Fascinating Insight into Apple's Pricing

Discussion in 'MacBook Air' started by Epsilon88, Oct 28, 2010.

  1. Epsilon88 macrumors 6502

    Oct 26, 2009
    I recently came across an article in Computer World that explained so much to me about the reasoning behind Apple's pricing and hardware configurations. This is probably old news to seasoned Apple consumers, but as a n00b, it was fascinating to me.

    Key Findings

    How bad is the Apple tax?

    - Apple manufactures the lowest-priced Macbook Air for $718, including royalties and licensing fees (not including software development and marketing).

    - This represents margins of 28% and 37% depending on the configuration, compared to the standard of 20% among Apple's notebook line, which I believe is well above the industry standard (hence the so called "Apple tax"). So in addition to paying the Apple tax, you are also paying for the Macbook Air tax of between 8 to 17%.

    How does Apple make a good chunk of its money?

    - By offering extremely pricey upgrades. By upgrading your SSD from 64 gb to 128, you pay $200 while Apple only incurs $73.60 in additional costs. The 13" costs $300 more for 256 gb of space, which costs just $141. Profit margin is now 37%.

    - That money goes straight to Apple's profit, and is a key strategy to Apple's pricing strategy. They price the computer with relatively low specs, and many consumers inevitably pay exorbitant prices for the upgrades

    Wait, so does this mean that Macs aren't good value?

    Not necessarily, because value is very subjective. If Apple has designed a product that better meets your needs, and is worth the tax, then it is perfectly reasonable to go ahead and buy it.

    They are clearly very good at generating profits. As a consumer it's interesting to learn about the margins and how Apple uses lower specs to encourage people to spend large amounts disproportionate to the upgrade value. Personally, I'm still keen to buy an 11.6" Macbook Air, but reading the article is kind of making me hesitant to double the flash storage.
  2. fuzzielitlpanda macrumors 6502a

    Mar 24, 2008
    honestly, if they did not make their products as good as they are, no one would buy due to the high cost. however, i really don't mind the apple tax because of the awesome build and awesome customer service. sometimes, you just have to pay more for the good stuff.
  3. Macpowered macrumors member


    Feb 4, 2009
  4. Mike225 macrumors 6502a


    Jul 15, 2010
    SF BAY
    IS the RAM in the Air not user changeable? If so, that sucks.
  5. Brien macrumors 68030


    Aug 11, 2008
    The good news is this gives Apple wiggle room to drop the price of the 11" to $899 in the future.
  6. aberrero macrumors 6502a

    Jan 12, 2010
    Yes, they are a rip off, but the problem is that nobody is releasing anything as good as the Air for $800 or $900. So Apple basically has a monopoly.
  7. WardC macrumors 68030


    Oct 17, 2007
    Fort Worth, TX
    The 11.6" is clearly the fastest small machine with a fullsize keyboard that you can run Mac OS X on, so they have something there.
  8. bella92108 macrumors 68000

    Mar 1, 2006
    I don't get it... if companies operate like ASUS or SAMSUNG where their netbooks aren't profitable and bring the company's value down, people complain. If companies like Apple charge a fair market value for something, and turns a profit, making a healthy US company, you complain?

    What do you want? Do you want them to sell more units for less profits? Do you want them to sell for a lower price and have to open 10 new factories and still bring in the same profit?

    It baffles me how everytime Apple comes up with a new product someone has to bitch about it being over priced. It's not overpriced, it's a premium product that is priced at a level in which people are willing to pay (see the tons of threads saying how apple is backlogged in production and people are tracking flights by the minute as to where their laptop is, I'm guilty of it too, hehe)....

    Bottom line. I think a Porsche is a waste of money, I think Porsche Tax is ********, but I don't go on Porsche threads online and talk crap to people who disagree, because clearly as a company they're highly successful, and their customers fully enjoy the benefits that come with the premium product. If you have an issue with the "Apple Tax" then maybe you should go to your neighborhood best buy and buy a nice ASUS netbook for $299 and enjoy the "experience" that comes with owning it.

    Until then, I will continue to pay the "apple tax" to support the development of great products.
  9. Epsilon88 thread starter macrumors 6502

    Oct 26, 2009
    High blood pressure...? :D This thread wasn't a complaint. Re-read the "value" subheading.
  10. ingramLee macrumors regular

    Oct 27, 2010
    New York, NY
    Dont fret OP, shes like this in every thread.

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