Apple Inc. is well known for developing innovative products like the iPhone, iPad and iPod. Such devices are manufactured with complex electronic components and incur substantial design and development costs. The actual cost of manufacture of these products is a closely guarded secret. While the manufacture and distribution costs are important factors in setting a price for such devices, other factors affect pricing policy too, according to industry analysts and reviewers. Taking the iPhone as an example, the first factor is the features and capability of the device, whereby, for example, the price increases according to the storage capacity or screen quality. As the iPhone has developed through to the current iPhone 7, additional functionality has been offered. For example, the iPhone 7 introduced better battery life, is water resistant and has improved stereo speakers. Such additional functionality has increased manufacturing costs, but in general end-consumer pricing has remained relatively static for each new iPhone model, including the iPhone 7, at about \($600–700.\) How has Apple kept prices low, despite increasing costs? The answer lies, at least partly, in a pricing policy which forces mobile phone operators to offer heavy subsidies to new customers wanting an iPhone. And operators typically comply as the demand for iPhones remains high – the iPhone 6/6s sold almost 50 million units in the first half of 2016, with iPhone 7 sales remaining steady, helped no doubt by defects with the Galaxy Note 7.
Questions:
1 Do devices like iPhones have differing prices during various stages of their life cycle?
2 Can companies like Apple adopt priceskimming policies? Why or why not?