When the iPhone was first released in 2007 Apple charged its customers $599 for the 8gb version. Only 66 days after the initial offer at the end of June Apple dropped the price to $399 for the exact same device, which led to heavy protests among the innovators and early adopters…
The huge amount of complaints about the price drop made Apple give away $100 store credit cards to all who bought the new device right after its launch.
Looking at this behavior from the marketing perspective, it is obvious that Apple incorporated several different pricing strategies at the same time. Clearly there is a certain buyers’ expectation linked to Apple’s pricing, because the company has created a high quality image with a relatively high price level. The target group Apple addressed with their former product line is said to have been used to this image. The selling price of $599 (which is more about $380 higher than the manufacturing costs) turns out to be extremely well chosen, because just fit in with the rest of the product line, met the customers’ expectations and underlined the quality expectations. Considering Apple’s company image again, prestige pricing obviously played an important role in the pricing decision, too.
If looking at the immediate price drop after only two months, the initial price can also be seen as a skimming price used to recover from high development costs, because the device featured all kinds of new technologies, that had not been used in consumer products before. At that time there were no competing products in the market, which also contributes to the skimming price decision.
In the last years Apple seems to have moved away from the idea of selling an extremely prestigious and exclusive phone, as the price has been lowered with all future iPhone releases. In my opinion this is due to the growing competition in the touch-controlled smart-phone market, especially because Apple is known to improve its other products in relatively short intervals adding new features or improving performance while keeping the prices constant rather than dropping them.