Reducing margins to increase volume is a tricky beast. It’s easy to make an item cheaper, it’s hard to make it more expensive again, and there is no guarantee it will increase your sales enough to make up that difference of net income losses.
I tend to agree with the part about raising prices generally being harder but Apple have done it a number of times now. Every generation, the Mac Mini has become more expensive. The Mac Pro jumped up by a huge amount. The iMac dropped the lowest model and pushed the entry point much higher. The unibody laptops pushed the price up for that line too.
Because of the fact they don't have much effective competition, they seem to be able to switch prices around without any problems.
When you first visit a store, the entry prices are what you take in.
Mac Mini - $699. Automatic dismissal to a number of people if the cheapest machine is $700 without a screen.
iMac - $1199. It's above that psychological $999 barrier.
Mac Pro - $2499. Would be better with a $1999 entry point.
Macbook - great for students but pricey at $999 for the entry model.
Macbook Pro - as with the iMac, the $999 tag would do good things.
I think the entry prices should be the following:
Mac Mini - $499
iMac - $999
Mac Pro - $1999
Macbook - $799
Macbook Pro - $999
Obviously just cutting the prices of current models isn't something they can do because the prices are determined by the way they build the machines. The above prices are about $200 off each model and $500 off the Mac Pro.
If they put in the effort to do it, they could hit those entry points though as they have done in the past with pretty much all of the models.
Quote:
Originally Posted by solipsism
It’s a tricky balancing act and there is a lot of accounting involved to know when you’ve reached a saturation point based when sales stagnate. Remember, Apple already takes the lion share of the PC profits so increasing marketshare at the risk of losing profits is a fruitless endeavor.
It may be a fruitless endeavor in terms of profit but there's more to the computer industry than money. Volume gives you more leverage. This is clear from the mobile market. If the iPhones etc had a share equivalent to under 10% of the desktop market, would any major website switch from Flash to accommodate? But they do for the iOS devices because it's an audience of over 100 million and that's hard to ignore.
Quote:
Originally Posted by solipsism
Some items, like the iPhone and iPad are actually priced too low for the market today. We know this because demand is outstripping supply despite the iPhone being the largest produced high-end smartphone on the planet.
I guess that's a logical assumption but also backs up why the Mac line needs a reassessment because the demand there pretty much never exceeds supplies. Apple only started the whole iOS stuff 3 years ago and they outsell the Mac line with mobile devices by 5:1.
I have no idea where nicolbolas gets this figure from. That a smartphone should only make $100. It’s nonsense! Plus, this is an article about BOM, so his $100 value would probably make Apple lose money on each iPhone sold after everything is accounted for.
To put it gently, I think he was speaking rectally. The unfortunate thing is people don't have a clue of what it takes to get a product from idea to market, then there's the after sale support too. Not understanding that these estimates never were intended to be an "all expenses" list doesn't help, not having even basic education in business accounting doesn't hurt in the quest for supreme ignorance. Even if your raw material is only 5% of the final retail price, that's a pittance compared to other expenses, even seemingly simple things can be costly once all the other expenses are added in.
If iSuppli is low-balling these figures then that's another problem. It's possible they're shading the truth by pricing in "B" or "C" grade panels when Apple gets the "A" grade panels, not to mention being custom spec. If they regularly do low-ball prices, then it seems like it took this long for Apple execs to say anything about it. The only wrinkle is that they would have no good way to argue their claim, as they should be keeping specific part cost information secret.
Comments
Reducing margins to increase volume is a tricky beast. It’s easy to make an item cheaper, it’s hard to make it more expensive again, and there is no guarantee it will increase your sales enough to make up that difference of net income losses.
I tend to agree with the part about raising prices generally being harder but Apple have done it a number of times now. Every generation, the Mac Mini has become more expensive. The Mac Pro jumped up by a huge amount. The iMac dropped the lowest model and pushed the entry point much higher. The unibody laptops pushed the price up for that line too.
Because of the fact they don't have much effective competition, they seem to be able to switch prices around without any problems.
When you first visit a store, the entry prices are what you take in.
Mac Mini - $699. Automatic dismissal to a number of people if the cheapest machine is $700 without a screen.
iMac - $1199. It's above that psychological $999 barrier.
Mac Pro - $2499. Would be better with a $1999 entry point.
Macbook - great for students but pricey at $999 for the entry model.
Macbook Pro - as with the iMac, the $999 tag would do good things.
I think the entry prices should be the following:
Mac Mini - $499
iMac - $999
Mac Pro - $1999
Macbook - $799
Macbook Pro - $999
Obviously just cutting the prices of current models isn't something they can do because the prices are determined by the way they build the machines. The above prices are about $200 off each model and $500 off the Mac Pro.
If they put in the effort to do it, they could hit those entry points though as they have done in the past with pretty much all of the models.
It’s a tricky balancing act and there is a lot of accounting involved to know when you’ve reached a saturation point based when sales stagnate. Remember, Apple already takes the lion share of the PC profits so increasing marketshare at the risk of losing profits is a fruitless endeavor.
It may be a fruitless endeavor in terms of profit but there's more to the computer industry than money. Volume gives you more leverage. This is clear from the mobile market. If the iPhones etc had a share equivalent to under 10% of the desktop market, would any major website switch from Flash to accommodate? But they do for the iOS devices because it's an audience of over 100 million and that's hard to ignore.
Some items, like the iPhone and iPad are actually priced too low for the market today. We know this because demand is outstripping supply despite the iPhone being the largest produced high-end smartphone on the planet.
I guess that's a logical assumption but also backs up why the Mac line needs a reassessment because the demand there pretty much never exceeds supplies. Apple only started the whole iOS stuff 3 years ago and they outsell the Mac line with mobile devices by 5:1.
I have no idea where nicolbolas gets this figure from. That a smartphone should only make $100. It’s nonsense! Plus, this is an article about BOM, so his $100 value would probably make Apple lose money on each iPhone sold after everything is accounted for.
To put it gently, I think he was speaking rectally. The unfortunate thing is people don't have a clue of what it takes to get a product from idea to market, then there's the after sale support too. Not understanding that these estimates never were intended to be an "all expenses" list doesn't help, not having even basic education in business accounting doesn't hurt in the quest for supreme ignorance. Even if your raw material is only 5% of the final retail price, that's a pittance compared to other expenses, even seemingly simple things can be costly once all the other expenses are added in.
If iSuppli is low-balling these figures then that's another problem. It's possible they're shading the truth by pricing in "B" or "C" grade panels when Apple gets the "A" grade panels, not to mention being custom spec. If they regularly do low-ball prices, then it seems like it took this long for Apple execs to say anything about it. The only wrinkle is that they would have no good way to argue their claim, as they should be keeping specific part cost information secret.
What's the big surprise...
How else do people think Apple keeps posting these (questionably) astronomical quarterly profits?
Hint: By charging 10 to 20 times more than the value of the actual hardware.
Hint: One doesn't get profits merely by charging ... someone must be willing to buy at the rate charged.