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The Price of an Apple

The hefty $399 pricetag of Apple’s iPhone didn’t stop tech junkies and PDA aficionados from lining up to snag one when they went on sale a few years ago. But surprisingly, Apple commands just a tenth of the smartphone market. And in the current economic environment, price is what’s going to separate the Davids from the Goliaths. Last year, Apple cut the price of of the iPhone in half, tripling sales and perhaps inspiring the company to continue slashing prices in 2009. At Apple’s Worldwide Developers Conference yesterday, it was announced that the iPhone 3G will be offered for a relatively affordable $99, making Apple more competitive than ever. Other products, like the MacBook also got retail makeovers, with both added Pro features and lower prices. More affordable upgrades for Mac computer users aim to keep current loyalists happy and, well, loyal, but the price cuts are also presumably aimed at converting new customers, especially price-conscious ones.

Leveraging price with market share is always a tricky endeavor. An established company like Apple can afford to experiment with price to cut into its competitors’ bottom lines, but how can a smaller business entice fence-sitters while at the same time making a profit? One way is to offer limited-time price reductions. Avoid using the word “sale,” but explore inventive, price-based ways of getting prospective new clients through the door. If Apple has proven anything, it’s that people are loyal to a brand once they’ve been hooked.