Exam 20: Setting the Right Price

Apple iPhone Apple Inc.iPhone went on sale on June 29,2007.Apple's loyal and enthusiastic customer base is known for rushing to purchase its new products and the iPhone enjoyed a tremendous amount of "buzz" before its introduction.As expected,the iPhone entered the market at what many believed to be a high price ($599).However,within weeks the price was reduced to $399.By the end of 2007 over 8 million iPhones had sold in the U.S.marketplace.By most,if not all measures,the original iPhone was a huge success for Apple and it exclusive U.S.carrier AT&T. On July 11,2008,Apple Inc.released the iPhone 3G,which it advertised as twice as fast as the original iPhone for half the cost.However,in order to obtain an iPhone at the new price of $199,buyers had to agree to a two-year service contract with AT&T.This allows iPhone users to receive phone calls and email,and search the web on the same device.A single charge of $59.99 from AT&T included 450 minutes of cellular calls,with free nights and weekend minutes,unlimited data,visual voicemail,200 text messages,rollover minutes,and unlimited mobile-to-mobile service within the AT&T network.This approach succeeded and over a million iPhone 3Gs were sold during the introductory weekend. -Refer to Apple iPhone.When the iPhone 3G was released at half the cost of the current iPhone,it appeared that Apple's strategic focus had shifted from maximizing profits to gaining market share.Its lowered price was consistent with the _____ pricing approach.

Penetration pricing means higher profit per unit.