Apple's pricing magic explained
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If you have ever wondered about the pricing magic that Apple does to keep its huge profit margin intact, an interesting article at MacWorld gives an explanation to at least a part of your questions.
First of all, Apple treats stores that sell its products differently from other companies. How? Every manufacturer gives its “manufacturer suggested retail price" or MSRP to retailers, and retailers can then come up with a price. However while all manufacturers allow for a wide gap between the wholesale price paid by the retailer and the MSRP, Apple does not.
The actual gap between wholesale price and MSRP for Apple products is a mystery surrounded with the veil of secrecy typical for Cupertino. And retailers cannot tell the numbers as they are bound by non-disclosure agreements.
This alone however does not do the trick. Apple actually provides considerable monetary awards to retailers selling their products at or above a set price. This works like a post-sale subsidy, and keeps the pricing flat.
Overall, this strategy works brilliantly for Apple. The company has an equal policy towards all retailers, and it avoids the risk of having one single retailer offer huge cuts, grab the majority of sales and then blackmail Apple for discounts. Instead, Cupertino has its huge margin and the retailers are happy with their monetary incentive. Not a bad business model, is it?
source: Mac World
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31 Comments
1. wendygarett (limited) 6 days ago posted on 15 Jan 2013, 07:56 20 7
It's funny, all of my mac and iDevice, are all collected from the cheap second hand users who wish to throw it away, and I bought it mostly around $200-$400 and some even free...
Oh Apple, when will you grab my money for real, I'm waiting :(
16. appleDOESNT.com posted on 15 Jan 2013, 11:04 5 0
Only apple makes money off Apple. Stores don't. Sales associates don't. Apple's highest of highest margins only benefit the ruthless, over priced, under-tech'd company starring non other than rotten fruit
p.s. why do you think most sales people push everything BUT apple. because their commissions are so low it's just a waste of time
18. thephoneguy92 posted on 15 Jan 2013, 11:40 0 0
Speaking from experience, most carriers base commission off of number of phones sold, regardless of manufacturer.
19. kellkeezy posted on 15 Jan 2013, 12:10 1 0
yeah but we make less commission on the iphone then any other brand. we work off a point system at my retailer so basically i make $60 (.60) off an iphone were an LG Spectrum 2 I make $172 (1.72)
23. thephoneguy92 posted on 15 Jan 2013, 13:07 0 0
Some third party dealers may work that way, but I would be willing to bet that all major carriers pay on the amount of phones sold, not types of phones sold.
27. jeck77 posted on 15 Jan 2013, 17:45 1 0
So you make as much as $172 for a sale? On a contract that your employer makes about $300 commission from the carrier? You get about 48% of the total gross commission your employer makes? Wow. I'd like to know where you work. I've been in this business for 14 years, and that's the largest commission per phone sold on contract (I'm assuming on contract because no retailer makes that kind of money on sales of non-subsidized handsets) I have ever heard of. Wow.
21. pats4thewin posted on 15 Jan 2013, 12:29 0 0
i make the same if i sell you a flip phone or an iphone 5 64gb (free and 400$ on contract) its more about boxes sold at most retailers. the majority of the reason that sales persons push android over iphone is that most salespersons have used multiple products and are more tech savvy than most consumers are. and like the fact that androids offer more utility to them. although that is not always the case as i have 3 co-workers with the iphone 5 (IMHO ofc)
3. ajac09 posted on 15 Jan 2013, 08:10 1 0
guess this didnt happen at Christmas time 2012. Iphones were dirt cheap and lots of ipad deals where around.
8. bucky posted on 15 Jan 2013, 08:42 1 3
Lol. If love to see some proof of a "dirt cheap" iPhone 5 and new iPad.
10. dan86 posted on 15 Jan 2013, 09:49 0 2
This is forgery with its high value customers. Apple produce iCrap you eat. A monopoly of market shouldn't be tolerated for a long.
Insane business strategies worth real dirt.
17. tedkord posted on 15 Jan 2013, 11:32 0 1
Iphone 5 was $128 on contract at Radio Shack. That was unheard of even a year ago.
4. andro. posted on 15 Jan 2013, 08:15 10 1
What ever goes on behind the scenes its all about what they charge the customer and having to pay over 100 bucks more for an iPhone over an s3 is bad for the customer. Thankfully most have seen the light an the better phone in the s3 is outselling it. I've seen it even on some carriers the Htc one x plus 64gb for 150 on 24 month contract while apple have the 64gb iPhone 5 at 400 on the same plan. What ever business model goes on behind the scene the customer always loses when it comes to apple
5. J-LoTheGreat posted on 15 Jan 2013, 08:27 4 0
Yes the customer loses, however, you are only a customer if you buy their product.
6. ramonleonjr62 posted on 15 Jan 2013, 08:34 5 0
but it will hurt them look now cuting production on their product poor apple selfish like always and realy l do not care about apple product
7. cretinick posted on 15 Jan 2013, 08:41 15 0
Not bad for Apple.
But it is very bad for the consumer.
That is, pretty much, a cartel formation among Retailers, coordinated by the supplier.
12. jmoita2 posted on 15 Jan 2013, 10:36 0 0
This is what the anti trust laws were created to prevent. I guess Apple is exempt from them. They turned price gouging into a science.
13. threed61 posted on 15 Jan 2013, 10:43 1 0
Apple is fixing prices on a non-essential product. There are lots of alternatives to iProducts, many both better and cheaper. No one has ever been forced to by their stuff.
28. cretinick posted on 15 Jan 2013, 21:07 0 0
I agree.
But as their products are a market reference (perhaps the major), all other manufacturers end up basing their prices on the Apple's prices. Ifthey lay far below, they are deemed inferior products. In the most of customer's minds, more cheap it is, lower is the quality.
In the end, they pull up the prices of all the Phone, Laptops, computers, music players, tablets...
22. pats4thewin posted on 15 Jan 2013, 12:41 0 0
a company can hardly be successful if the said company isnt money hungry. some may have a more aggressive approach than others, but that hardly should be a reason to hate apple that they are one of the most successful companies in the world because of their business model. hate them all you want, but you cant deny their smarts
31. ZeroCide posted on 17 Jan 2013, 13:40 0 0
Standard apple practice since the begining of apple.
20. rusticguy posted on 15 Jan 2013, 12:16 0 0
Apple will soon allow everything ... perforce. It's buyers market much to dislike of Apple execs.
24. downphoenix posted on 15 Jan 2013, 13:17 0 0
so basically the magic is, they stiffarm the retailers so that the retailers have no choice basically but to sell at their recommended price and not have any price competition with other retailers, which in turn also stiffarms the consumers.
Congratulations Apple. Your price is magical!
25. Fruitpoop posted on 15 Jan 2013, 15:41 0 0
People obviously buy the overpriced iPhone for the brand, while they can get much cheaper devices for lower.
29. jsdechavez posted on 15 Jan 2013, 22:26 0 0
I think resellers, despite the lower profits from Apple are lured by the high demands. Selling more for less works if the demand is really high.. But as it seems, Apple now fears overstocking the iPhone 5 since it's no longer selling as well. Resellers will find it harder to profit from it and thus pitch for fresher offerings such as Windows Phone and Blackberry 10.
30. kabhijeet.16 posted on 15 Jan 2013, 23:14 1 0
Bcoz Apple is greedy & wont reduce their profit margins...
