Pricing of Apple's iPhone 3G in SA appears to be in the high end of the pricing range for the coveted mobile phone in markets that have similar characteristics to this country.
A brief examination of the cash prices on offer in Brazil, Russia, India and Hong Kong shows the cash price for an iPhone can range from $549 (R4 557) to almost $1 084 (R8 997).
These countries were selected in the sample as they are the emerging markets with which SA would most likely identify. Normally, the People's Republic of China would be included; however, the iPhone is not on sale there and so Hong Kong was selected as a proxy.
These countries have similar socioeconomic characteristics in that their economies are dominated by a smaller and more select group of people, while the majority of their populations are still trying to emerge from poverty. However, cellular phones have seen widespread adoption across all the population strata of these countries.
Last Friday, network operator Vodacom launched the iPhone with the cash price for prepaid customers being R6 389 ($767) for the 8GB model, while the 16GB phone went on sale for R7 569, or $912.
By comparison, the iPhone 3G is priced in a wide range in Brazil from $549 (the 8GB model) to $769 (16GB model); however, in that country the varying levels of taxation applied by the different states complicate the pricing.
India, which is (for the network operators) extremely price sensitive, has the iPhone 3G on sale for $660 for the low-end version and $766 for the top of the range version.
In Russia, where the iPhone will be launched this coming Friday, the 8GB model will be sold for $923.60 and the 16GB version for $1 084.
At Apple's fully-owned store, in Hong Kong, an 8GB iPhone 3G can be bought without contract for $695 and its bigger sibling for $798.
Balancing act
Tony Twine, an economist at independent economic consultancy Econometrix, says the prices charged for a product depend on what the market will bear and how quickly the research and development costs can be recuperated.
"Very often what the companies will set a price at is not accepted in the volumes by the market, resulting in a sharpening of their pencils to bring the price down," he says.
This is what happened in India after the first generation of the iPhone was launched there over a year ago and the price had to be dropped. Similarly, Apple dropped its US prices and gave early adopters a $100 coupon as a goodwill gesture.
Twine says the cost of recovery, if done too quickly, means the price is too high and then the volumes needed are not met.
"The way companies often set their prices is by looking at what the competition is selling similar products for and then hoping their unique selling points justify a higher price," he says.
Apple's iPhone has developed a reputation among the young high-earning segments of society as an object of desire and Twine says: "Image is an important intrinsic value and this can play a very important role in setting the final price."
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