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Speaking of Apple's Prices... Why Are They So Damn High?

More than anything, users appreciate the undeniable consistency (and therefore, customer confidence) that comes with any Apple machine or app. This applies to both consumers and professionals, though some of the latter may hesitate in days to come. Of course, achieving this consistency can be a double-edged sword — the very measures that guarantee the quality you’ve come to know and respect of Apple computing are the same tendencies that see them labeled as “notoriously controlling.” This too goes for the staunchly unwavering prices of Apple products across the marketplace — that double-edged sword extends all the way out to how such pricing is so firmly set. And, in terms of sword metaphors, this is more often the kind that cuts a hole in your pocket than the kind that “slashes prices.”


Let me be clear, I’m a long-time Apple user — and fan, to a point within reason — of both its hardware and software. Why is Apple the biggest thing in tech (read: “consumer tech,” short for), anyway? Because its goods always work very, very well, and they look damn sexy doing it. Equivalent-or-better hardware or open extensibility are way secondary to elegant-but-robust functionality in sleek chic. The ways in which Apple all but brands the pricing into each and every polycarbonate shell for retail is no secret (or even all that sketchy) per se — but it’s certainly interesting. Basically, Apple uses some traditional business tactics in conjunction with each other, but to a whole other ‘perfect storm’ sort of success.

See first, Exhibit A: standard product, non-Apple — which may get up to a 50% markup at retail, in turn allowing for a lot of variability (and discount-flavored marketability) with pricing. Then, see Exhibit B, from MacWorld:

Apple, however, extends only a tiny wholesale discount on its Macs and iPads to your retailer of choice. The actual numbers are a closely guarded secret, protected by confidentiality agreements between Cupertino and its resellers, but the difference probably amounts to only a few percentage points off the official price that you find at Apple’s own stores. With such a narrow gap to tinker with, most retailers can’t offer big discounts and still hope to turn a profit.

The shorthand: Apple doesn’t cut anyone any breaks in wholesale — the price virtually can’t go down without retailers going under (or at least, losing on every Mac deal). The catch: Why not markup higher for larger profit? Well, because then you’d be the only store in town able to advertise “Highest Mac Prices in Town!”

This is where the second part of Apple’s retail strategy kicks in: The company supplements its tiny wholesale discounts to resellers with more substantial monetary incentives that are available only if those resellers advertise its products at or above a certain price, called the “minimum advertised price” (MAP). This arrangement enables retailers to make more money per sale, but it prevents them from offering customers significant discounts, resulting in the nearly homogeneous Apple pricing we are used to.

The shorthand: Retailers may pay less per unit on each order, therefore standing to make a higher profit — but only if the unit goes for however much Apple wants. The catch: Between this rock and that hard place, why carry Apple goods at all? Well, because the demand is so great, you’d be the only store in town able to advertise “Lowest Mac Prices in Town — Because We Don’t Sell Any Macs!” (Drivers-by may only read the top of the sign, and then sue you for false advertisement by their own error).

As it fittingly turns out, the way Apple can ensure a viable cost-to-profit margin — and a therefore sustainable “work great, be sexy” business model — is to keep prices as consistent as the performance of its devices themselves. It all echoes that absolute, pain-staking level of quality control. And with that invariable price comes a product of invariably high quality, to be sure — but since the body governing how much it costs virtually everywhere may be somewhat biased toward the product, the real worth is determined by the user. Whether you actually get what you pay for is up for you to decide — as is which platform you return to or depart from when it comes time to upgrade to the next generation.

[Update:] By the way, my first smartphone will likely be an Android — how about you guys? Is anyone quitting Apple and never looking back — because of things like price, or not? Is anyone else taking the mid-ground, and going for whatever the best deal for performance may be?

Link: How Apple sets its prices — MacWorld

[via Gizmodo]

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