Marketing and Branding - Few would dispute Apple’s
abilities in marketing products, based for example on the
success of the iPod and iTunes. In fact some have cited
marketing as one of Apple’s core competencies [1]. Apple
has marketed iPhone more like a service than a product [36].
Recent Apple advertising for iPhone stresses the capabilities
of iPhone and related third party applications rather than
focusing on the technology itself. From a pricing
perspective, the iPhone has followed the typical Apple
strategy of skimming and versioning, where prices are set
high initially to gain high profits from early customers
(skimming) and then pricing is dropped (in this case, mainly
due to AT&T subsidies) to increase reach to the general
public (versioning). The partnership with AT&T and
subsidies provided have contributed to Apple’s ability to
version pricing, currently as low as $99 in the US, compared
to a launch price of $599 for the original iPhone. This
subsidized pricing has contributed to the iPhone’s success,
as it has allowed the iPhone to be mass-marketed to the
general US consumer. Product pricing is also versioned by
geographic location [21] depending on what the specific
market is willing to pay. For example, in Japan, iPhone was
being distributed by Softbank for free with a two-year
contract [37], while it sold for $99 in the US (also with a
two-year contract). In addition to marketing efforts, Apple
has developed a brand image (as evidenced by the ‘iPod’
name becoming synonymous with MP3 players) which has
created an extremely loyal customer base. This customer
loyalty has led Apple consumers to build a pent-up demand
for future Apple products and an attachment to the iPhone,
leading to high switching costs, as iPhone owners are
unlikely to switch to a competitor Smartphone.