Actually this is not a bad idea. Imagine Apple saying "the iPhone will go on sale for x amount of dollars or buy one iPhone get one free for one month only". This would be interesting to see. Remembering back to 2009 and 2010 there were huge android promotions pushing buy 1 android device get a second free. This was at time when iPhone was selling many more iPhones then android. The user base was much larger for iPhone at the time. That buy one get one free promotion really helped android go over the top with its user install base... with goole making incredible claims of something like close to a one million android activations a day. I don't know if that was accurate number but clearly google realized that it needed to push its user base quickly to expand.
But really I am not sure any of this matters anyway now. Apple is company I would think is comfortable with its self and its position in the consumer technology business.
As a side note I really wish Apple would pay attention to the less popular products like its mac mini and iPod touch. The Mini and Touch probably don't make much money for Apple but these products are essential for people who generally cannot afford the apple experience a different way. The mini should be updated more regularly then is what seems now to be a two year update cycle. In my opinion Apple can afford to come close on breaking even on some of their products. Its not difficult to see that this would make sense. Just because you can only afford the lesser of the Apple products does not mean not mean that we should be left out and neglected with regular timely updates.
Thanks for being the only person who didn't crap on me for making the "perhaps they could reduce their margins" comment.
Funnily enough, right after I said it, 9to5Mac published a piece saying much the same thing.
To those taking me to task for the "commodity" word, I might have mis-spoke or used the wrong term. What I was talking about was market saturation and dwindling sales as a result of same. In other words, if they are having trouble selling iPhones, maybe the fact that some of the "cheapest" models withe the "lowest" prices are basically a thousand bucks has something to do with it.
Apple has the fattest margins in the business. I said two or three times the average, but some people even say four or eighth times the average. They make 40% on every product. Always. Most other computer manufacturers make 5% or so from what I understand.
One of the typical rules of business is that if people are having trouble affording your products or they aren't selling as well as you want, that reduction of said (super) fat margins is something to consider. It's not a crazy idea by any means.
As a consumer, you shouldn't be worried about margins at all. Margins are for shareholders.
The iPhone is the best selling phone on the planet and it appears to be priced appropriately for the market it competes in. Being the best product in its market, it deserves to command a higher price than the 2nd and 3rd best products - and obviously consumers agree. It's priced more expensive than the flagship Samsung phones - but only slightly more - and it is selling extremely well - so it appears that Apple has chosen exactly the right price point.
The biggest problem with your argument is that you think that Apple is making too much money and it sounds like you resent them for it because you are talking about "reducing margins" instead of "lowering prices" - and you compare their 40% margin to the 5% or less that their competitors are making - and implying that Apples margins should be closer to the margins of competing products. But margins should be irrelevant to consumers. You are essentially saying that Apple doesn't deserve to profit from the supply chain management efficiencies that allow them to build their products with less expense. Apple has made some bold, and risky moves - especially in the beginning of the iPhone life cycle that have paid off. They have designed a product that is so desirable, they sell millions of units per quarter which requires purchasing in bulk, vast numbers of components which translates into a lower price for the components. And Apple negotiates better deals for assembly, their logistics are better, etc, etc, etc. It took many years, a lot of effort, and some very smart people to create such an efficient supply chain - and *THAT* is what translates into higher margins. They deserve to be rewarded for all of the extra effort they put into keeping their costs low. Why should you be rewarded for Apples extra efforts? And who are you to determine how much a company should be allowed to make?
Forget about margins. They are irrelevant to retail pricing. The only important question is "Is the iPhone too expensive? Or is it priced "just right" with respect to the rest of the market?" From where I stand, it appears to be priced just right. You are obviously jealous and angry that they are allied to be so successful - but don't be. They've earned it.
Basic economic theory will tell Apple how much they can shift at any given price point, and they will price it to maximise profits, not sales.
Apple could price the phone at $1 and that would certainly get people buying it. At one dollar, let's assume that everyone on the planet can now buy an iPhone. That would give Apple revenues of $8billion (quite a bit less than they've just announced), and a huge, worthless market share.
Keep in mind each of those customers could buy iTunes Match at $25/year as well.
Okay.
They drop the phone from several hundred dollars to one dollar, and in return for his this they pick up $25 a year from each customer? But that's not the worst problem: Apple now has swapped several hundred dollars for one dollar, and has also picked up several billion users of its services, which will also lead to higher infrastructure costs.
One of the least talked-about purposes of pricing is to control demand. Apple may not want to have eight billion users of its services because it may cost it more to service them.
So what's the answer. Well, rather than giving away expensive hardware, it might be a better idea to extend your pay-for services to other platforms where there are already lots of phones costing a dollar. The question is, are the customers on those platforms willing to pay for services?
Cook should have been talking about install base YEARS AGO. He should have been pushing the SERVICES angle YEARS AGO.
Now he only pushed this when the company is experienced 10-15% iPhone decline. Now it looks like Cook is desperate and grasping at straws.
This is why Tim Cook needs to be fired immediately. He has FAILED to clearly articulate the vision of Apple. Instead Wall Street only focuses on unit sales of iPhones. That can't last forever. Cook should have changed the narative YEARS AGO. He should have been focusing on install base and monitizing the install base YEARS AGO. Why? Because its going to take 5-10 years for Apple to transition from a hardware to services/software company. Tim Cook should have been talking about this when the iPhone5 came out.
Any top-tier CEO would know this. But Cook is an operations/supply chain guy and does not have the vision. All he focused on was selling more and more units. When he should have been focusing on growing Apple's SERVICES portfolio and articulating this vision to Wall Street. It does not help that Apple's next big thing is also hardware: Cars. Stupid. Apple should be focusing on SERVICES. If Cook was a real top tier CEO he should have done this YEARS AGO:
1. He should have bought Facebook before it went public. In 2010 Facebook was valued at about $14 billion. Cook should have been aggressive and offered Zuckerburg $50 billion and allow him to continue to be the CEO of FB.
2. He should have bought Uber for $1 billion in 2011.
3. He should have bought Pandora or Spotify for $1 billion years ago.
4. They should have released a search engine by now. Either develop one or buy one.
5. Should have closed on the LiveTV package by now. Ridiculous that 2nd class companies like Dish Network and Sony have been able to get LiveTV packages and Apple has not. And the reason is because Apple wants to go the best price possible. Ridiculous. Close the deal and STFU.
6. Should have bought ADP for home security/automation.
Bottom line is Apple should be gobbling up services companies left and right. YEARS AGO. The lack of vision of Tim Cook is lacking. We need a CEO with vision. Cook is a great operations person but he sucks in strategic management.
Yes, because throwing sh*t at the walls and hoping some of it sticks is always a top-notch strategy.
Again, the best thing Cook could do is spend money on buybacks to get shares out of the hands of amateurs.
Actually this is not a bad idea. Imagine Apple saying "the iPhone will go on sale for x amount of dollars or buy one iPhone get one free for one month only". This would be interesting to see. Remembering back to 2009 and 2010 there were huge android promotions pushing buy 1 android device get a second free. This was at time when iPhone was selling many more iPhones then android. The user base was much larger for iPhone at the time. That buy one get one free promotion really helped android go over the top with its user install base... with goole making incredible claims of something like close to a one million android activations a day. I don't know if that was accurate number but clearly google realized that it needed to push its user base quickly to expand.
But really I am not sure any of this matters anyway now. Apple is company I would think is comfortable with its self and its position in the consumer technology business.
As a side note I really wish Apple would pay attention to the less popular products like its mac mini and iPod touch. The Mini and Touch probably don't make much money for Apple but these products are essential for people who generally cannot afford the apple experience a different way. The mini should be updated more regularly then is what seems now to be a two year update cycle. In my opinion Apple can afford to come close on breaking even on some of their products. Its not difficult to see that this would make sense. Just because you can only afford the lesser of the Apple products does not mean not mean that we should be left out and neglected with regular timely updates.
Thanks for being the only person who didn't crap on me for making the "perhaps they could reduce their margins" comment.
Funnily enough, right after I said it, 9to5Mac published a piece saying much the same thing.
To those taking me to task for the "commodity" word, I might have mis-spoke or used the wrong term. What I was talking about was market saturation and dwindling sales as a result of same. In other words, if they are having trouble selling iPhones, maybe the fact that some of the "cheapest" models withe the "lowest" prices are basically a thousand bucks has something to do with it.
Apple has the fattest margins in the business. I said two or three times the average, but some people even say four or eighth times the average. They make 40% on every product. Always. Most other computer manufacturers make 5% or so from what I understand.
One of the typical rules of business is that if people are having trouble affording your products or they aren't selling as well as you want, that reduction of said (super) fat margins is something to consider. It's not a crazy idea by any means.
Yeah, quoting 9to5Mac doesn't actually help your case. If Horace Dediu had said it then at least there would have been some sound research behind it. Unfortunately, you fail to grasp the very simple notion that selling units means nothing unless you're making money. The reason why Apple can weather storms is because they have selected a customer base that is less sensitive to recession.
Secondly, your one-dimensional thinking leads you to believe that Apple actually isn't using pricing to control demand and their market. They may not want to sell more phones than they can actually produce. They may not want customers who they have to service without getting anything back in return (sorry, but that's the truth of it). They may not want so many customers that iCloud degrades until they can build out the capacity to support them.
Going around screaming 'Apple is making too much money… it's… it's obscene!' is just taking a rather simple view of a very complex business.
I imagine what they will do is come up with a cheaper phone for those markets, rather than cut margins on their high end stuff, and the margins on the cheaper stuff won't be that much different. I doubt they're really going to stop trying to make money just because you think they're earning too much.
Thanks for being the only person who didn't crap on me for making the "perhaps they could reduce their margins" comment.
Funnily enough, right after I said it, 9to5Mac published a piece saying much the same thing.
To those taking me to task for the "commodity" word, I might have mis-spoke or used the wrong term. What I was talking about was market saturation and dwindling sales as a result of same. In other words, if they are having trouble selling iPhones, maybe the fact that some of the "cheapest" models withe the "lowest" prices are basically a thousand bucks has something to do with it.
Apple has the fattest margins in the business. I said two or three times the average, but some people even say four or eighth times the average. They make 40% on every product. Always. Most other computer manufacturers make 5% or so from what I understand.
One of the typical rules of business is that if people are having trouble affording your products or they aren't selling as well as you want, that reduction of said (super) fat margins is something to consider. It's not a crazy idea by any means.
I imagine what they will do is come up with a cheaper phone for those markets, rather than cut margins on their high end stuff, and the margins on the cheaper stuff won't be that much different. I doubt they're really going to stop trying to make money just because you think they're earning too much.
Or they may not. Apple doesn't sell soft drinks. Why? Because they've decided not to compete in that market. The same is true with the low-end and feature phone market. Apple has chosen not to compete in that market - and they may never enter it. Too many people think it was an oversight - but it's not. There's very little profit to be had in that market so why bother? Apple is not a government or a public service. They have no mandate or responsibility to ensure that their products and technology are available to everyone. They are entitled to as much profit as the free market will bear. They earn it through hard work, perseverance and they operate much more srupulously than most of their competitors. Condemning a company simply because they make "too much profit" is ridiculous.
They could always reduce their huge profit margin to the same level as the other players, that would increase sales by a factor of ten probably. If the iPhone is becoming a commodity device, maybe it should be priced accordingly instead of as if it were some kind of precious gem.
You man how most everyone making Android phones are breaking even or losing money? Ya, that's a smart move. So drop your price down to nothing sell millions of phones and in the end, made no money. What exactly does that get you?
Why does it have to be either have a huge profit margin, or none at all? There's a lot of middle ground between the two.
You man how most everyone making Android phones are breaking even or losing money? Ya, that's a smart move. So drop your price down to nothing sell millions of phones and in the end, made no money. What exactly does that get you?
Why does it have to be either have a huge profit margin, or none at all? There's a lot of middle ground between the two.
Because that's what they're worth! Do you really want to choose your next phone based on how much profit the manufacturers makes when selling it to you? Or do you want to choose it based on features and capabilities? How much the manufacturer makes off of my phone purchase is literally the last thing I'd be thinking about when selecting my next phone . It's insane that it matters to anybody - especially with the number of other options that are available to them in every price range!
Why does it have to be either have a huge profit margin, or none at all? There's a lot of middle ground between the two.
Because that's what they're worth! Do you really want to choose your next phone based on how much profit the manufacturers makes when selling it to you? Or do you want to choose it based on features and capabilities? How much the manufacturer makes off of my phone purchase is literally the last thing I'd be thinking about when selecting my next phone . It's insane that it matters to anybody - especially with the number of other options that are available to them in every price range!
I bet the last person who bought a Palm Pre wishes Palm had made a little more profit.
Then they would have been around to make more phones... instead of being sold off to the highest bidder and ultimately dismantled.
I agree that "too much" profit is largely unnecessary... but "not enough" profit can be devastating.
It will definitely affect your next phone purchase if that company doesn't exist anymore.
Because that's what they're worth! Do you really want to choose your next phone based on how much profit the manufacturers makes when selling it to you? Or do you want to choose it based on features and capabilities? How much the manufacturer makes off of my phone purchase is literally the last thing I'd be thinking about when selecting my next phone . It's insane that it matters to anybody - especially with the number of other options that are available to them in every price range!
I bet the last person who bought a Palm Pre wishes Palm had made a little more profit.
Then they would have been around to make more phones... instead of being sold off to the highest bidder and ultimately dismantled.
I agree that "too much" profit is largely unnecessary... but "not enough" profit can be devastating.
It will definitely affect your next phone purchase if that company doesn't exist anymore.
Yep. Sadly, I worked for the company that dismantled WebOS at the time all that happened (in a completely separate division). They made a lot of bad moves that year - and what they did with WebOS was a travesty. They put it on crappy hardware and then forced the phones on we employees. Many of us just switched the SIM card and stuck with our iPhones and then they refused to pay our cellphone expenses unless we used their hardware. That (amongst other things) was the catalyst for me to look for work elsewhere.
In the hands of a competent company, WebOS could have been a real contender and offered iOS some real competition - or at least more than Android did. It's a shame things didn't play out that way.
Because that's what they're worth! Do you really want to choose your next phone based on how much profit the manufacturers makes when selling it to you? Or do you want to choose it based on features and capabilities? How much the manufacturer makes off of my phone purchase is literally the last thing I'd be thinking about when selecting my next phone . It's insane that it matters to anybody - especially with the number of other options that are available to them in every price range!
I bet the last person who bought a Palm Pre wishes Palm had made a little more profit.
Then they would have been around to make more phones... instead of being sold off to the highest bidder and ultimately dismantled.
I agree that "too much" profit is largely unnecessary... but "not enough" profit can be devastating.
It will definitely affect your next phone purchase if that company doesn't exist anymore.
I think they wish Palm had made a better phone. At the time iOS, and Android were still relatively young and WebOS had a shot at becoming a major player. The entire smartphone landscape could have been much different if Palm had done a better job with the hardware.
I bet the last person who bought a Palm Pre wishes Palm had made a little more profit.
Then they would have been around to make more phones... instead of being sold off to the highest bidder and ultimately dismantled.
I agree that "too much" profit is largely unnecessary... but "not enough" profit can be devastating.
It will definitely affect your next phone purchase if that company doesn't exist anymore.
I think they wish Palm had made a better phone. At the time iOS, and Android were still relatively young and WebOS had a shot at becoming a major player. The entire smartphone landscape could have been much different if Palm had done a better job with the hardware.
Comments
The iPhone is the best selling phone on the planet and it appears to be priced appropriately for the market it competes in. Being the best product in its market, it deserves to command a higher price than the 2nd and 3rd best products - and obviously consumers agree. It's priced more expensive than the flagship Samsung phones - but only slightly more - and it is selling extremely well - so it appears that Apple has chosen exactly the right price point.
The biggest problem with your argument is that you think that Apple is making too much money and it sounds like you resent them for it because you are talking about "reducing margins" instead of "lowering prices" - and you compare their 40% margin to the 5% or less that their competitors are making - and implying that Apples margins should be closer to the margins of competing products. But margins should be irrelevant to consumers. You are essentially saying that Apple doesn't deserve to profit from the supply chain management efficiencies that allow them to build their products with less expense. Apple has made some bold, and risky moves - especially in the beginning of the iPhone life cycle that have paid off. They have designed a product that is so desirable, they sell millions of units per quarter which requires purchasing in bulk, vast numbers of components which translates into a lower price for the components. And Apple negotiates better deals for assembly, their logistics are better, etc, etc, etc. It took many years, a lot of effort, and some very smart people to create such an efficient supply chain - and *THAT* is what translates into higher margins. They deserve to be rewarded for all of the extra effort they put into keeping their costs low. Why should you be rewarded for Apples extra efforts? And who are you to determine how much a company should be allowed to make?
Forget about margins. They are irrelevant to retail pricing. The only important question is "Is the iPhone too expensive? Or is it priced "just right" with respect to the rest of the market?" From where I stand, it appears to be priced just right. You are obviously jealous and angry that they are allied to be so successful - but don't be. They've earned it.
Okay.
They drop the phone from several hundred dollars to one dollar, and in return for his this they pick up $25 a year from each customer? But that's not the worst problem: Apple now has swapped several hundred dollars for one dollar, and has also picked up several billion users of its services, which will also lead to higher infrastructure costs.
One of the least talked-about purposes of pricing is to control demand. Apple may not want to have eight billion users of its services because it may cost it more to service them.
So what's the answer. Well, rather than giving away expensive hardware, it might be a better idea to extend your pay-for services to other platforms where there are already lots of phones costing a dollar. The question is, are the customers on those platforms willing to pay for services?
Yes, because throwing sh*t at the walls and hoping some of it sticks is always a top-notch strategy.
Again, the best thing Cook could do is spend money on buybacks to get shares out of the hands of amateurs.
Yeah, quoting 9to5Mac doesn't actually help your case. If Horace Dediu had said it then at least there would have been some sound research behind it. Unfortunately, you fail to grasp the very simple notion that selling units means nothing unless you're making money. The reason why Apple can weather storms is because they have selected a customer base that is less sensitive to recession.
Secondly, your one-dimensional thinking leads you to believe that Apple actually isn't using pricing to control demand and their market. They may not want to sell more phones than they can actually produce. They may not want customers who they have to service without getting anything back in return (sorry, but that's the truth of it). They may not want so many customers that iCloud degrades until they can build out the capacity to support them.
Going around screaming 'Apple is making too much money… it's… it's obscene!' is just taking a rather simple view of a very complex business.
I imagine what they will do is come up with a cheaper phone for those markets, rather than cut margins on their high end stuff, and the margins on the cheaper stuff won't be that much different. I doubt they're really going to stop trying to make money just because you think they're earning too much.
Then they would have been around to make more phones... instead of being sold off to the highest bidder and ultimately dismantled.
I agree that "too much" profit is largely unnecessary... but "not enough" profit can be devastating.
It will definitely affect your next phone purchase if that company doesn't exist anymore.
In the hands of a competent company, WebOS could have been a real contender and offered iOS some real competition - or at least more than Android did. It's a shame things didn't play out that way.