“Why are Apple products not available cheap?”
The Answer – “Coz you dont want it that way”
“Why?” you might ask, “lets find out!”
Total Control – Apple is perhaps the only tech company that controls almost all aspects of their Product in-house. Apple design their own products and have in-house R&D. On the manufacturing front, they source materials themselves and the manufacturer (The Assembler) works under tight supervision. On sales front, they have their own Sales, Service and Training Centres. So whatever the margins made at every stage, are retained by Apple.
Quintessential Marketing – Apple never followed the traditional marketing practices. In fact, they built a ‘Cult’ around their products. Every new product launch sees fans religiously line-up for hours to get their hands on the latest Apple product. Steve Jobs during his initial keynotes announced Apple’s moto “Provide Relevant, Compelling solutions that customers can only get from Apple”. So Apple would either provide such perceptive novelty products to the customers, or atleast Convince them that they were choosing a novelty when buying an Apple product.
Product Plan – They never went out to aim for the masses, the aim was only at the classes. And the rest with aspirations would follow. They would not launch a slew of models to fit all customer types, rather focus on just one product. One iPhone per year, One Macbook per year (with hardly one or two variants) and clearly no product tiers. Every year the newer iDevice would have ‘Better’ features along with one or two ground-breaking features.
Supply & Demand – As Apple stuck to just one or two variants of a product, this implied that they buy components with limited variations and hence would command a Best price for One Big order.
Technology and the Dumb Rich Guys – Apple would talk about only a few features of their new iPhone that a tech guys in the Tech world wound endorse and the Rich guys would start aiming to buy it. They would keep the interface easy for the Rich Dumb Guy and lock away the juice from the Techie.
Essence of Luxury – Part of it is that Apple has convinced consumers that they’re a luxury brand… Mercedes, Louis Vittion, Perrier, Starbucks . selling Apple as an upscale brand
Service Equity – This is where Apple actually spends more than the competitors. They exchange the serviceable products with faster than anyone else. Why? Because this is an investment that Apple makes in their customers who shall go all out to boast about the ‘no questions asked’ lightening fast replacements. Even when you drop your iDevice and it develops cracks, you simply approach Apple Service and they replace it with new one. No wonder the extended warranty price is the highest for Apple. So in a way Apple invests in its customers for the ‘Word of mouth’ Marketing it gets out of them.
The Design Pain – Every new product launch event has a section dedicated to ‘Industrial Design’. Where Apple showcases the efforts they made to make the new iDevice even more delicate and pristine. A typical ploy undertaken by Luxury brands when spreading the word about their latest Couture. Like the iPhone X which has a full glass covered body. The next practical issue that pops in mind is how you would carry such a delicate thing through your daily grind? Cover it up with fancy tough case? So what was the need to spend a fortune on Designing for a thing thats is going to stay only half naked through its lifetime?
The Customer Delima – People are ’emotional beings’. Many a times people perceive value for an item based on feelings the item gives. Or as the Luxury marketeers put it, “People Pay for Experience”. apple charges for the Experience and people happily pay for it.
As if that were not enough, the poor gullible customers are subjected to exotic Buzzwords like Magsafe, TouchID, FaceID, Retina display, AirPlay, Airdrop, FaceTime, blah blah etc etc. These words give an elated feeling to the user that they own something special and unique. For any Android or a PC customer these things would have no meaning, rather these are just part of an overall Standard package.
By virtue of the facts above, Apple has a widened profit margin and no Great Unique product, their products would still sell at higher pricing. And yet the fact that the competition Mobile & PC companies would have operating margins of paltry 5-78%, Apple commands a margin of 30-35%. Is it not Greed one would say? Not Greed, they have created value of their products in the minds of the customers and customers are happy to pay this perceived value.
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