Apple: The low-price leader?
This morning all the ads on my radio were about sales, deals, and other ways to save money (by spending it). That’s what I always notice during an economic downturn: the advertising. It’s no longer so much about the products as about their low price tags or the efficiency that you’ll gain if you buy them. Buy this magazine for $6.99 and you’ll save a hundred bucks in added productivity!
But in a time of thinning wallets, rising unemployment, and plunging home prices, what happens to a company that refuses to compromise on features in order to slash prices? What happens to a company that emphasizes profitability over expanding market share? What does the terrible economy mean for Apple?
If reports on the rumor blogs are to be believed, it means price cuts are imminent. Specifically, the rumors seem to focus on price cuts for the iMac and MacBook to make those consumer-friendly models more attractive to shoppers who might otherwise be swayed by Microsoft’s stepped-up advertising efforts.
The knives are out
In late March, Microsoft unveiled one of its most aggressive—and if I’m being honest, most effective—ad campaigns in recent memory. The first two spots in the campaign featured a gal named Lauren and a guy named Giampolo trying to buy the most feature-filled laptop they could for a given amount of money—$2,000 for Giampolo, $1,000 for Lauren. Spoiler warning: neither Microsoft ad ended with the people buying Macs.
This is Microsoft hitting at one of Apple’s greatest weak spots: the perception that its computers are overpriced. Those of us who have looked at the matter closely can argue till we’re blue in the face that Apple’s products aren’t overpriced, but rather refuse to omit features that PC makers have no qualms about compromising. But perception isn’t about the facts. And in a time when people are scared about their jobs, their money, and the economy, playing to people’s fears is not necessarily a bad sales tactic. (I’ll leave any deeper analysis of Microsoft’s ads or its drum-beating about an “Apple tax” to my colleagues.)
Or take the endless rumors of an Apple netbook. Many voices out there—just not Apple’s—insist that Apple needs to build a low-cost laptop, especially given the rising tide of sales of low-cost PC laptops. (And yes, I wrote a complete diary of my own time spent with a netbook.) The undercurrent of that message is the same as the one Microsoft exploits—namely that Apple’s computers just aren’t cheap enough.
A free pony
Who doesn’t want something for nothing, or as close to it as you can get? I don’t think there’s a single person out there who would buy a MacBook for $999 if they could buy the exact same MacBook for $899. Or $699. Or if they found one on their doorstep, attached to a post-it note reading “Free To a Good Home.”
But that’s not reality. Apple is a business, and it makes a whole lot of money selling the laptops it’s got. Apple has never been the kind of company to produce cut-rate, cut-feature products. I’ve yet to see an Apple ad that uses the phrase “our prices are insane!” That’s not the kind of product and attitude that Apple’s brand has come to represent.
But in tough financial times, there’s definitely a pressure for companies like the ones on my radio this morning to cut prices in order to drive sales. So what does that mean for Apple? Does Apple alter course and product a low-price, low-featured product in order to stay relevant in the midst of a recession?
This isn’t a rhetorical question. I don’t know the answer. Apple has never tried to reach people who look at a product’s price tag as that product’s most important trait. It has always cultivated an audience of users who are willing to pay more for quality, who opt for Apple’s products because they’re good, not because they’re cheap. Steve Jobs said as much during a rare appearance in quarterly conference call with financial analysts last October: Apple believes its customers are more likely to delay purchases in tough economic times, as opposed to abandon the Mac for another type of computer.
So perhaps the question is, does Apple want the Mac to reach a broader audience? If it does, it may have to compromise on some of its values in order to create products that are cheaper. I honestly can’t see it happening. If Apple ever decided to invade the world of $350 netbooks, I’m pretty sure it would do so with a $500 or $600 version—cheap for Apple, but not the cheapest out there.
I just can’t see Apple ever being the low-price leader. It’s just not who the company is. But you never know. We live in strange, befuddling times.