Pricing the ecosystem

Take a look at the diagram below courtesy of Ryan Jones (thanks for the point Marc Abraham). It shows how Apple spans its offerings over a surprisingly wide range of price points.

By introducing new lines, retaining older lines at degraded prices and through the use of provider subsidies, Apple delivers an impressive range of ‘step-in’ opportunities for customers to join its ecosystem.

apple-price-points

I’m intrigued by this because, from a brand point of view, these arrangements provide a powerful alternative to traditional “up-sell” approaches and to the discounting that brands so often use to make high-end products more available.

Apple’s approach enables the brand to retain its all-important brand equity whilst providing consumers with the means to address any price barrier in the way they feel most comfortable with. They can enter the Apple world uncommitted or very committed in terms of contracts, with a spec’d up or spec’d down product (which they will then be encouraged to upgrade/add to). Until I saw Ryan’s analysis, I hadn’t realised the sophistication and range of this strategy.

Some learnings:

Choice is not the same as access. In Ryan’s graph, Apple has used product, price, capacity and configuration to turn 3 lines into 25 different ways to buy. The choices shown here are simple: iPhone; iPod; and/or iPad. The technical features offer scope to pay more or less for each product without cannibalising the opportunity to invest in the other members of the family (where more choices are available). There’s always a way to buy what consumers want – and there’s always more to buy.

Consumers are buying the brand, but they are deciding on the user experience they want by how they buy. Apple and its service providers have carefully calibrated the user experience (in terms of things like speed) so that, day to day, consumers either pay for what they get or get what they pay for. Regardless, they do so without any compromise to the Apple brand integrity.

Price isn’t about price. It’s about quantifying commitment. Most brands ask for the sale. Apple, it seems to me, goes one step further, and uses price options to actually ask for the commitment on two levels. First of all, they ask consumers to commit to the product without any obligations and pay upfront for that freedom, or commit over time with obligations and defer the cost of doing so. Secondly, and more importantly, they want consumers to commit to more and more of Apple. The Apple ecosystem exists to make this happen. So they’re not just pricing each range so that it is versatile and defendable, they are using their full ecosystem (including all the products not mentioned here such as laptops and desktops) to actively enable one point or multi-point commitment.

People commit to what they enjoy – and the more enjoyment they get, the more likely they are to continue to commit. With apologies to Hotel California, people can step in any way they like, because Apple’s intention is to then make sure they never leave.

More reading:
How to make sure your company’s next strategy succeeds
Why innovation needs to engage, not just impress
Strategy: 11 ways to purposefully achieve growth
Know thy enemy
You can’t lead as a brand if you follow another brand

Further perspectives
Take A Lesson from Apple: A Strategy to Keep Customers in Your Ecosystem (forbes.com)

About these ads

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s