Originally posted by madamimadamtimallen
I think the issue with the different types of macs that we would like to see is answered in Apple's history. Remember the times before Steve came back on the scene and Apple and a computer to suit almost every possible situation. If so, you would remember the trouble it caused Apple financially. Unfortunately, it just can not be done if the company is to stay profitable.
A manufacturer/retailer must match its product assortment with its target market's expectations. Ultimately, Apple's target market is driven by earnings.
Apple has been targeting the upper end of the personal computer market out of expediency, because Mac's were losing its differentiation from other makers, particularly with low-end consumers. MacOS X and the iApplications have changed that and it won't last forever, not with Bill Gate's around.
So, Apple must not make the classic mistake that many manufacturers and retailers have made repeatedly. Harley Davidson, General Motors, and Xerox, all neglected the low ends of their respective markets. This allowed Japanese competitors to make very significant market share gains in low-end (Or, in Apple's case, Apple is squandering an opportunity to steal market share from the others.) motorcycles and later encroach upon Harley Davidson's upper end. Though, Harley is in good shape now because of its incredible Brand Loyalty, it would have greater market dominance today had it not let new competitors establish beach heads at the low-end and then creep upward. The same applies to Xerox in not pursuing small copiers. General Motors utterly neglected the low-end and found itself struggling to penetrate a market with entrenched Japanese auto makers.
Apple has a golden opportunity to steal market share because of this differentiatiion and the perception (which is only what matters) that a Mac is simpler to use and has fewer problems. Simplicity and reliability are very important to low-end consumers because they tend to be less computer literate than those at the upper end.
A large percentage of computer buyers are satisfied with low-end computers. A large percentage of these consumers are not concerned with compatability with their office. And, the Internet has knocked down many barriers for Apple as well, particularly as web surfing and email are significant drivers for low-end consumers.
Apple's lowest end model is priced at $799, the old CRT iMac. Dell, Gateway, and the others offer comparably priced models with significantly more features. Why do consumers buy this CRT iMac today? I wish I had some credible market data rather than speculation. I suspect the novelty of this unit has worn off dramatically. Though its does look way more cool than competing products so the style edge is not completely lost. However, the low-end typically is targeting newbies and customers buying their nth PC. Such consumers are considerably more price sensitive than higher end consumers and less driven to buy 'style'. I'd like to see what a sound conjoint analysis would show us in terms of market share and earnings for CRT iMac versus iBrick as well as the two combined. Remember, price elastisity (aversion to perceived high prices) is much higher at the low end.
The CRT in the old iMac adds costs, which thins margins, in several ways: form factor, storage, inventory, and opportunity cost of capital. On the other hand, it saves costs in sparing Apple from worrying about 3rd party monitor drivers and support. However, all these drivers are relatively easily ported from Linux to MacOS X. And low-end consumers will generally be satisfied with generic drivers anyway. So, I wouldn't expect much trouble with 3rd party monitors in the way of technical support.
I must confess, however, that my idea for the iBrick was based partly on the assumption that the CRT iMac would be discontinued. As the above two paragraphs imply, there would be some cannibalism from the iBrick onto the CRT iMac sales. However, given the lower manufacturing and operations costs, Apple should be able to more easily enjoy fatter margins with the iBrick than with the CRT iMac.
Additionally, 15" and 17" CRT's are not only commodities to those that manufacture them, but they are also commodities to OEM's like Apple that resell them. Meaning, for every dollar that Apple spends on a CRT for an iMac, Apple realizes a relatively small return or margin on that investment. It effectively brings down Apple margins as a percentage on average. Not a good thing for share holders!
Let's not forget opportunity cost, low-end consumers being highly price elastic, means that the CRT iMac would sell considerably fewer units than an iBrick. Only a detailed conjoint and production/operations analysis could absolutely confirm higher earnings. But, I'm very confident that the iBrick would generate greater earnings for Apple as well as generate greater market share and hence greater software diversity and mindshare.
And let's not forget another market consideration, a significant percentage (supposition) of low-end consumers prefer a 17" CRT to a 15" CRT enough to make a decision-making difference. In the case of elderly with poor eyesight, this can be a huge factor. My father didn't want an iMac for that reason alone.
The iBrick expands the market segment at the lower end by giving consumers greater flexibility with monitor selection as well as lowering the low-end Mac price point into a larger pool of potential buyers.
So, I would seriously consider killing the CRT iMac. But, even if Apple kept it, I do not believe the availability of both a CRT iMac and an iBrick would generate adverse product assortment conflict, in other words: confusion.
One last element to consider in product assortment (the product line) is manufacturing/operations. Obviously, a more complex assortment can increase production costs on average and lead to diminishing returns targeting discrete market segments. At some point, an assortment becomes too complex.
The iBrick concept is premised on low-cost. Someone earlier suggested that Apple simply sell iMac domes without the arm and monitor. While this idea has obvious benefits in terms of production, it might generate assortment dissonance and even incite pressure to close the price gap between the LCD iMac and the iBrick because the difference between the two units could be rationalized as simply a piece of steel and an LCD, undermining the value of the LCD iMac's style and novelty. No, the iBrick should have a considerably different form factor from that of the LCD iMac.
That doesn't mean that they cannot share common components, however. To further differentiate between the iBrick and the iMacs, I wouldn't offer CD-RW or DVD-R for the iBrick. Besides, low-end consumers are apt to be less interested in those features anyway. Again, a conjoint analysis would quantify this very effectively so a smart product assortment decision could be made. I'd also look at other ways to differentiate the iBrick from the iMac in terms of features/components.
The years before Steve Jobs returned to Apple did indeed feature a confusing, overlapping product assortment for the Mac product line. I personally recall the confusion among consumers and sales clerks. It was bad enough trying to debunk negative myths and truths about Mac's in general only to further complicate sales with an incoherent product assortment.
I do not believe adding the iBrick to the Mac product line would unduely complicate it, with or without continued production of the CRT iMac. If anything, the current Mac product line has a giant hole that ought to be filled to maximize Apple's market share and earnings. The iBrick would greatly appeal to the price sensitive low-end consumer market yet add greater choice and enable them to re-use their existing CRT's.
Well, there I go again, I set out to tell the time and described how to build a watch.
Cheers,
Eirik
