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Apple also obscures references by making its products look like nothing else, from the first iPod with a unique scroll wheel to the current iterations wrapped in gleaming aluminum. Such deeper research can also be a powerful weapon to overcome price pressure by retailers.

How Apple plays the pricing game

The Professional Pricing Society Journal, Second Quarter Price optimization has been the subject of many articles in recent years. The companies we found that had achieved better pricing all had top managers who championed the development of skills in price setting price orientation and price getting price realization.

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Exploring the full range of pricing options For products that replicate others on the market "me-too" products or that offer small improvements evolutionary productsthe room to maneuver is relatively narrow, and incremental approaches may come close to the optimal price see sidebar " Launch position ".

But by using an existing product as the reference point, the company undervalued a revolutionary product. Price setting and price getting require discipline — not luck.

The main advantage of this approach is that the competitive situation is taken into account, and the main disadvantage is that aspects related to the demand function are again ignored. The first area that may require a fundamental rethink is the way companies set prices.

These companies use slightly more advanced approaches for setting prices. Without managerial engagement, companies typically use historical heuristics, such as cost information, to set prices and yield too much pricing authority to the sales force.

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Apple wins the best of both worlds - stoking demand for products that look like bargains and for all the decoys it sells at much higher prices. On rare occasions, however, the price lever may be the right tool to undercut competition. In companies in or near this zone, list prices generally reflect customer value well.

Six companies 18 interviews adopted cost-based pricing, five 14 interviews used competition-based pricing, and four 12 interviews relied on customer value-based pricing.

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The Value Surrender Zone high capabilities in price orientation, weak capabilities in price realization. Despite the higher price point and thanks to solid communication of the beneficial aspects of the properties of the private label, sales volumes exceeded the volume targets the company had originally set for the product.

If you wonder why in the world Apple would add yet another potentially cannibalizing product to its lineup of iPods, iPod Touches, iPads, laptops and computers, realize that this gadget is likely a decoy.

Related content from the McKinsey Quaterly.

The power of pricing

Respondents included 15 CEOs or top executives, 18 sales and marketing managers with full or partial responsibility for pricing and 11 finance and accounting managers with decision-making authority. Charge too much and it won't sell -- a problem that can be fixed relatively easily by reducing the price.

By contrast, if a product line is being retired, a lower release price for a new offering may be appropriate to shift customers to it as quickly as possible. Our initial assumption was that the private label only compared unfavorably with the brand because it lacked a recognizable brand name.

MIT Sloan Article – “Is It Time To rethink Your pricing Strategy? [ ] The Psychology of Pricing | October 13, [ ] the details of pricing could make a big difference to your bottom line.

How Apple plays the pricing game

McKinsey & Company has estimated that fewer than 15% of companies do systematic research on pricing, and yet studies have shown that [ ].

Psychological pricing is a technique of setting prices at a certain level where the consumer perceives the price to be fair, a bargain, or a sale price. The most common method is odd-pricing, which uses figures that end in 5, 7 or 9, such as $ Jul 30,  · News about Food Prices and Supply, including commentary and archival articles published in The New York Times.

Jul 12,  · Most executives know how pricing influences the demand for a product, but few of them realize how it affects the consumption of a product.

In this article, Save; Share; Buy Copies. Most businesses struggle with their product pricing strategies. Am I charging too much or too little? What's the price elasticity like?

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