December 17, 2012
Apple Gets Promotional
Apple, often lauded for its strict pricing policies, appears to be getting more promotional this holiday season.
On Friday, Walmart said it would begin selling the new iPhone 5 at $127, down from an original price of $189.97. The deal is valid with a two-year wireless contract. That’s well below Apple Stores’ ticket price of $200. Best Buy also has a deal at $149.
The 16 GB iPhone 4S is being offered at Walmart at $47, versus an original price of $89.97. Best Buy is offering it for $49.99, and Apple for $99.
Other Walmart deals include a 16 GB, third generation iPad with WiFi for $399, down from $499. Buyers also receive a $30 iTunes card. Best Buy is selling the same model for $499. Apple offers the iPad 2, which doesn’t have a Retina display and a slower processor, for the same price on its website.
The Walmart offers will be available for 30 days in about 3,000 of its stores until supplies last. They are not available online. Not part of the discount is the latest, fourth-generation model iPad.
The deals appears to be a coup for Walmart, which can tout the best Apple deals this holiday season. Target also has some Apple discounts but not as steep as Walmart’s.
"We worked together with them on this," Sarah Spencer, Walmart spokesperson told Reuters. "They are a great partner."
While Apple has run discounts in the past, it’s rare to have a new item such as its iPhone 5 selling at a cheaper price elsewhere than at Apple Stores. Some said the seemingly higher level of promotions this holiday season could be a response to pricing pressures from competing smartphone and tablet providers. The move also comes as Walmart in September indicated it would stop selling Amazon’s Kindle line after Target did the same in the spring.
Speaking to Money’s Life Inc. blog, Brian Sozzi, chief equities analyst at NBG Productions, believes Apple’s rapid launches may be leading to more promotions being found in the marketplace. He was concerned that consumers seeing discounts may be more apt to wait instead of paying full-price for new products as they’ve typically done in the past.
He also said Apple Stores’ branding could also be undermined by the deals across the marketplace.
"You start to worry about, well, mixed messages," said Mr. Sozzi. "You now have consumer discounts (at) Wal-Mart stores, and then a full-price experience at a mall-based store."
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Recent Discussions
Discussion Questions
What do you think of Apple’s deals at Walmart and elsewhere this holiday season? What are the risks to Apple’s pricing integrity? Should Apple be looking to be somewhat more price-competitive?
Poll
Apple walks a fine line. Their Apple Stores are consistently consumer favorites for sales and service. Apple products have always been priced higher than their competitors. Changing that metric to permit Walmart to offer discount pricing will change consumers’ perception about how the brand goes to market. In the long run, this could negatively impact the brand. And it will give Wall Street another reason to punish Apple by continuing to drop its stock price.
Welcome to the real world.
The rarified atmosphere in which Apple products were sold was bound to breached at some point. This is probably a healthy development, and will allow companies within the Apple ecosystem to compete on price and service. I would doubt that afficianados of the Apple store would shop in a Walmart store, and vice versa.
All the high praise about how Apple Stores are the greatest with incredible sales people, and now they are joining forces with Walmart? Is December 21st the real Apocalypse, or is Apple finally caving to the discount giant to grow its business? I’m curious to know how the employees at the Apple Stores feel right now.
Oh well, it was a matter of time before the last bastion of regular priced electronics made its way to the deep discounter. Maybe we’ll see a Nordstrom kiosk next at Walmart!
We live in an omni-channel world and differences in promotional strategy must be managed carefully across channels. While we agree that Walmart and Apple Store shoppers are different, Walmart’s pricing impacts everyone. “Welcome to the real world” is right.
This is a sign that some of Apple’s competitors are catching up and retailers know it! Truly superior product demands a higher price point. Minor differences are at the mercy of promotional activity.
Apple has put themselves in the position of the price is the price. Other than a 10% black Friday discount, there are no discounts. Additionally, the price has been somewhat high in the market for the features that are offered, which is consistent with a premium brand.
The reason to lower prices is to sell more units. However by lowering prices in some stores and retaining high prices in others, you cheapen the brand and you lower consumer confidence in buying direct. It seems the current shift in pricing strategy is a short sighted attempt to boost revenue and gain market share (which Apple has done in the past through innovation). The cost will be damage to the brand; the question is, how much?
The big difference here is Apple having more new item launches than in the past. Apple has been a stalwart in retail price maintenance and minimum advertised price policies. They are clearly dealing with economics which are new to Apple, but familiar to other consumer product manufacturers.
It seems to me that Apple would not do this unless they were pretty confident that their loyal users will not be affected. It also looks from here like Apple is in a full court press to grab other users, sensing weakness in competition.
In some cases, access to some of the care programs only comes if you purchase the product in the Apple store. If these distinctions are not being made clear to consumers, there is likely to be a major backlash. I think this is not a good strategy for Apple.
I believe Apple gets a monthly fee from the carriers for each iPhone. With increasing competition in the smartphone segment, Apple may be trying to protect its share and revenue from activated units. I can assure you that Apple is not involved in any knee jerk reaction to anything. The rise of competition and marketing in this environment has been planned for some time.
All must consider the fact that the iPhone is an entertainment device that connects the consumer with iTunes. Preserving the connection of the consumer to iTunes is very important to Apple. The ability to sell music, books, apps and advertisement is an integral part of the Apple dominance plan. The iPhone is the conduit and it may be more important to be “connected” than to be concerned with pricing integrity.
While Apple seems to have dispatched with Microsoft, the Google/Samsung consortium is making some headway. While the hardware from Samsung is impressive, the Android platform has some security concerns which may get worse before geting better. The integrity issue has much more to do with performance than it does with price.
The only research I have available is the people I hang with and the iPhone people have never thrown a phone away. I know of three android users that have literally thrown their phone off a bridge.
I am not a pricing strategist but I really see this as a tarnish on the Apple brand. If they were going to discount, i would have suggested other products and not the hot ones. Like, deep discounts for the 4s, not the just-out 5. My nieces and nephews all have iPhones and they would not hesitate to bypass the Apple store to get such a great deal. They would still go hang at the store just for the fun of it. Just sayin’….
I think Android has made some significant inroads into Apple territory with an optional competitive technology and lower prices.
It’s an expensive way to remain competitive and maintain share of market. I feel it’s a mistake. Apple could always justify the price of their phones with technological advantage, the reduction in price is akin to an admission of technological parity in the consumer’s mind.
I am a little surprised at the move.
While through one lens it might suggest that product sales may not be what Apple wants them to be; it might also be hinting at a future in which they drive more growth from the data and monetizing access to consumers.
Certainly something to keep an eye on.
I’m really surprised by this move. There’s usually two reasons to do something of this nature; 1) you made too many iPhones and you need to ‘dump’ them or 2) you need new customers. Neither of which fits the Apple profile.
There could be another reason: Samsung. If Walmart, the #1 seller of everything, decides to dump the iPhone 5 in favor of the Galaxy 3 because of stubbornness on discounting, that would be pretty damaging.
Still, if Jobs were around, you have to wonder if they would’ve stuck to their guns on pricing. After all, what message is that to their core user/raving fans (i.e. the brand)? Careful.
Apple is no longer untouchable. It is no longer the aspirational and innovative brand it once was. Apple has become a “me too” company that is often playing catch-up to Samsung and friends (maps, screen size, processor speed, etc…). Unsurprisingly, we now learn they are discounting at Walmart.
The rules of merchandising don’t apply when a company is so innovative, it can write its own rules. Innovation at Apple has slowed considerably and reality has caught up with the company. Your iPhone may not be the most revolutionary thing ever, but you can now buy it at Walmart on sale. I’d say most customers are better off for it.
Lower the price to get the traffic and the back-end revenue through use of the device and related revenue from content providers/publishers. Smart as a fox. It’s a play for penetration and for those who wish to buy at the Apple Store and get the “cool” factor of being serviced, let alone the fun/cachet of buying at the manufacturer store, a small price differential will not matter.
Without knowing the intimate details of these retailer agreements, it is hard to do a sound peice of judgement. However, it intuitively feels to be a risky move on Apple’s part to move from a fundamental element of the brand promise and into the “fray” with all other manufacturers who were previously viewed by Apple and its legions of fans as “inferior.”
The short term movement of units via price could very well backfire on Apple in the long run. Further, giving in to what I would assume was relentless pressure from Walmart will only embolden Walmart to press for further pricing and promotions concessions in the future. Watch the stock price….
Walmart is trying to build on its image to attract discount shoppers. Perhaps, Apple should re-consider if its products should be available at Walmart, but Apple’s brand is not likely to be much impacted by discounting at Walmart. This is the Walmart strategy to improve its image and attract additional foot-falls. The savvy shoppers can make the most use of the opportunity.
These promotions are a real departure from Apple’s historical pricing strategy. Until now, Apple products have rarely been discounted, and even then a discount of 5 or 10% made for an excellent deal on an Apple product. Walmart’s Apple promotions mark a significant shift in—and risk to—their pricing strategy from at least a couple of perspectives:
1) Omnichannel pricing – Since Apple sells not only directly through its own Apple-branded channels (Apple.com, Apple stores), but also indirectly through other retailers, consumers will research the product through their various channels and purchase from the least expensive one that provides the other elements of the purchase experience they are seeking (e.g. service, support, return policy, and so on). In this case, customers may make use of the Apple store to explore the product, but then purchase it at Walmart. This poses a profit risk to Apple from reduced sales at their Apple stores.
2) Pricing integrity & Consistency: Apple products went on sale so infrequently that consumers rarely waited for a good time to buy. With the launch of these promotions, however, consumers may be tempted and eventually conditioned to wait on Apple purchases until they can save a few dollars. Furthermore, consumers’ perspective of the brand may shift away from considering it to be the premium product on the market. All that said, it is possible that with the increased competition from Samsung on the hardware side, and Android, Windows 8 and a potentially renewed Blackberry on the operating system side, Apple may have felt that it had no choice but to sacrifice profits for market share or risk a reprise of the Windows/Mac experience on the PC.
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Apple walks a fine line. Their Apple Stores are consistently consumer favorites for sales and service. Apple products have always been priced higher than their competitors. Changing that metric to permit Walmart to offer discount pricing will change consumers’ perception about how the brand goes to market. In the long run, this could negatively impact the brand. And it will give Wall Street another reason to punish Apple by continuing to drop its stock price.
Welcome to the real world.
The rarified atmosphere in which Apple products were sold was bound to breached at some point. This is probably a healthy development, and will allow companies within the Apple ecosystem to compete on price and service. I would doubt that afficianados of the Apple store would shop in a Walmart store, and vice versa.
All the high praise about how Apple Stores are the greatest with incredible sales people, and now they are joining forces with Walmart? Is December 21st the real Apocalypse, or is Apple finally caving to the discount giant to grow its business? I’m curious to know how the employees at the Apple Stores feel right now.
Oh well, it was a matter of time before the last bastion of regular priced electronics made its way to the deep discounter. Maybe we’ll see a Nordstrom kiosk next at Walmart!
We live in an omni-channel world and differences in promotional strategy must be managed carefully across channels. While we agree that Walmart and Apple Store shoppers are different, Walmart’s pricing impacts everyone. “Welcome to the real world” is right.
This is a sign that some of Apple’s competitors are catching up and retailers know it! Truly superior product demands a higher price point. Minor differences are at the mercy of promotional activity.
Apple has put themselves in the position of the price is the price. Other than a 10% black Friday discount, there are no discounts. Additionally, the price has been somewhat high in the market for the features that are offered, which is consistent with a premium brand.
The reason to lower prices is to sell more units. However by lowering prices in some stores and retaining high prices in others, you cheapen the brand and you lower consumer confidence in buying direct. It seems the current shift in pricing strategy is a short sighted attempt to boost revenue and gain market share (which Apple has done in the past through innovation). The cost will be damage to the brand; the question is, how much?
The big difference here is Apple having more new item launches than in the past. Apple has been a stalwart in retail price maintenance and minimum advertised price policies. They are clearly dealing with economics which are new to Apple, but familiar to other consumer product manufacturers.
It seems to me that Apple would not do this unless they were pretty confident that their loyal users will not be affected. It also looks from here like Apple is in a full court press to grab other users, sensing weakness in competition.
In some cases, access to some of the care programs only comes if you purchase the product in the Apple store. If these distinctions are not being made clear to consumers, there is likely to be a major backlash. I think this is not a good strategy for Apple.
I believe Apple gets a monthly fee from the carriers for each iPhone. With increasing competition in the smartphone segment, Apple may be trying to protect its share and revenue from activated units. I can assure you that Apple is not involved in any knee jerk reaction to anything. The rise of competition and marketing in this environment has been planned for some time.
All must consider the fact that the iPhone is an entertainment device that connects the consumer with iTunes. Preserving the connection of the consumer to iTunes is very important to Apple. The ability to sell music, books, apps and advertisement is an integral part of the Apple dominance plan. The iPhone is the conduit and it may be more important to be “connected” than to be concerned with pricing integrity.
While Apple seems to have dispatched with Microsoft, the Google/Samsung consortium is making some headway. While the hardware from Samsung is impressive, the Android platform has some security concerns which may get worse before geting better. The integrity issue has much more to do with performance than it does with price.
The only research I have available is the people I hang with and the iPhone people have never thrown a phone away. I know of three android users that have literally thrown their phone off a bridge.
I am not a pricing strategist but I really see this as a tarnish on the Apple brand. If they were going to discount, i would have suggested other products and not the hot ones. Like, deep discounts for the 4s, not the just-out 5. My nieces and nephews all have iPhones and they would not hesitate to bypass the Apple store to get such a great deal. They would still go hang at the store just for the fun of it. Just sayin’….
I think Android has made some significant inroads into Apple territory with an optional competitive technology and lower prices.
It’s an expensive way to remain competitive and maintain share of market. I feel it’s a mistake. Apple could always justify the price of their phones with technological advantage, the reduction in price is akin to an admission of technological parity in the consumer’s mind.
I am a little surprised at the move.
While through one lens it might suggest that product sales may not be what Apple wants them to be; it might also be hinting at a future in which they drive more growth from the data and monetizing access to consumers.
Certainly something to keep an eye on.
I’m really surprised by this move. There’s usually two reasons to do something of this nature; 1) you made too many iPhones and you need to ‘dump’ them or 2) you need new customers. Neither of which fits the Apple profile.
There could be another reason: Samsung. If Walmart, the #1 seller of everything, decides to dump the iPhone 5 in favor of the Galaxy 3 because of stubbornness on discounting, that would be pretty damaging.
Still, if Jobs were around, you have to wonder if they would’ve stuck to their guns on pricing. After all, what message is that to their core user/raving fans (i.e. the brand)? Careful.
Apple is no longer untouchable. It is no longer the aspirational and innovative brand it once was. Apple has become a “me too” company that is often playing catch-up to Samsung and friends (maps, screen size, processor speed, etc…). Unsurprisingly, we now learn they are discounting at Walmart.
The rules of merchandising don’t apply when a company is so innovative, it can write its own rules. Innovation at Apple has slowed considerably and reality has caught up with the company. Your iPhone may not be the most revolutionary thing ever, but you can now buy it at Walmart on sale. I’d say most customers are better off for it.
Lower the price to get the traffic and the back-end revenue through use of the device and related revenue from content providers/publishers. Smart as a fox. It’s a play for penetration and for those who wish to buy at the Apple Store and get the “cool” factor of being serviced, let alone the fun/cachet of buying at the manufacturer store, a small price differential will not matter.
Without knowing the intimate details of these retailer agreements, it is hard to do a sound peice of judgement. However, it intuitively feels to be a risky move on Apple’s part to move from a fundamental element of the brand promise and into the “fray” with all other manufacturers who were previously viewed by Apple and its legions of fans as “inferior.”
The short term movement of units via price could very well backfire on Apple in the long run. Further, giving in to what I would assume was relentless pressure from Walmart will only embolden Walmart to press for further pricing and promotions concessions in the future. Watch the stock price….
Walmart is trying to build on its image to attract discount shoppers. Perhaps, Apple should re-consider if its products should be available at Walmart, but Apple’s brand is not likely to be much impacted by discounting at Walmart. This is the Walmart strategy to improve its image and attract additional foot-falls. The savvy shoppers can make the most use of the opportunity.
These promotions are a real departure from Apple’s historical pricing strategy. Until now, Apple products have rarely been discounted, and even then a discount of 5 or 10% made for an excellent deal on an Apple product. Walmart’s Apple promotions mark a significant shift in—and risk to—their pricing strategy from at least a couple of perspectives:
1) Omnichannel pricing – Since Apple sells not only directly through its own Apple-branded channels (Apple.com, Apple stores), but also indirectly through other retailers, consumers will research the product through their various channels and purchase from the least expensive one that provides the other elements of the purchase experience they are seeking (e.g. service, support, return policy, and so on). In this case, customers may make use of the Apple store to explore the product, but then purchase it at Walmart. This poses a profit risk to Apple from reduced sales at their Apple stores.
2) Pricing integrity & Consistency: Apple products went on sale so infrequently that consumers rarely waited for a good time to buy. With the launch of these promotions, however, consumers may be tempted and eventually conditioned to wait on Apple purchases until they can save a few dollars. Furthermore, consumers’ perspective of the brand may shift away from considering it to be the premium product on the market. All that said, it is possible that with the increased competition from Samsung on the hardware side, and Android, Windows 8 and a potentially renewed Blackberry on the operating system side, Apple may have felt that it had no choice but to sacrifice profits for market share or risk a reprise of the Windows/Mac experience on the PC.