Playing the PC pricing game
PC users always say that the Mac is way too expensive. Mac users, on the other hand, say that Macs are actually competitive to "comparably-speced PCs".
Like many of you, I've seen this in action. I saw an ad for a $699 PC from Dell, with what appeared to be decent specs. However, once I added all the features that I needed (assuming I actually wanted a crap PC, which I don't!), I found the price to be pretty close to what a Mac would be.
So why doesn't Apple just play the same game? Keep all their current configurations intact, but add a "starter" configuration, with all the "extras" stripped out. That way, Apple could market a brand new PowerMac G5 for $999, or an eMac for $699. When the user actually gets there, they'll find that they'll have to add several hundred dollars worth of goodies to get the machine they want, but that's how the rest of the industry works anyway.
I mean, to the uninitiated, seeing an ad that says "starting at $699" is a lot more tempting than "starting at $1699", right?
This would be great advertising, and would get analysts off their backs for awhile. Why can't Apple just do what the rest of the industry is doing?
Like many of you, I've seen this in action. I saw an ad for a $699 PC from Dell, with what appeared to be decent specs. However, once I added all the features that I needed (assuming I actually wanted a crap PC, which I don't!), I found the price to be pretty close to what a Mac would be.
So why doesn't Apple just play the same game? Keep all their current configurations intact, but add a "starter" configuration, with all the "extras" stripped out. That way, Apple could market a brand new PowerMac G5 for $999, or an eMac for $699. When the user actually gets there, they'll find that they'll have to add several hundred dollars worth of goodies to get the machine they want, but that's how the rest of the industry works anyway.
I mean, to the uninitiated, seeing an ad that says "starting at $699" is a lot more tempting than "starting at $1699", right?
This would be great advertising, and would get analysts off their backs for awhile. Why can't Apple just do what the rest of the industry is doing?
Comments
It's the sort of strategy that looks great when you can punt any responsibility for the user experience. Windows OEMs can, because they only assemble the hardware. Apple can't, because it takes responsibility for the whole widget.
From a software and peripheral developer point of view, the more assumptions you can make about available hardware, the better. The original iPod wouldn't have been so cool - or so successful - if Apple hadn't been shipping FireWire standard on everything for a good while before it was unveiled.
So, while it's a tried-and-true retail tactic, and while it's a tactic that Apple does employ to some extent, I can't really see Apple being able to do it to the extent that PC makers do. It hurts both their image and their ability as a systems integrator to ship insufficiently capable hardware. (As it is, I know I'm not alone in wishing that they'd stop skimping on standard RAM and tell their resellers to find another way to add value.)
apple says $999 u PAY $999
pc (dell, gateway, bestbuy compusa and so on) say 499$ they also hoever mean $999 example
BLASING FAST PC SUNDAY SPEACeL
# GHZ P IV
# gig hdd
# ram
cdr/dvd combo
ONLY $399
and in tiny print:
1299-399 mailin rebate (store) -99 monitor rebate -100$instant rebate--200$(p)msn rebate (mail in of course)
PC sales is legalized bait and switch!!
wheres the FTC
BAN MAILIN REBATeS
if the ads dont look as insane people will be more senceable if REAL prices are advertised
Originally posted by a_greer
PC sales is legalized bait and switch!!
wheres the FTC
BAN MAILIN REBATeS
if the ads dont look as insane people will be more senceable if REAL prices are advertised
Amen!
I would add that: half the time the advertised ?special? is never in stock, and that you have to get a higher priced item if you want one that day. Or, you can get that WOUNDERFUL rain-check.
I think many consumers think that Apple works the same way, but their base prices are just starting that much higher. They don't realize that most of the add-ons are already added on.
If Apple really wants to get more consumers to even look at them (and to get dumb-a$$ analysts off their back), I think they should keep all their current Good-Better-Best levels, but also throw in a "Starter" price point. Clearly, things that Apple thinks are crown jewels or strategic will always be there (for instance, they wouldn't want to take away FireWire), but other things that aren't absolutely necessary can be taken out (replace USB 2.0 with USB 1.1, or throw in an absolutely bottom-of-the-barrel video card and CD-ROM drive).
This would let Apple go around touting the PowerMac G5, the most powerful personal computer in the world, starting at $999. Or the eMac, starting at $699, and you don't need to buy a monitor!
Sure, there'll be some absolute cheapos who'll buy these emasculated machines, but there will probably also be more purchases overall, because people who had never even considered a Mac before, due to price, will now be taking a gander. Plus, when it comes to marketshare, a low-end user is better than no user. Further, analysts and rabid PC users would have a weaker position when trying to say that Macs cost more than PCs. Right now, they can just go to the Dell site and the Apple site, and look up the cheapest computer on each. Many people don't look much deeper than that when initially comparing prices.
The emac should be covering the cheap PC equivilant end of the market. If you want a 3.6GHZ with 800Mhz FSB then there is no $299 sunday special.
With anything you purchase 'Caveat emptor'!
Dobby.
I bought a Dell Poweredge 400sc (p4 2.4ghz, 128 RAM, 40gb HD) for $249.00 (after $100.00 rebate). This is a pretty nice piece of equipment. I've been around poweredge's for a few years and they are rock solid reliable (hardware, that is).
I only need to add a CD-RW (~$100) and AGP video card (~$100) and I have a decent system for playing games or doing my Linux stuff.
Of course, when I need to get any work done at home I fire up my B&W.
I doubt they could drop the price much by downgrading the grahics card and the CD and HD. You'd save maybe $100 perhaps $200. They don't have much memory to start with and if you downgrade the internals too much you lose the throughput and you have some customer how didn't have too much money complaining how Macs are meant to be so fast but his is damn slow cos he went for the 2x2GB with PC100 64MB memory , 8MB graphics card, cdrom and 10GB 5400rpm ATA33 hard drive.
Okay, but just think if you could lop off $200 from the price of an eMac. All of a sudden, the price is looking a lot more attractive, isn't it?
And even if you do want to cut the price further by using cheaper RAM and stuff, the build-to-order site would have the cheapest stuff selected by default (only on the "starter" model, and only to keep the price down), but with a little explanation saying "we recommend that you select such-and-such, because so-and-so". This wouldn't be off in a separate info window the user has to ask for, but right there in front of them so they know full well that the cheap selection will adversely affect their performance. If a user decides to stick with the cheapo stuff, it's because they asked for it, going against Apple's advice.
Originally posted by podmate
Sometimes a quality PC can be cheaper than an Apple.
I bought a Dell Poweredge 400sc (p4 2.4ghz, 128 RAM, 40gb HD) for $249.00 (after $100.00 rebate). This is a pretty nice piece of equipment. I've been around poweredge's for a few years and they are rock solid reliable (hardware, that is).
I only need to add a CD-RW (~$100) and AGP video card (~$100) and I have a decent system for playing games or doing my Linux stuff.
Of course, when I need to get any work done at home I fire up my B&W.
I have to agree with this. I just helped my girlfriend's mom buy a Dell 2400 w/ 2.4 GHz P4, 256MB RAM, 80GB HD, CD-RW, Modem, Floppy drive (!!) for less than $500 after rebate. To spec it equivalent to a current PowerMac you would have to add an AGP card for probably around $100 and a PCI firewire card (less than $50?)... What is that machine missing that the towers currently have except expandability (for her unnecessary) and OS X?
Then there is apple's Servers, Xerve and Xraid are the leaders in price/performance by far.
I dunno, in some areas apple's pricing is very good, and in others it's not so good.
The Poweredge 400sc I bought is made as a file server type system. Apple has no line of computers that serve as dedicated file servers. So, in items like this Dell can beat the pants off of Apple with their 400sc and 600sc servers. Of course I would never run my web sites off of a low end poweredge. I use SunFires for that at the moment.
When you start talking about higher end stuff you can't beat (price wise) the X-Serve or even a G5.
Apple doesn't make low end desktops because they would have to compromise too much. I bought my nephew a Dell 2400 (he and his father demanded that it had to be a pc). Stupid me got the Celeron. This friggin computer (2.0ghz celeron, 512 ram) is sooooo slow that my B&W (G4 450) can beat it at some tasks.
The internals are difficult to get to and pretty cheap looking.
Why would Apple want to piss off new customers by supplying a computer like that. I suppose that they could drop the emac down to a G4 500mhz and sell it for $300, but why?
Originally posted by The Pie Man
I have to agree with this. I just helped my girlfriend's mom buy a Dell 2400 w/ 2.4 GHz P4, 256MB RAM, 80GB HD, CD-RW, Modem, Floppy drive (!!) for less than $500 after rebate. To spec it equivalent to a current PowerMac you would have to add an AGP card for probably around $100 and a PCI firewire card (less than $50?)... What is that machine missing that the towers currently have except expandability (for her unnecessary) and OS X?
It's missing PCI-X, Gigabit Ethernet, an industry-leading case, a DVD burner, huge SATA hard drives and an architecture with gobs of bandwidth and no significant bottlenecks. The latter is a major source of cost, by the way. Cheap computer hardware is like cheap stereo hardware: It seems to have all the same functionality that the good stuff does, but none of it seems to work quite as well. You can push all the subsystems of a G5 to their limits at once and the machine won't stumble. Try that on a consumer offering, and it'll wheeze and die. That's true of the offerings from any vendor.
Granted, none of that is likely to be useful to your girlfriend's mom. The system you bought doesn't even begin to compete with a professional offering. Its competition from Apple would be an eMac, and I'll bet that the price without rebate wasn't too far off.
The fact that the Dell comes in a tower is, as I've explained many times, simply due to the fact that that's the form that all the cheapest components are designed for. That doesn't mean that the components in question are designed to be used as intensively as a pro tower can be used.
Example:
I would like to buy a Mac, which I am going to do in the next couple of weeks, but my budget severly limits me and due to that fact I'm going to have to sacrifice what I truly want just to afford a Mac.
I would like a tower desktop or a notebook with a 15" screen. Neither are within my budget even though I can buy a PC for half the cost of what a Mac cost with either of those two features.
I understand due to problems in the past with the G4 that Apple has to do other things to differentiate between lines of products, but I just hope over the next two years that they begin to differentiate products primarily off of performance of the processor than off of other things as the G5 can begin to trickle down.
Originally posted by Amorph
It's missing PCI-X, Gigabit Ethernet, an industry-leading case, a DVD burner, huge SATA hard drives and an architecture with gobs of bandwidth and no significant bottlenecks. The latter is a major source of cost, by the way. Cheap computer hardware is like cheap stereo hardware: It seems to have all the same functionality that the good stuff does, but none of it seems to work quite as well. You can push all the subsystems of a G5 to their limits at once and the machine won't stumble. Try that on a consumer offering, and it'll wheeze and die. That's true of the offerings from any vendor.
Well that's the problem. Most PC users don't realize that. They see that they can get a Dell stock full of what appears to be top-of-the-line components. The specs look top-notch. It's everything that's not mentioned that differentiates the Mac (or even Dell's higher-end PCs) from the bottom-of-the-barrel stuff out there.
So Apple should really do one of two things:[list=1][*]Make it very clear that Macs have higher performance innards right at the Apple Store, or at least with well-labelled links to pages that brag about how well-made Macs are. And make sure to take (thinly veiled) shots at the PC competition's cheap quality. This would help justify higher prices.[*]Or, produce lower end machines. This would either be "starter" categories in their current lineup, or a new "iCheap" (not serious about the name, obviously) line of computers that seems to have really high-end specs, but whose innards are just as cheap as Dell's consumer machines. Sure, it wouldn't be up to the "Apple-premium" standards, but you wouldn't be paying a premium either. And sure, you might piss off some of the super-low-end customers with a computer that's not as fast as they'd expected, but they'd get that with a PC too. And hey, it's another notch up in marketshare.[/list=1]
Originally posted by X X
They can be too expensive depending on what you want.
Example:
[...]
I would like a tower desktop or a notebook with a 15" screen. Neither are within my budget even though I can buy a PC for half the cost of what a Mac cost with either of those two features.
If you want things that Apple doesn't make, yes, you'll run into problems.
Apple doesn't make a consumer tower (not a professional tower - they're two utterly different things in terms of capability) or a consumer notebook with a 15" screen.
They do offer two consumer desktops, and a consumer notebook with a 14" screen (and better quality generally than any PC notebook in its price range). But if you aren't willing to consider what Apple does offer then you're going to be buying PCs for the forseeable future. It's your choice.
Originally posted by Amorph
If you want things that Apple doesn't make, yes, you'll run into problems.
Apple doesn't make a consumer tower (not a professional tower - they're two utterly different things in terms of capability) or a consumer notebook with a 15" screen.
They do offer two consumer desktops, and a consumer notebook with a 14" screen (and better quality generally than any PC notebook in its price range). But if you aren't willing to consider what Apple does offer then you're going to be buying PCs for the forseeable future. It's your choice.
I know Apple is better quality, which is why I stated initially that I was going to buy one regardless. My statement was just that I simply would like a 15" display. I don't really fault Apple for this now because of the bad luck they've had with past processor developement that they need to come up with other means to further differentiate. I just hope that as G5's start to trickle down the line and they become "cheap" and ubiquitous that Apple can begin to give customers more options and not force someone to settle for a smaller screen size or pay $2000 just to get a 15" display.
That's not an unreasonable thing at all to ask for. I'm not wanting a dual 5 GHz machine with 8 GB of RAM for $600; I would like either a 15" display or a desktop in the shape of a tower. As far as the tower, I don't like the way iMacs look, and so I'm not going to buy one. Also, I'd like the option of upgraded future processors and graphics cards if the desire ever fits me. Neither of which can be done with the iMac.
I think it's ironic that your last statement is indicative of Apple's business philosophy: you don't like what we give you, buy a PC. Maybe that's one of the reasons why Apple's sales are not growing as fast as the rest of the industry. When I worked at Dell, their philosophy was give the customer what they think they need/want not what we think they need. Look how well they've done.
If Apple doesn't want to remain a niche company they're going to need to stop alienating customers like me 'cause not everyone is going to be like me and buy Apple despite not entirely meeting their needs/wants.
Originally posted by TrevorD
Okay, but just think if you could lop off $200 from the price of an eMac. All of a sudden, the price is looking a lot more attractive, isn't it?
I refer all of you "armchair economists" to a post I made a few weeks ago:
Originally posted by Brad
Let's look at some real numbers compared to these made-up ones everyone seems to be agreeing are the best.
Originally posted by hmurchison
eMac- Drop the entry down to $699 Top unit $999
iMac- 17" $1299 20" $1999
Powermac Express- Tower single G5 $1299. Plastic Case
Powermac - All Duals $1699 and up
I won't touch on the rest of hmurichson's post, just this part.
Apple's gross profit margin is 26.7 percent. I don't feel like trying to find more specific numbers for the different models because this is sufficient enough to make my point.
Take the 1.6 Ghz single G5 tower, for example. Current price: US$1799.00. Profit: 1799.00*0.267 = US$480.33. Cost to Apple: 1799.00*0.733 = US$1348.67. Your price: US$1299.00. So, your "Powermac Express" may sell, yes, but would mean Apple loses US$49.67 per unit. Apple may cut these losses by using cheaper plastic cases, as you mentioned, but let's not forget the initial R&D costs of designing a new case. You and I both know there's not a snowball's chance that Apple would drop the G5 into a generic ATX case. For one, it'd be way too hot.
The iMac, starting at 17" by your proposal, is currently priced at: US$1799.00, same as with the above G5. Your price: US$1299.00. So, again, Apple loses US$49.67 per unit.
The eMac change is the only one that might work. Current price: US$799.00. Profit: 799.00*0.267 = US$213.33. Cost to Apple: 213.33*0.733 = US$585.67. Your price: US$699.00. In this case, Apple would earn US$113.33 per unit.
Let's look at this in a more generic sense. The 17" iMac will make a fine example. It costs US$1799.00. Say we here agree the price should be dropped by US$200.00, knowing that Apple will still be profiting a good bit. Profit before the drop is US$480.33. Profit after the drop is US$280.33. Now, we all know that if Apple starts reporting reduced profits in quarters to come, the real economists will start to worry. In order to maintain the same gross profit, assuming production costs are constant, Apple has to sell 71% more iMacs.
The same logic applies across all lines. Cut prices by a little and you have to sell a lot more to make up for it.
Apple's really in a no-win situation right now regarding any sort of price war. The only way out now is through innovation. Entice PC users with the lovely iPod, iPod Mini, and iTunes and get them to switch over to a Mac. Keep the killer pro titles like FInal Cut and DVD Studio rolling out. Keep updating the great consumer apps like iLife with GarageBand, iPhoto, and iDVD. Bring more updates to Mac OS X itself to make it irresistible to Windows and Linux users. Find ways of convincing network admins and corporations that Xserve is just as economically feasible as a home-built PC.
Apple can only win by improving the whole package, not by cutting prices.
Apple CANNOT afford widespread price cuts. Period. Not gonna happen right now, at least.
Remember, folks, that Apple does a LOT more than Dell and the other manufacturers. Dell and company just piece together parts from the cheapest sources available. "R&D" for them is "look for cheaper suppliers" not "let's design some innovative products that can push the envelope".
Originally posted by X X
I know Apple is better quality, which is why I stated initially that I was going to buy one regardless. My statement was just that I simply would like a 15" display. I don't really fault Apple for this now because of the bad luck they've had with past processor developement that they need to come up with other means to further differentiate. I just hope that as G5's start to trickle down the line and they become "cheap" and ubiquitous that Apple can begin to give customers more options and not force someone to settle for a smaller screen size or pay $2000 just to get a 15" display.
The G5 is irrelevant to whether Apple will offer a cheap notebook with a 15" display. Apple can't afford to offer a broad range of models until they're selling into a much larger market. They have to focus their efforts on machines that appeal to the broadest segment of people.
Apple notebooks traditionally compromise between power and portability in search of a "sweet spot". So the iBook has a screen almost as big and it's a good deal smaller and it weighs a lot less.
Also, I'd like the option of upgraded future processors and graphics cards if the desire ever fits me. Neither of which can be done with the iMac.
Apple will never design for CPU upgrades; those will always be unsupported aftermarket hacks. The G5, incidentally, makes them an order of magnitude more difficult to implement. But the point is that Apple will never offer a machine that features an upgrade path they won't support.
These desires put you in a vanishingly small minority within the consumer market as it is, so you're flying under Apple's radar. The overwhelming majority of people pull machines out of the box and use them until they're no longer useful. A smart company designs for that.
I think it's ironic that your last statement is indicative of Apple's business philosophy: you don't like what we give you, buy a PC.
It's not a business philosophy, it's an inevitable fact. Apple can only offer so many models. If they can't accomodate you, that's the end of the discussion. I'm sure they'd love to sell to everyone, but at this point they have to make choices.
Maybe that's one of the reasons why Apple's sales are not growing as fast as the rest of the industry. When I worked at Dell, their philosophy was give the customer what they think they need/want not what we think they need. Look how well they've done.
I don't actually believe that it has anything to do with how Apple's sales are growing, and I *laugh* at the idea that Dell did even a moment's work on what the customer wanted. Dell offers towers because they're cheap, period. They offer configurability because that's useful to enterprise purchasers, period. Their attention to the end user begins and ends at pricing, and they get there by silently cutting corners that most end users would reject if they knew about it. Most customers want their hard drives to last more than three months.