How Apple (NASDAQ:AAPL) Charges a Premium through Customer Loyalty

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By Thomas Copeland on September 15, 2014 Technology & Software

The wisdom of crowds has always been seen as a money maker in American markets. Apple’s (NASDAQ:AAPL) customer base seems to love the idea of paying a premium whereas others, not as much. The company believes in keeping people happy in order to charge their premium. However, this isn’t as simple as it looks.

Apple (NASDAQ:AAPL) was able to launch its iPhones last week even with all the ups and downs of criticism the company had to face the previous weeks, both its iPhone 6 and 6 Plus are larger in size with a thinner width of 7mm.

As Tim Cook predicted, Apple (NASDAQ:AAPL) will and all its current phone offerings cost more than $300 and people are no longer switching to the larger iPhone 6 and 6 Plus. The new growth wave is coming from the cheaper phone pfferings available in the market. With all these upgrades analysts predict that Apple (NASDAQ:AAPL) may go head to head with Samsung (KRX:005930) this Christmas regarding sales leadership of its smartphones and come out the winner.

Apple’s (NASDAQ:AAPL) smartwatch has been pricier than what others are offering in the same category but with its differentiating factor targeting the rich, its bound to make a lot of profits. The same thing happened with the iPad somewhere around 2010 thus making a category for itself in a market where nothing existed like its sort before.

Google’s (NASDAQ:GOOGL) mobile payments have been in the market for several years with Google Wallet however, it hasn’t gained much attention in the past. But the security breaches at various retailers like Target (NYSE:TGT) and Home Depot (NYSE:HD) caused the US retailers and banks to adopt a different measure of dealing with credit cards and introduced a chip and pin system for payment functionality. POS terminals will have to be adopted in order to fix the security concerns.

Now iPhone 6 is being promoted with this added feature already with Apple (NASDAQ:AAPL) negotiating with MasterCard (NYSE:MA), Amex (NYSE:AXP) and Visa (NYSE:V) regarding lower fee payments on every iPhone transaction. The payments will generate a one-time only temp code validated by a fingerprint reader and this won’t give much leverage to hackers.

One perk of an iPhone is the enhanced privacy measures as the company will not record any data on these transactions, including amounts and names of who they bought from etc. This is an excellent little perk where the environment is full of surveillance and keeping track of the customer movements, Apple (NASDAQ:AAPL) will be giving the user full privacy.

Apple (NASDAQ:AAPL) is in the market to stay with its constant improvements and extensive ecosystem of various app makers. They create Apple (NASDAQ:AAPL) applications first and Android afterwards, even though Android users are much more where numbers are concerned. This is only because of customer loyalty which Apple (NASDAQ:AAPL) users profess, even though the numbers have been decreasing slightly.

Hence Apple (NASDAQ:AAPL) gets a bigger chunk of market share over Android through a premium as it simply rejects selling to the cheaper market.