United States. The iPads are highly sophisticated communication tools operating like computers, but with advanced application software. The iPads are relatively small in size. They are smaller than laptops but relatively larger than smartphones. The iPads can be treated as a gadget that should be exploited by the audio-visual media.

This includes periodicals, books, music, movies, applications, games and web content. There are three generations of iPads. The first generation of iPad was released in the year 2010 with the second generation being released a year later. The iPad with the iOS6 are products which are expected to get to the market by the end of this year. The iOS6 is a new operating system that was launched on June 6th this year by the Apple Company (Zimmerman, 2012; Lin and Willington, 2012).

The target group/market

The iPad with the iOS6 target a very large market that is composed of youths and those people who are technology conscious. The iPads with the iOS6 are best suited for students in higher learning institutions because they have internet applications and other. Entertainment and general business companies are also customers of the company. This product has improved software with many automated applications. The iPad with the iOS6 is an improvement of the third generation of iPads.

It processes data at a high speed as it utilizes the 4G technology. These products are designed to attend to the needs of the current market. A majority of the inhabitants of Europe live above the average line. Therefore, they have the economic power to acquire the new iPads. The target market for the product is the entire population of Europe. This includes both youths and adults in all sectors of the economy (Snell, 2012).

Product image

The iPads are fairly recent products in the market. However, the attention that they have gained in the market speaks volumes about them. They were introduced to the market first in the year 2010 preceding other technological products from Apple like the iPods and iPhones. Their entry and growth into the market resonate with the high i-technology used in manufacturing them. Many people have consumed products from the Apple Company, especially the first three generations of ipads. iPad with the iOS6 is another brand of ipads.

The Apple Company has attained a reputable name amongst the customers. Therefore, customers always look forward to enhanced and sophisticated products from the firm. The company and products can be said to have established a good name and impression, and thus a respectable image to the company’s customers.

iPad with the iOS6 is expected to enter the market with bhang. According to marketing experts, the images of products are built in different ways including pricing, branding and quality of products and services. The Apple Company has established an image in the competitive information technology market through the quality of its products.

The new iPads have better screens, optics, processors and networking which combine to make them more impressive than the other generations of iPads. Above all, it has a highly advanced operating system – iOS6. The new iPad has been based on the improvements on iPad 3 (Pride, Hughes and Kapoor, 2012).

Distribution Channels

When a new product is designed, it has to reach the intended market through the distribution channels. The distribution channel plays a part in the marketing function of a product or a service in the market. It is the means through which the product reaches the market. Apple has stores in different destinations around the world, which are used in distributing its products. The company will open several other stores in Europe. This is meant to increase its distribution bases as the iPad with the iOS6 gains demand.

This is the main target market for the company. The two key targeted markets are Germany and France. The Apple Company will ensure that it has established as many stores as possible in these countries. This will ensure that the company can bring its products in proximity with customers. Retail stores help in simplifying the marketing exercise. Thus, apart from the main Apple stores, the company will pick on other retail distributors (McDonald, 2011).

Pricing studies

Pricing is a substantive component of the product mix, which is an essential part of marketing. The setting of prices for products and services is a crucial component of marketing. This is mostly done through a pricing policy (Boone and Kurtz, 2012). A pricing policy is a set of rules that are used by the company in tagging prices on their products.

The pricing policy is formulated based on different pricing strategies. There are a number of standardized pricing policies that are used by companies in establishing prices for products- goods or services. Marketing specialists emphasize the need for conducting research in order to choose the best policy for setting price on goods and services (Smith, 2012; Pride and Ferrell, 2013).

Marketing research studies will be conducted about the possible market for the iPad with iOS6 before settling on a policy with maximum pay-off. Both qualitative and quantitative studies are imperative. This is because they help the product marketers to understand the market in which they are entering in an effective manner.

Marketing researchers maintain that it is essential to do a general market research before setting prices on new goods and services. This gives the firm a detailed picture of their product relative to the market in which the new product is being introduced (Meehan, 2011; Grewal, Roggeveen, Compeau and Levy, 2011).

The first research to be done will be aimed at establishing the need for the new generation of iPads in the market. This will ensure that the company has a solid foundation on which to penetrate the market. Also, this research will be aimed at determining the prevailing prices for the same lane of products in the market. This will help in the selection of prices that match the new iPads (Tyson and Schell, 2012).

After the general marketing research is done, it becomes essential to conduct studies on pricing. The main aim of pricing studies is to come up with a price on the product. The price must be favourable to customers. In this regard, the customers should be ready to accept and able to purchase the product at the set price.

For Apple and the iPad with iOS6, the pricing study will be quite easy. This is because the company already has other products in the European market. The new study will be based on the pricing studies that were done prior to the introduction of the second third generation of iPads into the market (Tyson and Schell, 2012).

Pricing studies are followed by consumer mapping studies as concerning the price ranges suggested by the company. Pricing studies differs as applied to different products. The pricing studies that will be done will be based on the pricing model for technology products. The pricing curve for Information Technology (IT) products behaves different from that of the normal consumer goods.

This is due to the effect of industry gurus in the market. There are firms that have specialized in marketing research for information technology products. Such firms fully understand the IT market and the policies and market conditions affecting the prices of such products. The European market is extremely large, thus conducting a pricing research will be quite costly.

Therefore, the services of specialized research firms that can easily cover the entire region will be given first priority. The Apple Company will contract Stelacon to do the pricing study on its behalf. Stelacon is an experienced research and strategy firm, which specializes in Information Technology and Telecommunication market (Shankar and Carpenter, 2012).

Objectives of the price strategy for iPad with iOS6

The formulation of pricing strategies is a complex task especially in the competitive market like Europe. Firms formulate diverse pricing strategies due to the diversity of products and objectives which they set to guide the strategies. There is no significant literature to describe the real pricing strategies for commodities, especially the customization of pricing strategies.

The actual pricing strategies are dependent on firms, their customers and competitors among other factors. The pricing strategies have to touch on every level of product development. In this respect, the most beneficial price should be the retail price. This is because it is the real price at which consumer gets the product (Zhou, 2011).

There are three main approaches or strategies for pricing products and services. This includes the customer-based pricing in which prices are set basing on what the customers can pay according to the belief of the firm. Cost-based pricing is the second strategy. In this strategy, prices are set by adding profit on the cost of manufacturing the product.

The third strategy is competitor-based pricing where the prices of competitor products are the basis on which prices are set. The choice of either of these strategies goes with a firm and is influenced by the pricing objectives. Pricing objectives often go with the pricing strategies (Shankar and Carpenter, 2012).

For the case of Apple and the pricing of the new iPad with iOS6 in the European market, there are a few core objectives. The first objective of the pricing strategy for this product is the maximization of profits in the European market. Profit making is the chief aim of any given business firm. The profits will be maximized by balancing the price of the new iPads with the demand. The overall profit for the company will be considered at each of the stages of the supply.

As it is with the rule of microeconomics, the best prices will be selected at the intersection of demand and supply. Such prices are referred to as the ideal prices, and they stand to bring maximum returns to the company. The projection of revenues by the company will be used to adjust the supply of new iPad with iOS6 in Europe (Snell, 2012).

The second objective of the pricing approaches is to ensure that the iPad with iOS6 are effectively introduced in the market. The price of the new iPad with iOS6 has to be strategic so as to enhance marketing campaign. Promotion encourages customer knowledge of the product and the subsequent purchase of the product.

Vouchers, mark-downs and special offers can be used in reducing the prices. Several pricing strategies can be used in promotion. This includes seasonal promotions, bulk discounts, and customer- loyalty discounts. The discounts offered on prices of iPad with iOS6 are critical in rising quantity of sales. This is especially among consumers who are sensitive to prices. Promotion basing on prices will raise the value proposition of the new iPads (Snell, 2012).

Apple Company expects to recover all costs that are incurred in the manufacture of products by selling the new iPads in the European market. The company is investing a lot in the manufacturing of the iPad with iOS6, and the output of this investment comes out of the sales. Prices are established appropriately making sure that they do not become unsustainable to customers. This also is to ensure that the company does not operate at a loss from extremely reduced prices.

For iPad with iOS6, which is a new product, the company will use a cost-recovery pricing strategy in the initial stages. This strategy can only be used when the company wants to maximize the flow of cash from sales so as to cover for the initial investment cost. The products have to be priced appropriately so as to enhance the speed at which they are sold (Snell, 2012).

Product prices are also used in differentiating and positioning products in the market hence objectives of pricing strategies. Higher prices are at times used in denoting higher quality of products. The prices of the iPad with iOS6 are expected to be high because of the quality and value of the products. However, depending on the competitor companies and their products, the prices will be adjusted (Snell, 2012).

Competitive leadership is pegged on price also thus Apple will formulate price strategies that will position the iPad with iOS6 in the market. The pricing strategy used has to match with the market leadership objectives of the company so that the impact can be maximized (Snell, 2012).

Pricing strategy of the new iPad 3

The pricing strategies are the approaches that a company takes in pricing its products. It is easy to price a single set of products in the market than many sets of products. The iPad with iOS6 is a single product which is yet to be introduced to the market. Marketing scholars are advocating for the use of strategies which are based on consumers. The strategies used in pricing the products have to factor in the market. In addition, the strategies should factor the needs or expectations of the company marketing the product (Pride, 2011, Lin and Chang, 2010).

The customer-based pricing strategy will be used by Apple to price the iPads. Setting the penetration prices will be the first step. The European market is not new to the Apple products. The objective of penetration pricing is to raise the market share of the product. Once the product has attained a significant market share, prices can easily be raised.

Penetration pricing is closely linked to the marketing objectives of raising the market share. This is usually a short-term sub-strategy. The prices are reduced when a significant number of customers acquire the product. At this stage, the prices fetch minimal profits for the company. However, the ultimate goal is attained as more customers buy the product causing swell in the market-share (Lamb, 2012).

Penetration pricing will be followed by price skimming. Price skimming is mostly used for technological products with high levels of innovation. Once a sizable number of customers are gained, the company can raise the price of the product as long as competitive products do not exist.

It is at this point that the company makes bumper profits. If the company is highly innovative, then it can gain more from the market by challenging its own products and maintaining the market and high prices. After exploring the market with the third generation of iPads, Apple is developing a new class of iPad with iOS6 (Hirschey, 2009).

Calculating the price for the new iPad with iOS6

In the calculation of the real prices of a finished product in the market, two factors are of utmost importance. These include the expenses incurred in the manufacture of the product and competition prevalent in the market. These two factors are particularly valuable in reaching an amicable price of the new iPad with iOS6 (Barrow, Barrow and Brown, 2012). Therefore, this is a general procedure of calculating the price of any of the iPad with iOS6.

The first procedure of costing or calculating the price at which a commodity will be sold in the market is calculating the material costs of the product. It is necessary to ensure that a record of all the materials that are used in making the products is well kept. The cost of purchasing or procuring those materials is calculated and added to the cost of assembling the product. All details must be reflected and added to the cost. These include the labour costs, costs to do with technical services among others (Whittington and Delaney, 2012).

The second step involves the calculation of the cost of marketing. This includes the cost of distributing the product and the amount that is being spent on advertising or promoting the products. The transportation cost is included in this cost (Morris, 1996). Most notable are the charges from taxation that will be incurred when the products are taken to the market. All costs related to or incurred in marketing must be included in the sum. None should be left out as this can lead to under-pricing of the product (Whittington and Delaney, 2012).

The third step is to identify the prices of the competitor products in the market. Though, this also forms part of marketing research. Competitor products are either compliments or the supplement goods in the market. The company can compare the costs and come up with the price or the cost of the product.

However, this will be after establishing the competitor products and their prices. The highest cost is expected to be in the manufacture of the product. Nonetheless, companies spend more finances in marketing than what goes into the manufacturing of the products (Entrepreneur Press and Turner, 2010).

The other step will involve the summation of the cost of production and the cost of marketing. The firm with arrive at the real cost of the product after summing up all costs. It is vital to understand that the real cost of the product is not the actual price of the product. The actual price of the product will be reached by looking adding expected profit to the product. This is where the price of the competitor takes centre stage (Morris, 1996).

The company will set the expected profits by looking at the price at which competitor products like the Samsung Galaxy tablets fetch in the market. The final price, which is the market price of the commodity, will be reached at this stage. Market prices are shifted basing on the changes and the events that are happening in the market (Forsyth, 2009; Pride, Hughes and Kapoor, 2012).

Changes in price are imminent and are determined by the pricing objectives of pricing by the company (Ferrell and Hartline, 2011). Companies set a lower price limit for their products. Such prices rarely go below the total cost of the product (Forsyth, 2007). Lower prices are usually set on the product at the introductory phase of the product in the market.

Once the objective is achieved for instance gaining a substantive number of customers, the prices are adjusted (Lamb, Hair and McDaniel, 2011). The long term lower prices are set when competition totally takes over. At such a time, the number of highly competitive products in the market is high. This forces the firm to maintain low prices in an effort to keep their customers (Furtwengler, 2010; Kurtz and Boone, 2010).

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