Apple’s Lower Prices Are All Part of the Plan

Something unexpected has happened at Apple, once known as the tech industry’s high-price leader.

Over the last several years it began beating rivals on price. People who wanted the latest Apple smartphone, the iPhone 4S, were able to get one the day it went on sale if they were willing to wait in a line, spend at least $199 and commit to a two-year wireless service contract with a carrier. Or they could have skipped the lines and bought one of the latest iPhone rivals from an Apple competitor, as long as they were willing to dig deeper into their wallets. For $300 and a two-year contract, gadget lovers could have picked up Motorola’s Droid Bionic from Verizon Wireless, or they could bought the $230 Samsung Galaxy SII and $260 HTC Amaze 4G, both from T-Mobile, under the same terms. Apple’s new pricing strategy is a big change from the 1990s, when consumers regarded Apple as a producer of overpriced tech baubles, unable to compete effectively with its Macintosh family of computers against the far cheaper Windows PCs. But more recently, it began using its growing manufacturing scale and logistics prowess to deliver Apple products at far more aggressive prices, which in turn gave it more power to influence pricing industrywide. Apple’s innovations — including products like the iPhone, iPad and the ultrathin MacBook Air notebook — are justifiably credited for their role in the company’s resurgence under its chief executive and co-founder, Steven P. Jobs. But analysts and industry executives say Apple’s pricing is an overlooked part of its ability to find a large audience for those products beyond hard-core Apple fans. Apple sold more than four million iPhone 4S smartphone over its debut weekend. People can still easily find less expensive alternatives, with less distinctive and refined designs, to most Apple products. Within the premium product categories where Apple is most at home though, comparable devices often do no better than match or slightly undercut Apple’s prices.