I have to friendly argue about the OSNews article about Apple: “Could an eMac Strategy Bring More Market Share to Apple?“ That article is written from the Computer enthusiast point of view rather from the business man point of view, which usually diverges from the hobbyist, because it considers things that nobody that is not in the Marketing business is aware of. I understand Marketing as defined by Kotler: the right mix of Price, Product, Place and Promotion.Of course everbody wants to buy an Apple for 10$, I would like to buy a Mercedes CLK for 1.000$, but I have not yet found the dealer who wants to make me this price, this is the typical little man complaint. Everyone normal out there, thinks that the goal of each company is to sell as many units as possible, well, this is not the goal. The only goal is to make the biggest profit at the end of the year WITHOUT hurting your brand, your most valuable asset, bigger than the technology of your product.
You argue that economies of scale is the way to go, well, think about Gucci, Giorgio Armani, Prada, etc. are they interested in economies of scale ? I don´t know any american big shopping chain, but think about the german cheap Lidl or Aldi, they sell cheap products at cheap prices, they are interested in economies of scale, sell as much as possible in order to sum all the very little
margins and make a profit as well as investing the cash they get and make a few more cash before the have to pay for the products they have already sold. In esence, two completely different business models, both work, but both target different segments of the population, this is quite hard, but so it is. And no, I am not in the Gucci segment, I am in the cheap no-name PC brand, I would like to buy an Apple but I cannot afford it. And I want to repeat,
if you are not in the economies of scale business, your brand is your biggest asset, take care of it as if it is your own child.
But coming to the Apple case:
Apple has been building up a very big reputation and a very strong brand,
I suppose that Apple is within the most expensive brands on earth.
Everybody associates automatically Apple with innovation, design, quality,
being different, etc. Apple cannot deliver products that are not
innovative, well designed or top-notch quality, they would only destroy their
own brand and reduce sales figures dramatically. Innovation and quality
are related with high price, the high price guarantees the customer that
he is buying an excellent product, this is psychologically as well as from the
business side, a typical business model. The human psychology says that
the higher the price, the better the product and otherwise. Cheap Apple
boxes would mean low quality and a desperate need for cash, which would
hurt the Apple brand in good times and maybe in a long term, be more
dangerous than just trying to survive the hard times. If your break the
association of Apple and quality, which is been given by the price, you ruin
your segment and deposition yourself, a catastrophic failure.
Apple has positioned itself to a certain type of customer, wealthy people,
innovators, people with good jobs, good lifestyle, etc. If Apple targets the
poor man type, the trendy guys will stop buying Apples, because everybody
can and Apple is not the Porsche of the computers anymore, this would
hurt more the brand than maybe the increasing sales because of lower prices,
and in good times, where everybody has more money, Apple would have the
problem that they cannot rise prices, because everybody expects a cheap
Apple (the macroeconomics deflation problem).
– The Smart Paradigma
Smart is a car designed by Swatch and manufactured by Mercedes targeted
to a wealthy segment that already owns a first or even second car. It is the
Apple of the road, designed for the same people, urban people with a trendy
lifestyle. I personally think it is expensive for what you get so I don´t buy
it, but, I am conscious that I am not yet in the segment of Smart buyers. From
the view of a Smart potential buyer it is a nice and trendy car, the price is
secondary because you don´t talk about money, you just have it.
– Snob Product
A Snob Product is the product that when it is sold cheap, the sales figures
drop absolutely down, it´s the Ferrari dilemma, sell a Porsche for 10.000 $ and
nobody will buy more, even for the low price. If Apple decreases prices, related
to the branding issue, figures will fall down.
– The Decision
Well, who at Apple wants to make the experiment to decrease prices (if costs
allow it, of course) ? I wouldn´t have the necessary put-your-favourite-word-here
to make this experiment, if it goes wrong… it may be the end of Apple. I suppose
this is also a big argument for letting things as they are. Pricing is a complex
science and if you are in doubt “let things as they are” or “if it isn´t (very) broken, don´t fix
– Substition Products
On the other hand, there are no really substitution products, there are no similar machines
than we can buy to have the same user experience, PCs are the same competition to Apple
as Ford is to Mercedes. The higher price is in these case allowed because of the lack of
existance of a Banana Brand or a Coconut Brand which similar high tech machines. PCs
are the everyday workhorse for the masses, Apple is the elegance for the minority. I don´t
think that it is possible to directly compare PCs and Apples. A Ford and a Jaguar are also
I don´t know the COST STRUCTURE of Apple but cheap achines will only put the Apple brand in danger, rather than help them to make more profit, cheaper doesn´t always help to increase sales figures on a long term view.
I absolutely agree that there is one issue in the article that is not comparable to other sector. In the car world, it doesn´t matter what car you buy, you can go to every gas station, use every road, so the “platform” is common. Or, buying a Ford doesn´t mean that you only can drive on Ford roads and use Ford fuel. This is different in the world of computing. I agree that if third party developers want and have to create software, they need a big audience to buy their products. A big audience means cheaper machines… and the circle goes round. I don´t have
a clue or solution for the Apple dilemma, but I would appreciate if other Marketing aspects are also brought to the spotlight, as the “lower the prices, sell more machines” argument is very simple and not well thought for my understading, there are lots more issues that have to be
taken consideration of, for sure, enough to write a few books.