How Apple Sets Its Prices

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Apple pricing is unlike almost every other brand in consumer tech: consistent across each and every retailer, and rarely discounted. How do Cook and Co manage to pull that off?

MacWorld has an interesting article about the techniques which Apple uses to keep its prices fixed. From the article:

Most products move from manufacturers to retailers through a network of distributors. Even though each product has a "manufacturer suggested retail price" (MSRP), each retailer is free to set its own sale price...
[P]rice variability is possible because of the large difference (commonly from 30 to 55 percent) between the wholesale price-what the retailer pays the distributor for each unit of the product-and the MSRP for each unit. That gap leaves enough room for each retailer to set its own policies and generate a sometimes significant range of market prices for a product.

Apple, however, extends only a tiny wholesale discount on its Macs and iPads to your retailer of choice. The actual numbers are a closely guarded secret, protected by confidentiality agreements between Cupertino and its resellers, but the difference probably amounts to only a few percentage points off the official price that you find at Apple's own stores. With such a narrow gap to tinker with, most retailers can't offer big discounts and still hope to turn a profit.


It doesn't stop there, though. Apple will supplement its minuscule wholesale discounts with monetary incentives—but if, and only if, the retailer in question advertises its Apple products at or above a minimum advertised price. In turn, the retailer can make more money, but only if it does what Apple says. While it may sound like a technique bound to put retailers off stocking Apple, clearly it doesn't—there's a cachet which comes from carrying the brand—but even if it did, it probably wouldn't harm sales dramatically, only serving to make the brand seem more exclusive.

It should be clear that it all benefits Apple massively: it keeps prices high so Apple never has to compete and prevents big retailers assuming a strong enough market positions to bully the folks at Cupertino. While all this sound faintly dubious, the techniques used by Apple are completely legal, and used—separately—by many manufacturers across the industry. It just happens that Apple has distilled them down to a killer model which gives them ultimate control over retailers. If you find all this interesting, you should check out the MacWorld article, which also dives into the murky world of iPhone pricing. [MacWorld]