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Price Discrimination: Apple’s iPhone 4

Price Discrimination: Apple’s iPhone 4
Price discrimination is defined as the process by which the same product is sold to different consumer groups at different prices. The demand for different consumer groups may differ and this causes the marketers to sell the products at higher or lower prices to different consumers. Marketers use price discrimination when they have monopolistic power to control the prices in the market. As such, the prices in the market are not influenced by the forces of demand and supply but they are determined by the characteristics of different consumers in different regions. The marketer segments the market in a way such that they are able to differentiate the consumers according to their level of demand and purchasing power (Gwartney, Stroup, Sobel & David, p. 514).
The keys to successful discrimination are: the marketer should be able to separate the market into different segments and each segment should have customers with similar demand patterns for the product. Secondly, it should be impossible to buy and resell products from regions with lower prices to high priced regions. Lastly, the market should be made up of a monopolist such that there are no other firms operating in the market. These conditions allow marketers to set different prices to different consumer groups because there are no competitors to offer competitive prices or to resell the products at lower prices (Gwartney, Stroup, Sobel & David, p. 513).
Apple is an example of a company which has successfully discriminated the market for iPhone 4 product. The company manufactures and sells computer software and hardware. In addition, the company has started to manufacture electronic products in the recent past. Apple has diversified its products as well as its marketing strategies so as to maximize the profits as much as possible (O’Grady, p. 3).
According to Baig and LeVitus (p. 352) the iPhone 4 product is sold at $599 to non-contract customers and $199 to customers buying it with AT&T or Verizon contract. Customers can buy the products from retail stores or through the website of the company by the use of online stores. This system has helped the company separate the customers depending on their accessibility to either retail or online stores. It is not possible to buy and resell the iPhone products from one region to another because the company has registered for copyrights protection for all its products. Apple is unique in that it is the only company manufacturing the iPhone 4 products, thus it enjoys a monopoly advantage in the sale of the product. Therefore, there is no other company which can sell the product at competitive prices such that it can force Apple to sell the iPhone 4 at the same price to all its consumers (Baig and LeVitus, p. 353).
The typical groups of people to lose when Apple successfully applies the price discrimination strategy are the customers purchasing the products on non-contract basis because they will get the products at a higher price. On the other hand, customers buying the products on Verizon contracts will win because they will get the product at a lower price. It is evident that customers purchasing the products from online stores will also win because the online stores can be found in many regions whereas the retail stores are located in a few regions (Plunkett, p. 592).

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