The Apple tax and what Apple could learn from it's own recent success.

[/user/me]

Oh right, because Apple never miscalculates or mishandles the market.

The Mac G4 Cube, the Lisa, the Newton, the Powerbook Duo, the Pippin and the Apple TV all would like a word with you.

You're joking right? those only failed because the marketing dept. dropped the ball. all big business has products that fail, but I don't think that you know more than a multinational monster like Apple.... Passing high school econ doesn't give you the knowledge to run a company.

 

[aristobrat]

You don't seem to understand the basic principle of volume. Sometimes, the best way to maximize profits is to lower prices and increase in sales volume.

Right, that's the model that Dell tried. How'd that end up for them?

Have you followed Apple's quarterly statements recently?
https://www.apple.com/investor/

Mac Sales Volume:
Q1 2011 = 23 percent unit increase over the year-ago quarter
Q4 2010 = 27 percent unit increase over the year-ago quarter
Q3 2010 = 33 percent unit increase over the year-ago quarter
Q2 2010 = 33 percent unit increase over the year-ago quarter
Q1 2010 = 33 percent unit increase over the year-ago quarter

The Mac's sales volume, at current prices, is already growing significantly. Add much more on and it becomes a unmanageable mess, IMO. Think it's already hard to get a Genius Bar appointment now?

IMO, Apple does as well as it does because it does things differently .. it gives a different experience, especially with its stores. With the volume increase that you're proposing, they become just another mass merchandise retailer. Essentially, they lose the specialness of their brand that they've spent the last 10+ years making.

They're already realizing an incredible profit. Short-term, yes, they could increase that. But I don't think they can do that (via mega-Mac sales volume) and keep the brand loyalty that makes them what they are.

 

[MacManTexas56]

Nonsense. Some customers are willing to pay the premium, but many aren't.

Do away with the premium, and the vast majority of people would opt for Apple over the competitors. The sales of the iPod, iPad and iPhone relative to the competition is proof of that.

The iPad wouldn't be anywhere dominant if it was priced at $999 while all the compeitors were priced at $599. However, because Apple priced it a $499, it's accounting for 90% of all tablet sales. The same is true for the iPod and iPhone sales.

the people that don't want to spend a lot of money on a computer aren't going to buy an apple even if it was discounted down to $800. When netbooks can be had for $199 and full blown laptops for $300, why would a regular joe want to still fork out over $500 more for an apple?

Apple has it's own niche market. and they don't see a need to lower the price bc people will continue to buy their computers at the current price.

Don't get me wrong, apple computers are great machines and that's all I use, but when someone wants me to recommend them a computer it's hard to do so based on apples prices. BUT even if the prices were lowered, majority of people still won't want to pay that high of a price when you can get a similar laptop for $300. (similar in the meaning of someone who isn't a techy)

Thus why it's a niche market. Apple is not targeting the everyday joe that has a tight computer budget.

 

[orfeas0]

The Macbook Pros and iMacs account for only a small portion of Apple's overall profits. This is because they're just priced too high and not enough customers are willing to pay that premium.
In these areas, by not charging much of an Apple tax, Apple absolutely dominate the competitors and make up for the lower prices with volume.

iPods cost double the money of other mp3/mp4 players, what the hell are you talking about? And iPad? What are you comparing it with, a samsung galaxy tab? yea they cost the same price, but most of the new tablets that are coming out soon will cost 250-400$, not 500-800 like iPad...
Do you know how much the iPod nano costs? 8GB: $149.00
another brand's mp4 player at that capacity costs ~50$, 1/3 of apple's price.
About the macbook's price, you're paying for what you get. Sure you get less specs in the laptop (not in this line, they currently use the best cpus available), you get no discrete gpu in the 13" etc etc, but you get a good exterior case, you get mac OSX (better than windows ultimate, which costs 400$).

 

[MacManTexas56]

Any reasonable guess would put it's costs around $400 or so, about $250 more than the iPod costs to make.

You don't seem to understand the basic principle of volume. Sometimes, the best way to maximize profits is to lower prices and increase in sales volume.

Apple is in such a position with the MBP and iMac.

The iPad wouldn't be anywhere near as dominant or as profitable if it was priced at $999 while all the compeitors were priced at $599. However, because Apple priced it a $499, it's accounting for 90% of all tablet sales, and this is translating to record profits. The same is true for the iPod and iPhone sales. In these areas, by not charging much of an Apple tax, Apple absolutely dominate the competitors and make up for the lower prices with volume.

Apple could easily do the same in the computer sector and maximize profits.

Instead Apple is charging $1200 for a product their competitors sell for a $699. It would be akin to them pricing the entry level iPad at $1000 when the competitors sell them for $499. The iPad wouldn't be turning in anywhere near the same profits then.

go look at the dell business model and let me know how they are doing.

obviously the goal is to not pump out as many machines as they possibly can. They have a niche market and make a TON of money from it.

Mac Mini and iMac are super cool machines. Competitors? have you seen their designs? lol.

Go look at Coach, prada etc. they can sell stuff for much lower but they don't. and you know what? people STILL continue to buy their stuff.

 

[whateverandever]

And it's clear that Apple could maximize profits by lowering pricing and increasing volume.

Drop the prices, and they would maximize profits.

That's completely impossible for you to know.

Look, Apple's products have a set cost to manufacturer. Let's say with a $1000 MacBook they currently make $250 per laptop.

For the sake of the example, let's say they sell 10 million MacBooks at that price. If Apple were to drop the price to $800 for the same MacBook they would need to also see an increase of sales to 50 million in order to break even with their current profit.

Now, take into account the support infrastructure would most likely need to grow five-fold as well... they would need to build more Apple Stores, they would need to move into more channels (Walmart, Target, etc). There's additional overhead per user.

Apple doesn't want to commoditize their products. They want to stay in the premium space. If they owned 90% of the market they would have very little ability to take chances at innovating. They would have to take all safe bets (see: Dell).

Apple likes where they are and their Mac business has been growing consistently without making their products "consumer" level.

 

[Eddyisgreat]

The bulk of Apple's profits are made off of iPad, iPhone and iPod where Apple doesn't really charge a premium over the competition.

orly?

The Macbook Pros and iMacs account for only a small portion of Apple's overall profits.

Link to this?

This is because they're just priced too high and not enough customers are willing to pay that premium.

See below.

The Apple tax on their computers and laptops is bothersome and the reason I'll never I can't justify buying one, and I think many consumers feel the same and thus opt for the competitors.

Can't afford one? Big deal. I can't afford a maserati either.

It seems absolutely ridiculous that one can't get a laptop with a dedicated gpu from Apple unless I'm willing to plop down over $2000, when competiting laptops offer one in models priced under half that.

It seems absolutely rediculous that you'll complain about one laptop vendor when there are other laptop vendors..."competitors" as you call them....offering you the very product you want! Go get one! They could use your business.

However, there really isn't an Apple tax on their iPhone/iPad/iPod.

LOL Yeah keep telling yourself that.

All three products cost the same as their closest competitors.

Ya, retail price. Apple's build cost is cheaper and the dev costs are sunk. Apple scooped up the patents on much of the technology a while back. Now they're just riding the wave and innovating in house.

The iPad wouldn't be anywhere dominant if it was priced at $999 while all the compeitors were priced at $599. However, because Apple priced it a $499, it's accounting for 90% of all tablet sales, and this is translating to record profits. The same is true for the iPod and iPhone sales. In these areas, by not charging much of an Apple tax, Apple absolutely dominate the competitors and make up for the lower prices with volume.

I like how much effort you put into making it seem as if price was the only factor in this equation. It aint. And again, have you seen the component cost? Don't forget, Apple gets a kut from carriers on monthly plans $$$.

Perhaps Apple should learn from that and lower the price on their computers to boost sales and profits. A Macbook Pro at $800 (more in line with it's competitors) would absolutely slaughter the rest of the laptop market.

Perhaps you should learn that they're doing a great job right now. Again price isn't the only factor. Some people WILL NEVER want Mac OS X even if it and the Macbook Pro was FREE.

On the higher end, Apple really needs to put a dedicated gpu in a laptop that is priced at around $1200 (again in line with competitors). Some customers are willing to pay the premium for apple computers, but many aren't.

Target Audience

Gaining these sales would translate to much higher profits, due to volume.

Dell.

So why hasn't Apple learned from the success of the iPod/iPad/iPhone and dropped the Apple tax from their computers?

Good question. Perhaps someone can give you a loudspeaker and you can yell @ the Apple HQ demanding that they save the company from profitability. That nonsense has got to end.

Do away with the premium, and the vast majority of people would opt for Apple over the competitors. The profits from the high volumes of sales of iPod, iPad and iPhone relative to the profit from the iMacs and MBPs is proof of that.

Noob, is this your first time on making such a declaration on an Apple board? You seem skilled at such.

 

[al2o3cr]

not enough customers are willing to pay that premium.

"Not enough" for what exactly? Q4 2010 portable sales were up 10% over the previous year, and were the second biggest chunk of revenue following the iPhone (source: http://www.betanews.com/joewilcox/a...-iPad-push-revenue-to-2034-billion/1287432873 ).

Do you troll BMW forums insisting that they should start making cheapass cars because you're not willing to pay what they charge now? I seriously doubt it - so GTFO of this one if that's all you're planning to do.

 

[bobr1952]

Oh right, because Apple never miscalculates or mishandles the market.

The Mac G4 Cube, the Lisa, the Newton, the Powerbook Duo, the Pippin and the Apple TV all would like a word with you.

Seems Apple TV Redux would dispel that theory too.

 

[bigjobby]

What is nonsense? The general principle of economics that drives every single industry/business? Go to school kid. A Macbook costs a lot more to make than an iPod.

This is exactly what its all about, economics and before the OP starts banging on about maximising profits, one should really have a good understanding of the subject before using the term. If there's one company who should know about maximising profits, its the one who is currently sitting on a $50 billion cash reserve.

Also to add, Mac computers are priced at a premium... as are iPhone, iPad, iPod products. If one should think otherwise, they are only kidding yourselves.

 

[GFLPraxis]

The Apple tax exists, but it's not nearly as high as you make it out to be. The real problem for people like me is Apple prioritizing components rather than the buyer.

Apple's notebooks have a higher standard of engineering, and use premium parts from reliable brands. Net result is a higher cost, in a large part to make up for R&D and a small apple tax as well.

Now, the problem for tech guys often lies in the fact that Apple doesn't offer a lot of variety across their lineup. For example...you want the cheapest laptop possible with the biggest screen possible? Tough; Apple only puts a 17" screen in its best-spec'd machine. Same goes for graphics cards, sadly. If your priorities end up not lining up with Apple's, you end up having to buy a more expensive machine to get that one thing you wanted. :/