Eventually Drucker is correct...

Peter Drucker purported "The purpose of a business is to create a customer".  He outlined five deadly business sins that corporations should avoid in order to be successful. 

1. Seeking high profit margins and premium pricing
2. Charging what the market will bear
3. Using cost-driven pricing
4. Focusing on past winners
5. Giving problems priority over opportunities

One quick glance at Apple's Iphone strategy seems to defy Drucker's number one deadly sin.  The notion that big margins absolutely lead to maximum profit is problematic.  Apple charges high premiums for a device that offers comparable features to other smart phones in the market.  Additionally, the continuous iPhone releases with marginal new features appears to align with deadly sin number two.  As a marketing student, I know high price and charging what the market will bear will afford lower risk to competitors and an invitation to enter a market segment.  Apple's iPhone has been wildly successful and appears to be immune to Drucker's warnings. 

In a recent Business Insider article, iPhone's pricing was the center of attention.  Should Apple consider lowering product prices to increase market share?  According the article's author, yes.  Jay Yarow states that Apple is perfectly happy with it marketing strategy but lower prices would increase market share. 

"One strange criticism that pops up is people saying that if Apple lowered prices it would hurt the company since it's currently positioned as a high-value, premium company."

Yes, a business can charge premium prices for a premium product but the iPhone is not as upscale as its price suggests.  Yarow calls out the elephant in Apple's boardroom... "The important thing here to keep in mind is that Apple managed to be a premium company selling a less-than-premium product."  Apple has had great success with various price points on their other products.  However, it seems that Apple is happy with a small piece of the market as long as the margins are grossly profitable. 

I think that Apple's iPhone is beginning to show signs of weakening.  With each iteration, consumers still line up over night but the product's value is questioned more often.  The iPhone 5C, c is for color, was not as successful as Apple forecasted.  Apparently adding a simple colorful cover on the same product and changing its name doesn't work... even for Apple.  Another issue that I find Apple will face is the increasing amount of new competitors.  Motorola has been innovating good phones lately and the newest Moto G should provide good competition at less than half the price...

 Only time will tell, but I find eventually Drucker will be proven correct.

 

 

Peter Ferdinand Drucker, 1909-2005

 

 

Yarow, J.  (2013). Business Insider.  To All the People Who Say Apple Can't Lower Prices Because It Would Destroy The Brand.  Retrieved from  http://www.businessinsider.com/apple-pricing-2013-11#ixzz2lPw6ERwb