The newest entry in the smart watch industry has finally hit the market and Apple Watch is now available for purchase. It isn’t cheap though – the watch starts at $349 for sports models, and can reach up to very pricey 18K gold special edition models at $12,000.
But let’s take a look at the costs to manufacture the product:
- Display – $20.50
- Processor – $10.20
- Memory – $7.20
- Sensors – $3.00
- Battery – $0.80
- Charger, box, etc. – $9.00
- Misc. – $30.50
- Manufacturing – $2.50
- Total to make – $83.70Use this product as a topic for a discussion about how Apple and other companies price their products.
- Group Activities and Discussion Questions:
- Start by viewing Apple Watch models: http://store.apple.com/us/watch
- Next, show the video: https://youtu.be/Kyec1H4eB-g
- Discuss the six steps for establishing a price: determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments.
- Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
- For the Apple Watch, divide students into groups and have each group work on any/all of the six steps.
- When setting the price level, assign each team a different model to use (demand-oriented, cost- oriented, etc.).
- Debrief the exercise. Compare the various pricing models and discuss advantages/disadvantages of each.
Source: CNN Money, Manufacturing Business Technology
