How Apple Hit One Trillion in Market Value with Disappointing Sales

August 6, 2018

Apple just made business history by becoming the first U.S. public company to reach $1 trillion in market value. The final push over the $1 trillion mark came in a positive market reaction to the company’s latest earnings report.

This push was the latest in a year long climb in Apple shares. Year to date, Apple shares have significantly outpaced the broad market, rising roughly 23% compared to only about 6% for the S&P 500.

This outperformance has occurred, however, despite disappointment over unit sales of the company’s latest smartphone, the iPhone X. Since its release last year with a $1000 price tag, widespread press coverage documented large inventories resulting in discontent not only among investors but inside the company itself.

So what gives? Why have Apple shares done so well despite the negativity? Pricing is clearly one of the answers.

As this article indicates, while the number of iPhone shipments has been disappointing, “the higher price tag has been successful enough to significantly increase the iPhone’s average selling price–and generate the majority of Apple’s recent revenue growth.”

In other words, while unit sales of the iPhone X missed expectations, enough sales at the higher price tag occurred not only to overcome missed volume estimates but create strong revenue growth.

So how do you apply this lesson to your own business? Start by thinking about your “velvet rope” customers. Who are those customers who love your product or service so much that they will pay more to get behind the “velvet rope” (an enhanced product offering or a wider suite of services) which you create? What would that enhanced offering to customers look like?

That’s what Apple did with the iPhone X. They identified a segment of customers so in love with their iPhones that they always want to own the latest model with the most up-to-date features. There’s a segment of Apple clients for whom having the latest, greatest iPhone is more important than the price they pay for that phone.

Effecting pricing can overcome a lot of other errors in the business, even when one of the “errors” is pricing “too high.”

(Photo credit: Pexels)

To view the original article published on LinkedIn, click here.


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