Will Apple Stay Premium In The Long Run?

http://seekingalpha.com/article/1074471-will-apple-stay-premium-in-the-long-run?source=email_rt_article_title&ifp=0

This article highlights the challenge of trying to maintain a premium brand, pricing strategy which often leads to lower volumes. This is a critical component to Apple’s future strategy and one faced by every business where brand –whether B to C or B to B—is an important component of its marketing effort.

Although several electronic gadget companies have introduced interesting variants in the industry, people who are loyal to Apple (AAPL) products seldom think of switching. Experts believe that this is mainly because of the prestige attached to this brand. AAPL seems well aware of its prestigious position and this is one reason why its marketing mix is aimed at enhancing this prestige. 

Apple has the same pricing philosophy as Louis Vuitton. It sells premium products at premium prices and never discounts. That philosophy has made it an aspirational brand worldwide. You don't see vendors in China selling fake Google Nexus 7s. Apple products are so much more expensive than the competition that only the rich and faithful tend to buy them. But that uncompromising devotion to the fundamental philosophy is what has made Apple such a powerful global brand. 

This analysis by Felix Salmon clearly indicates that the success AAPL has attained is mainly because of its premium positioning strategies. However, we feel that AAPL's success because of this prestige based perception can fade away in the near future. This is because of some recent strategies adopted by the company through its key strategic partner Wal-Mart (WMT). 

The world's leading retail giant, WMT, is selling iPhone 5, iPhone 4s, and iPad at significant discounts. Wal-Mart said it is selling the 16 GB iPhone 5 for $127 versus an original price of $189.97. The price is valid with a two years contract from wireless carriers such as Verizon (VZ), Sprint (S) and AT&T (T). WMT also reported that it is selling the third generation iPad for $399. While this certainly can boost sales for WMT, we feel that this strategy of selling on discounts can become one of the biggest threats to AAPL's premium positioning. 

As mentioned earlier, AAPL has long used the premium pricing strategy by refraining from discounts to enhance its prestige based image. However, this new promotion based on offering discounts can make customers feel that AAPL is no longer a brand for the prestige loving customers…. 

….Such deals become even more dangerous if moves from competitors like Samsung (SSNLF.PK) are taken into account. Samsung has introduced new high end products like the Note 2 to capture the prestige based market long held by AAPL. In such a situation, if AAPL loses its premium because of discount based promotions, other brands can get a chance to strengthen themselves in the perceptions of customers.

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