Justifying Higher Mac Prices
Apple CFO Fred Anderson and Corporate Controller Peter Oppenheimer recently spoke to investors and here is the last part of a news article reporting it.
If Apple is not going to offer a low-end entry level Mac, maybe Apple should consider even more ways to justify a higher price tag -- ways that are more immediately obvious to buyers. Today's buyers typically do not see the benefits of a Mac until they get a cheap Windows PC. When they are dissatisfied enough, they will buy a better Windows PC, typically, not a Mac. If Apple is going to increase sales to consumers, the trick may be to make Mac's benefits more immediately obvious. A Mac may now avoid limitations of a cheap PC and offer iLife applications, but these features are not enough to really get people's attention it seems. What ideas can we come up with that will turn the heads of buyers?
I'll start with one idea, for music lovers. Say that Apple makes a music station for the home, something like a mother iPod with 80 or 120 GB of storage. It would have FireWire to download songs to all the iPods in the home. It would have good audio connections to a home sound system. It might have FireWireless to transmit music throughout the house. Many more ideas would surface I'm sure.
So, let's say Apple sells this home music station for a little higher price than the most expensive iPod. If such a product is appealing, it will sell well. In addition, it can be a tool to sell Macs. If new Macs provide this music station built in, the added value of owning a Mac becomes more obvious. The buyer gets two products in one, a computer and an Apple music station for the home. By selling the music station as a separate product too, it establishes a value that can be consider part of the Mac price tag. Maybe buyers can see this kind of value more easily.
Quote:
Some criticism has been laid at Apple's feet for not getting a value-priced Mac to market. Its least expensive system -- the CRT-based all in one eMac -- cost consumers about $800. It's trivial to find Windows-based PCs with significant higher clock speeds than the eMac for half that price. The iMac starts at almost $1,300.
"We're not focused on shipping four, five, six hundred dollar PCs. We don't think there's a good way to innovate there or differentiate, and we don't think people are making a lot of money," said Oppenheimer.
Some criticism has been laid at Apple's feet for not getting a value-priced Mac to market. Its least expensive system -- the CRT-based all in one eMac -- cost consumers about $800. It's trivial to find Windows-based PCs with significant higher clock speeds than the eMac for half that price. The iMac starts at almost $1,300.
"We're not focused on shipping four, five, six hundred dollar PCs. We don't think there's a good way to innovate there or differentiate, and we don't think people are making a lot of money," said Oppenheimer.
If Apple is not going to offer a low-end entry level Mac, maybe Apple should consider even more ways to justify a higher price tag -- ways that are more immediately obvious to buyers. Today's buyers typically do not see the benefits of a Mac until they get a cheap Windows PC. When they are dissatisfied enough, they will buy a better Windows PC, typically, not a Mac. If Apple is going to increase sales to consumers, the trick may be to make Mac's benefits more immediately obvious. A Mac may now avoid limitations of a cheap PC and offer iLife applications, but these features are not enough to really get people's attention it seems. What ideas can we come up with that will turn the heads of buyers?
I'll start with one idea, for music lovers. Say that Apple makes a music station for the home, something like a mother iPod with 80 or 120 GB of storage. It would have FireWire to download songs to all the iPods in the home. It would have good audio connections to a home sound system. It might have FireWireless to transmit music throughout the house. Many more ideas would surface I'm sure.
So, let's say Apple sells this home music station for a little higher price than the most expensive iPod. If such a product is appealing, it will sell well. In addition, it can be a tool to sell Macs. If new Macs provide this music station built in, the added value of owning a Mac becomes more obvious. The buyer gets two products in one, a computer and an Apple music station for the home. By selling the music station as a separate product too, it establishes a value that can be consider part of the Mac price tag. Maybe buyers can see this kind of value more easily.
Comments
Also, the whole seamlessness/efficiency of the system is worth more than $$
http://www.billpalmer.net/com000159.html
The net, net of it is that there are no $499 PCs, just hype, discounts and empty boxes with no frills.
The reality is that you get what you pay for and Apple is never going to sell a bare bones system without the proper ports and configuration.
BZ
Originally posted by BZ
You should read this article...
http://www.billpalmer.net/com000159.html
The net, net of it is that there are no $499 PCs, just hype, discounts and empty boxes with no frills.
The reality is that you get what you pay for and Apple is never going to sell a bare bones system without the proper ports and configuration.
BZ
That was a great read, thank you.
Granted... the iBook isn't the most powerful. But, unless you're doing CAD or Photoshop type work... or want to play games on it... it's silly to spend more than twice the price for power you'll never use. I have a fairly large and bulky (and heavy) Sony Vaio notebook with a 2.4GHz P4 processor and all I do is basic office stuff... word processing, spread sheets... some IMing and wireless surfing. The iBook is fine for this type of use... plus it's an excellent size.
It was actually the very competetive price of the iBook that got me to buy my first Mac after 20 years with Windows boxes.
Valid points, but I have no problem justifying a Mac for myself. I have a G5 in fact. It looks like I didn't get my point across. A typical computer buyer does not appreciate the value of owning a Mac. Because a Mac's starting price is higher, folks think Macs cost significantly more. This view seldom changes, even after they spend as much or more to buy a Window PC.
Apple needs to sell better in the consumer market. If Apple refuses to play the price game, by offering a lower cost model, then they need another way to hit consumers over the head to get their attention. Apple needs to justify the higher price in the eyes of the average buyer. Refinements, better features, iLife applications, these don't seem to be working. So what else can Apple do so buyers will really take notice? What would make the Mac's higher price seem more like a bargain?
Originally posted by BZ
You should read this article...
http://www.billpalmer.net/com000159.html
The net, net of it is that there are no $499 PCs, just hype, discounts and empty boxes with no frills.
Great article! Thanks for posting the link.
That would be Apple's problem in a nutshell: Their prices really aren't that much higher - and they can be lower, too - they just don't play that kind of shell game with their prices and configurations. I'd say that they just have to get the word out that they do that, and people will notice - wow, a $1099 iBook is actually $1099.
I wonder how much of the perception that Apple is overpriced comes from people mentally adding $500-$600 onto the listed prices?
g
Originally posted by snoopy
So, let's say Apple sells this home music station for a little higher price than the most expensive iPod. If such a product is appealing, it will sell well. In addition, it can be a tool to sell Macs. If new Macs provide this music station built in, the added value of owning a Mac becomes more obvious. The buyer gets two products in one, a computer and an Apple music station for the home. By selling the music station as a separate product too, it establishes a value that can be consider part of the Mac price tag. Maybe buyers can see this kind of value more easily.
There are plenty of such "music stations" out there already: Any Mac will do! Just add AirPort, and turn on "Share Music" in iTunes' preferences -- that's all! All the other Macs will see your music library and your playlist in their iTunes window. Apple makes sharing music around your house really very easy!
I mean, he still does use it to watch movies and play games, but the *vast* majority of his computing is on the couch or bed with his iBook.
When people look at what they 'want' and what they 'need' they often don't really know what they hell they are talking about
Originally posted by BZ
You should read this article...
http://www.billpalmer.net/com000159.html
The net, net of it is that there are no $499 PCs, just hype, discounts and empty boxes with no frills.
The reality is that you get what you pay for and Apple is never going to sell a bare bones system without the proper ports and configuration.
BZ
Bad article. Very misleading. There are, indeed $499 PCs. And his reconfigurations are off. Bad thing to do just to try to prove your point. Getting something a little more usable than Dell's $499 PC (adding DVD/CD-RW+optical mouse) brought me to $620.
But that's not the point at all. The point is that users might not need or care about firewire or an uber graphics card. Maybe grandma just wants to use AOL to see pics of her grandkids. And to grandma, being on a fixed income, the extra $200 means a lot. She doesn't know anything about computers and doesn't realize that she'll be turning the thing off and leaving it off within a year out of frustration (if not sooner because it's filled with viruses).
Grandma doesn't know any of this. But she should. The reason she doesn't is because Apple is and always has been terrible at marketing. In fact, Apple is pretty darn bad at all things business related. Maybe now that Steve has a few more grey hairs, things will get better. Don't count on it though.
Originally posted by Faeylyn
Bad article. Very misleading. There are, indeed $499 PCs. And his reconfigurations are off. Bad thing to do just to try to prove your point. Getting something a little more usable than Dell's $499 PC (adding DVD/CD-RW+optical mouse) brought me to $620.
I just went to Dells site, choose the $449 Dell Dimension 2400. I then didn't change anything, and just clicked on continue, and the price jumpted to $849! So I went through and turned everything to the lowest priced settings, and got a machine for $488 (it was a pretty shitty machine...)
So I would say the article is pretty good in that when you go to these sites looking for a $449 computer, you don't get it with out some tinkering. Do you think Grandma would know to change settings (or even what settings to change) to get her machine for $449. She would just end up with the $849 priced system.
And don't even get me started with mail-in rebates. I just sent in 2 rebates for $50 (one for 20 the other for 30). I got the $20 rebate, but no word on the $30, and it has been over 5 months now. Both had the exact same paper work and everything. It seems like a scam to me...
Originally posted by Faeylyn
Bad article. Very misleading. There are, indeed $499 PCs. And his reconfigurations are off. Bad thing to do just to try to prove your point. Getting something a little more usable than Dell's $499 PC (adding DVD/CD-RW+optical mouse) brought me to $620.
But that's not the point at all. The point is that users might not need or care about firewire or an uber graphics card. Maybe grandma just wants to use AOL to see pics of her grandkids. And to grandma, being on a fixed income, the extra $200 means a lot. She doesn't know anything about computers and doesn't realize that she'll be turning the thing off and leaving it off within a year out of frustration (if not sooner because it's filled with viruses).
Grandma doesn't know any of this. But she should. The reason she doesn't is because Apple is and always has been terrible at marketing. In fact, Apple is pretty darn bad at all things business related. Maybe now that Steve has a few more grey hairs, things will get better. Don't count on it though.
Wha Wha Wha What!!! Apple "Bad" at advertising? I would think that if someone were to make a Top Ten list of things that Apple is great at... advertising would be pretty close to the top of the list... ever hear of the iPod?
Originally posted by kupan787
I just went to Dells site, choose the $449 Dell Dimension 2400. I then didn't change anything, and just clicked on continue, and the price jumpted to $849! So I went through and turned everything to the lowest priced settings, and got a machine for $488 (it was a pretty shitty machine...)
So I would say the article is pretty good in that when you go to these sites looking for a $449 computer, you don't get it with out some tinkering. Do you think Grandma would know to change settings (or even what settings to change) to get her machine for $449. She would just end up with the $849 priced system.
And don't even get me started with mail-in rebates. I just sent in 2 rebates for $50 (one for 20 the other for 30). I got the $20 rebate, but no word on the $30, and it has been over 5 months now. Both had the exact same paper work and everything. It seems like a scam to me...
Another tedious debate. Sigh....
The article's main theme is about a $500 computer not being a reality. That's simply not true. And, BTW, I did just go to Dell (AGAIN) and was able to get their $499 computer by using all the defaults. Maybe you're going through a different route. In either case, that to has nothing to do with the FACT that you CAN get a PC for $499 from Dell.
Now neither you nor I may like what you get for $500, but that's a completely different story.
I've received every rebate I've ever sent for - including ones from both Dell and HP. I realize that they count on people not bothering or waiting until it's too late, but that doesn't change the FACT that you CAN get a $500 PC.
People really need to stop worshipping at the doorsteps of Apple. You can argue that what you get for $500 is garbage. You can argue that it would take another $500 to get it up to the same thing as the $800 eMac, but you CANNOT argue about it not being available.
Originally posted by Joey
Wha Wha Wha What!!! Apple "Bad" at advertising? I would think that if someone were to make a Top Ten list of things that Apple is great at... advertising would be pretty close to the top of the list... ever hear of the iPod?
I said Apple was bad at marketing. They are. If it's significant news when Apple comes out with a new ad that it gets people on these boards all hyped-up, that's a perfect indication that they're marketing is in need of a major overhaul.
Originally posted by kupan787
I just went to Dells site, choose the $449 Dell Dimension 2400. I then didn't change anything, and just clicked on continue, and the price jumpted to $849! etc etc
I did the same thing and clicked on the N series (no OS) then clicked though to the end... same price ! I think it was 549 or something.. Dell probably figures that people who specifically want a computer with no OS will take the time to configure their system.
The other auto-upgrading probably manages to squeeze a few extra dollars out of people who are attracted by the low price to begin with by "suggesting" upgrades they might not have thought of.
I doubt people who are looking to spend $500 on anything just click through to the end and pay (or not), I know I always look and Im sure most other people do too.
For example... I might go to Dell's web site to purchase their new $500 computer, then they ask me to customize it, so I go through the list not realising how all the little things add up (faster proc, bigger hdd, more ram etc) then when I get to the checkout Im surprised to find it now costs $900 ! but Ive already invested time in time so its not difficult to go back and make a few corrections, get it down to something a little more reasonable. So I half the RAM I wanted, but I want a large hard drive (bigger is better right) and well I dont really know about processors anyway but I do know 2.0GHZ is faster than my last computer so that should be good enough. So now Ive convinced myself to spend a little more money than I would have originally and Im quite happy to do so (now my computer is customized the way I want it).
I dislike Dell and preach the joy of mac whenever given the opportunity, but I agree with the other guy who said the article is misleading because it is. Not everyone needs firewire or a kick ass graphics card and if I dont want it I wont pay for it. I onlyu own one firewire device, an external hard drive that also supports USB 2.0. So firewire isn't exactly a deal breaker for me... I would never buy Intel integrated graphics personally but plenty of people dont even know the difference, even "computer people".
If Apple knocked $50 off the Emac and sold it headless I for one would happily buy one (because of OS X)... it's the CRT (and form factor) that keeps me at bay and we all know how much PC we could get for the price of an FP Imac (also dont like the form factor).
sorry.