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Apple's iPhoneAfter the sizable price cut on the iPhone, the shares of Apple Inc. (Nasdaq: AAPL) have been jumpy. Kind of like Google Inc. (Nasdaq: GOOG), it's never easy to predict the goings-on at Apple.

So is the price cut a good thing?

Well, I had a chance to interview Rafi Mohammed, who is a pricing expert and the author of The Art of Pricing.

His opinion on the matter?

"With Apple announcing it recently sold one million iPhones, what should be clear is that last week's $200 price cut was not out of desperation. It was a very strategic move. When it released the iPhone, Apple stated its two key goals: sell one million phones before September 30 and 10 million phones before the end of 2008. One million iPhones were sold in just 74 days, but to achieve mass adoption, Apple has to cut its price to attract everyday customers. This is exactly what Apple is doing. Additionally, following its classic strategy of under promise and over deliver, an early September price cut will produce blockbuster numbers for its first full quarter (which ends on September 30) of iPhone sales.

Apple's next step is to do exactly what it has done with its other innovative products like iMacs and iPods: offer a full line of good, better, and best iPhone products. A good, better, and best line will enable Apple to achieve mass adoption while also profiting from those willing to pay for a premium product.

"Apple's rollout strategy illustrates the key roll that price plays in profits and growth. Apple employed a classic pricing strategy of lowering prices over time. And as I mentioned previously, there may have been room to even price the $599 version (Apple has noted that most iPhone sales were for the higher priced model). While many companies lower prices over time, they fail to offer a good, better, and best product line that enables them to price for profits and growth.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Pricing expert riffs on iPhone price cut: Strategic move, not desperate originally appeared on BloggingStocks on Tue, 11 Sep 2007 17:29:00 EST. Please see our terms for use of feeds.

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