If you keep your eye on the profit, you're going to skimp on the product. But if you focus on making really great products, then the profits will follow.
I have increasingly been feeling that Apple under Tim Cook has forgotten this.
This statement means if a company focuses on profit, they cut component costs to get better margins or a lower price for higher volume and end up making a poor quality product that customers aren't happy with.
Instead, if a company makes a good quality product, customers will want to pay more for it.
Tim Cook knows exactly what he's doing and Apple under Steve Jobs never shipped cheap products or parts.
Having higher margins allows retailers to apply steeper discounts and still make a profit and they can absorb currency differences globally. Apple's net margins are 25%, this isn't excessive.
Some of the higher upgrades are really expensive but the entry upgrades for most buyers aren't too bad.
A config for the Air that would work for most people would be the 32GB/1TB model. This is $1999. Apple could charge $400 for the upgrades instead of $800 so that the price is $1599. But $400 extra for a laptop that people buy once every few years isn't that much extra and by not charging that, Apple loses out on $400 x 6 million units = $2.4b / year that is purely profit.
Businesses all wish they could make more from their products and if PC manufacturers could convince customers to pay that much, they'd price them like that too but they make cheap quality products that nobody is willing to pay more for.
This isn't actually what's going on here. It's easy to say that Apple is ripping us off. It's more correct to say that Apple is demanding high quality.
You might think that Apple is over charging for a 1TB HDD because you can get a 1TB HDD at the shop for say $100. However, you're not comparing apples to apples as much as you'd think.
Apple demands the highest quality parts. To achieve this they'll go to the best brands. So already you're not on par because a cheap HDD won't be coming from Fujitsu or whoever, but a subsidiary that sells parts that don't quite meet the specs to be branded Fujitsu or whoever. They still work perfectly fine but they'd have failed one or two tests. Think Panasonic and Transonic
But Apple goes even further. They want the best of that model. So say for example Fujitsu makes a model of FJX123. All of the models tested perfectly in order to be given the Fujitsu name instead of the sub-brand name. However, more often than not there are variances in those models that mean some drives might have slightly varying throughputs with read/write speeds. Apple wants drives that top perform. To get these drives Apple pays a higher cost. You then wear that cost. They might have lower test speeds but what the tests don't show is that while lower speed, those speeds are guaranteed to be that speed ALWAYS.
For those of you who are old enough to remember T1 verses ADSL, you paid way more for a T1 line at 1mbps than you would for a 10mbps ADSL line. However, you were guaranteed 1mbps with the T1 line. It's the same for parts.
Of course there's also a lot of R&D with Apple's gear. They developed their own system boards and now they're designing their own chips. That also raises prices.
So I don't feel it's totally fair to rail on Apple for their prices.
If you keep your eye on the profit, you're going to skimp on the product. But if you focus on making really great products, then the profits will follow.
I have increasingly been feeling that Apple under Tim Cook has forgotten this.
In comparison to who? Their competition? I can think of smaller battery and less memory in an iPhone as being the two big skims if you wanna call it that, but Apple being a vertical computer company will always be able to optimize the memory or the size of the battery (ie.. battery-gate) and precisely control many other things thru software in any of their curated devices.
Apple Silicon, the R1 chip the C1 Apple modem chip, Apple curated tandem OLED with LG (because Samsung didn’t want to step up after initially signing the contract), and Thunderbolt five all cost money, lots of it, particularly if it unique in some way or ends up being the best in class over a period of time.
Don’t like the price of Apple products, don’t buy them.
Apple is a business and prices its products the way they want to and based on what the market will bear. It isn’t a sum of the parts cost+ pricing model. It is up to them to define their business model and they have to weigh all the impacts including profitability, competition, sabotaging Mac Book Pro or iMac sales, etc.
BTW, I just took a look at pricing for a new BMW 3 series. Ranges from $45K for a 330i base model to $109K or more for the top line M3 series. All essentially the same car with more power, better trim and handling. It surely doesn’t cost them more than twice as much to make the higher model.
¯\_(ツ)_/¯
BMWs, Porsche, and Mercedes are some of the best cars you can buy and the price is the price usually, when you compare those cars to their competition, particularly outside of Germany, none of them like Apple will ever be mainstream across the world. It’s just not gonna happen, Apple is very influential in the computer industry yes, but being on every corner no (even though it may seem like they are). Being a vertical computer company ultimately makes that impossible.
Comments
Instead, if a company makes a good quality product, customers will want to pay more for it.
Tim Cook knows exactly what he's doing and Apple under Steve Jobs never shipped cheap products or parts.
Having higher margins allows retailers to apply steeper discounts and still make a profit and they can absorb currency differences globally. Apple's net margins are 25%, this isn't excessive.
Some of the higher upgrades are really expensive but the entry upgrades for most buyers aren't too bad.
A config for the Air that would work for most people would be the 32GB/1TB model. This is $1999. Apple could charge $400 for the upgrades instead of $800 so that the price is $1599. But $400 extra for a laptop that people buy once every few years isn't that much extra and by not charging that, Apple loses out on $400 x 6 million units = $2.4b / year that is purely profit.
Businesses all wish they could make more from their products and if PC manufacturers could convince customers to pay that much, they'd price them like that too but they make cheap quality products that nobody is willing to pay more for.
Apple demands the highest quality parts. To achieve this they'll go to the best brands. So already you're not on par because a cheap HDD won't be coming from Fujitsu or whoever, but a subsidiary that sells parts that don't quite meet the specs to be branded Fujitsu or whoever. They still work perfectly fine but they'd have failed one or two tests. Think Panasonic and Transonic
But Apple goes even further. They want the best of that model. So say for example Fujitsu makes a model of FJX123. All of the models tested perfectly in order to be given the Fujitsu name instead of the sub-brand name. However, more often than not there are variances in those models that mean some drives might have slightly varying throughputs with read/write speeds. Apple wants drives that top perform. To get these drives Apple pays a higher cost. You then wear that cost. They might have lower test speeds but what the tests don't show is that while lower speed, those speeds are guaranteed to be that speed ALWAYS.
For those of you who are old enough to remember T1 verses ADSL, you paid way more for a T1 line at 1mbps than you would for a 10mbps ADSL line. However, you were guaranteed 1mbps with the T1 line. It's the same for parts.
Of course there's also a lot of R&D with Apple's gear. They developed their own system boards and now they're designing their own chips. That also raises prices.
So I don't feel it's totally fair to rail on Apple for their prices.
Apple Silicon, the R1 chip the C1 Apple modem chip, Apple curated tandem OLED with LG (because Samsung didn’t want to step up after initially signing the contract), and Thunderbolt five all cost money, lots of it, particularly if it unique in some way or ends up being the best in class over a period of time.