Ever since the rumor sites pulled the rumor of a $799 MacBook out of thin air, the Mac web was abuzz with rampant speculation about its theorized impending appearance at the recent Apple special notebook event.
When such a product didn’t materialize, the Apple stock took another beating and the analysts came out of the woodwork, donning their Expert Hats™ and suggesting that lowering the price of entry for MacBooks to $800 would propel Apple into the magical land of all-encompassing market share, huge profits, and cute ponies.
Yesterday, during the Apple quarterly earnings call, Toni Sacconaghi, on behalf of Sanford Bernstein, asked Jobs whether we would “continue to see more affordable price points across the Mac product family and across iPhone going forward”.
To this, Jobs astutely replied:
“There are some customers which we choose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk, and our DNA will not let us ship that. But we can continue to deliver greater and greater value to those customers that we choose to serve and there’s a lot of them. And we’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody.”
Given the choice between, on the one hand, owning a small percentage of the market and having guaranteed higher profit margins than most other companies and, on the other hand, aiming for a slightly higher market share by lowering the profit margins, Apple will always choose the former, and it makes sense for it to do so.
When you’re talking about the iPod, it makes sense to lower prices—Apple already owns more than 70% of the market and the more it controls, the more powerful it becomes in that market. That, in turn, gives Apple more freedom to experiment with both prices and features.
But when you’re talking about markets in which the company occupies a niche, it’s better to aim for higher revenues and keep the cash flowing in, instead of lowering the prices and trying to attract those customers who may very well never be convinced to buy a Mac anyway.
Here’s the basic rule: Anyone who willingly makes the decision to buy a Mac, without being coerced into it, does so with the expectation that he’ll be paying more for it than similarly specced PCs. A couple hundred bucks here and there do not make a difference to these buyers. And these people are the sort who make up Apple’s primary target market.
And, of course, if you have any doubt about the company’s market strategy, you just need to take one look at its quarterly results. Apple continues to be the fastest-growing, coolest technology company in the industry right now. And it has $25 billion in the bank with zero debt. Clearly, the company knows what it’s doing.
I think apple doesn't want to be accused of selling crap. They don't need to sell cheap macs to be where they want to be in the market.
If consumers want a cheaper mac, buy a used one. It may actually have better hardware than what apple could put together for $500.
As I see it, the main reason they don't want to reduce prices, would be that after the recession is done with, people will not take a price hike lightly!
"So you guys have your money problems settled now, so it's time to pay us more" - Jobs.
On the other hand, the PC manufacturers have to compete with each other so they have to reduce prices. Apple on the other hand is the sole manufacturer of Macs and will at least keep those who have already switched in the loop.
Catering for more casual customers, people with lower expectations and awareness, mostly spoiled by their prior experience with the muddy side, can only hurt Apple's position as a company that fosters high standards and innovation and churns out computers that are both attractive and reliable. Even if such a trend should cause a raise of Apple's market share, in the long run it would submerge the company into the sea of other hw/sw makers.
Unfortunately, such a trend is already visible in the last moves, i.e., the phasing out of a superior technology, as FireWire is, and the surrender to the obnoxious fashion of glossy displays.
"$25 billion in the bank with zero debt"
They could sell nothing for 10 years and stay in the black.
As Jobs said there are still many rich people that don't own a Mac yet. The poor people that can't afford one will have to wait.
I think Apple would sell a ton of cheap notebooks if they chose. Personally, I think the plastic on the white and black macbooks was crap from the beginning anyway (I'm a Macbook Pro user). Just cut some meat on the hard drive (offer an 80gb), and no backlighting, just a CD reader/writer and sell it for $700.
With that said, the Mac mini is the cheapest mac available and rumors are that it hasn't sold well. I am a Mac mini owner and that's the machine that helped me switch 100% to Macs. I love the little buddy, but it didn't reach most people. I think if Apple had made Mac mini commercials, people would notice and it would have sold better. Enough of those "I'm a mac" commercials. Everyone that sees my Mac mini never heard of it, but think is fabulous.
Yea, spiderbat, those glossy displays sure are hurting sales. ROFL
You were doing well until the end there. People do not expect to pay more for similarly specced macs. They haven't for some time. My brother made the switch because an iMac was cheaper than a similarly configured Dell.
That said, Apple cannot compete with the PC makers on the low end where price is king. People who buy macs are people who have decided they want a decent computing experience; and yes, they are willing to pay for that. Better hardware is part of that better experience. If you buy a cheap POS to run Mac OS X, you might decide that the OS isn't so great because of your subpar hardware. That is the experience Apple wants to avoid.