“We can’t ship junk. There are thresholds we can’t cross because of who we are. The difference is, we don’t offer stripped-down, lousy products.” — Steve Jobs
Every so often a new wave of articles and message board threads pop up online about Apple’s refusal to offer lower-priced Mac computers, thereby supposedly hurting their chances for major marketshare gains. PC makers like Dell and HP offer desktops and notebooks around $500 or $600, so why won’t Apple? There’s been a generally-held belief for years that Apple’s systems are more expensive than Windows PCs for no reason other than the fact that they have an Apple logo on them. While this may be true to a certain extent, there is more to the situation that may not be obvious to the casual bargain-hunting consumer.
Apple is a premium product provider. In the same way that BMW and Mercedes represent the golden standard for premium vehicles, Apple is at the top of the heap when it comes to building sleek and solid computers that just work. Attributes like Mac OS X, iLife ’08, and unibody aircraft-grade aluminum casing are all unique to Apple. Not to mention their excellent customer support and ability to run Windows and Linux software (with the help of tools like Boot Camp or Parallels). All of these factors add up to differentiate Apple’s products from those sold by competitors. Whereas all other computer vendors are forced to assimilate to whatever operating system features (and flaws) Microsoft decides to roll out, Apple can pave their own path and go in a different, often better direction.
Having established that Macs are vastly superior machines overall, what does that have to do with their choice not to play in the sub-$600 computer market when so many people buy systems in that price range? Quite simply, it’s because they don’t want to. That sounds like a pretty lame answer, but it is in fact the truth and it’s the right move. Apple’s name is synonymous with hip, cool, and (most importantly) quality products that stand out from the pack. People lust after them. They’re the envy of the entire industry. If they decided to put together a cheap computer with less features and poor quality components just to reach a low price point, it would ruin the reputation they have worked so hard to build.
Going back to the comparison I made with BMW and Mercedes, would you expect either of those companies to put a $18,000 car on the market? Absolutely not, because it would be a disaster of epic proportions. Consumers would no longer think of them as makers of superior performance vehicles — they would just blend into the crowd and become cheap impersonations of themselves. Their upscale brand names would be diluted to a point that may not ever be reversed.
Going back to Apple, their motto has always been to “think different.” In this case, thinking different has separated them from the commodity computer market that its slowly ruining Dell and HP. Sure, these companies have all the market share and are pushing out units left and right, but look at their profit margins. In order for them to make the same amount of money Apple gets from about 2.5 million Macs per quarter, they need to sell several times more units. Pushing out volume and making pennies on each sale is a terribly short-sighted business model that is coming back to haunt PC makers, specifically Dell. Even though they are still selling a large number of systems, they are laying off thousands of employees what seems like every 2 or 3 months.
How did PC makers get themselves in this unfortunate position? Right from the start, since they all run Windows operating systems, they were faced with the difficult situation of offering products that are extremely similar to each other. That’s quite the problem when you need to convince customers to choose your brand instead of the other guy’s. The solution companies like Dell chose to go with, of course, was to stunt technological advancement and cut corners to fool the general public with low price points. Why wouldn’t somebody want to spend $600 instead of $1200, right?
Instead of innovating the hell out of both software & hardware design and creating unrivaled product features like Apple, they took the easy way out and competed on price alone. Now, because they see them everywhere they go, unknowing consumers have been trained to think that computers are only worth $500-$700. Since these cheap systems have been turned into commodities, there’s still no real differentiating factors between those from Dell, HP, Toshiba, or Acer. What does that mean for the highly competitive holiday season? Slash prices even more, of course! Laptops are going for as little as $299 and $399, which is barely even enough to cover the retail price of Vista. I have a hard time believing any money is being made here and wouldn’t be surprised to learn that they are actually taking a loss to pump up market share numbers. This is extremely troubling for PC makers and will only get worse as time goes on.
Not only does competing on price eventually hurt the health of PC makers’ bottom lines, it also screws the consumers who fell for the low price tag. They have been jipped of some of the best things technology can offer by purchasing stripped-down, partially-featured, and under-powered computers which barely meet the system requirements for Windows Vista. Ultimately, these conditions add to up to create a less-than-stellar user experience. In constrast, this is where Apple picks up the slack and truly shines. You aren’t just buying a computer when you get a Mac — you’re getting a unique user experience with a multitude of features that are specifically built to work seamlessly together. This is what makes Apple who they are and it’s why they can’t sell bargain PCs like everybody else. Macs offer a greater level of value to consumers, proving the old adage of “you get what you pay for” to be entirely accurate.
Apple doesn’t pretend to be all things to everybody. They have a carefully defined target market which has proven to be very financially successful for them, particularly in the last two years or so. Some consumers may not fit into that target market and that’s okay. It’s unfortunate for those folks, but the general public is gradually warming to the idea of paying more for a premium product (thanks in large part to Apple’s brilliant advertising campaign). Instead of changing their philosophy to appeal to a broader range of markets, Apple is broadening the size of their market by convincing consumers to change their philosophy.
Check out the followup to this article, “Are Macs really worth it? Selling points for choosing Mac vs. PC“