Drucker’s sin of premium pricing and high profit margin shows how companies can become too narrow focused on increasing profits. In the example of Xerox, the company believed that it could continue to grow sales by adding “bells and whistles”. The added features were thought to have added value to the product, however the customer did not have perceived value for these added features. This was also the case in Drucker’s example of the car industry where auto makers did not focus on what customers wanted. Customers saw no value in the features provided and were unwilling to pay that premium price. Apple is course a premium pricing brand which Drucker might consider as breaking one of the sins. However, I feel that unlike the automakers of the 1970’s and Xerox, apple is able to provide added value to the customer. It is easy to see that customers are willing to pay a premium price for the brand. Customers value Apple’s product innovation and most importantly their brand equity. They are willing to pay the premium to “fit in” with others who have Apple products. That premium pricing strategy will be successful as the Apple brand has been built into the culture.
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