Most people think of Apple as selling over-priced equipment. We think of it like Mercedes, BMW or Bose. These brands stand for high quality, but are commonly perceived as over-priced, which is part of their snob-appeal.
Look at me. I can afford to overpay!
I think that perception no longer jibes with reality for Apple. It is now the value leader in personal computing.
Apple changed their corporate name from Apple Computer, Inc. to Apple, Inc. in early 2007 when they announced the iPhone. This was an indication that the management (AKA Steve Jobs) saw the company as more than a high-priced computer company.
The original pricing of the iPhone used the traditional premium pricing model Apple had followed since its founding. Yet Apple quickly backed off and put the carrier-subsidized iPhone on the same price footing as comparable smartphones. That was the first game changer.
Today Apple sells hardware into five market segments:
- Cell phones – iPhones
- Small, portable media players – iPods
- Tablets – iPads
- Computers – Macs
- Miscellaneous – Apple TV, AirPort devices, mice, trackpads, keyboards…
The first three categories are a combination of iOS devices—iPhones, iPod touches, iPads— and true iPods—iPod classic, nano and shuffle models—which run the iPod OS, not iOS.
The original iPad was priced much lower than it needed to be. There was no competition and Apple faithful would have bought it if it cost $100 or possibly $200 more. But Apple chose to keep the pricing constrained and below Mac price points.
iOS devices today are usually the same price or less expensive than the competition. Samsung, Motorola, RIM, and others price their tablets and smartphones on par with or higher than Apple. In the tablet category, only ASUS seems to understand that they have to offer a different feature set and better price-points than Apple in order to compete. (See this tablet comparison table for more information.)
iPods have no true competitors today so it is hard to compare them.
PCs sold through retail channels, used for non-organizational or non-business computation, i.e. individual or home use, are either Windows PCs or Apple Macs. Windows machines are initially lower-priced than comparable Macs. However, Macs do not command as much of a premium today as they once did. Furthermore, when I look at total cost of ownership for a household running multiple computers I see no real difference.
Since the introduction of the Mac App Store to Snow Leopard earlier this year, much of Mac software is licensed to an Apple ID and not by CPU, the Microsoft model. The cost of upgrading multiple Macs to Snow Leopard was a fraction of the cost of upgrading the same number of Windows computers to Windows 7.
The cost of upgrading a household full of Macs to Lion, due shortly in July 2011, is $29.99 for all your Macs. I expect Windows 8 upgrades, due in 2012, to follow the more expensive Windows 7 per CPU pricing. Today Amazon sells a single computer Windows 7 Home Premium Upgrade for $110.
iWork competes with Microsoft Office. Although I prefer Office, iWork’s applications—Pages, Numbers and Keynote—are usable. If I buy iWork I can install it on all my Macs. I don’t have to have a separate 25 digit alphanumeric product key for each computer. Microsoft charges a license fee for each CPU. (Microsoft does offer a Home and Student edition which can be installed on up to 3 computers.)
So Apple has made the software side of owning a Mac much less expensive than Windows in a multiple PC house. The multi-year effect is to make the total cost of ownership for a Mac household comparable to a Windows household.
Apple uses this same app pricing model on iOS devices. You buy the software once and can install it all your iOS devices. You don’t have to buy a new license for each iPad, iPhone or iPod touch.
When I look at the miscellaneous hardware category I think AirPort network routing devices, mice, trackpads and keyboards are still premium-priced. Apple TV is not.
From my perspective, Apple is no longer the premium-priced brand. Today they are more like Honda or Toyota in their pricing than Mercedes or BMW.
I am as surprised as you.
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