I’ll trade you one Twitter re-tweet and a Facebook Like for two LinkedIn endorsements. Deal? How about if I throw in a recommendation on Yelp?
In a world where it seems as if everything has a value, adjusted in real-time, tailored for each specific person based upon their unique wants, needs, interest and location, auto-managed by Big Data, leveraging platforms eagerly funded by Silicon Valley, and all of it executed by a ever-expanding range of bartering algorithms which forever traverse the world wide web, why is it so damn hard to put a actual price on anything?
Excepting Apple products.
I love love love the fact that Apple cares enough about its products – and me – to put a specified price on each of its products, clearly marked, unchanged by locale or season or aggressively savvy salespersons.
Want a Mac? An iPad? Want to download that song on iTunes? Want to purchase that book on iBooks? Want that newest app? The price is obvious. No games, no gaming.
Why is it that so few tech companies, even (supposedly) great ones, are unable to match this simple act?
Microsoft Office has been around for about 20 years. I would honestly not be surprised if every single reader paid a different price than I did. Worse, if you want an online version, or want to be able to access Office on your iPad or Android, for example, you may need to hire an accountant to decode the pricing scheme.
This is not done for our benefit.
I am here, money in hand, ready to buy your product. Just tell me: what does it cost? It cannot possibly be so hard to answer so simple a question, can it?
I’m not simply picking on Microsoft. Amazon is constantly gaming me. Offering an endless series of deals, specials, “gold boxes”, cheaper prices if I subscribe to Prime, free stuff if I get a Kindle, virtual coins if I download their Android store.
Still worse, they further compound their anti-customer complexity by offering different prices for the exact same product to different customers. Apparently, Amazon’s big data cloud can alert the company in real-time to exactly how much I am (really) willing to pay. Clever tech, I suppose, but it makes me feel used and cheated.
Apple seemingly stands alone in standing behind its products. The price is listed, take it or leave it.
Google, meanwhile, dares not charge any of us for their service. This speaks volumes. Of course, while they may be unable to divine a price for their very own search and map offerings, they’ve clearly determined how much I am worth to anonymous advertisers.
It really is this radically simple: Build a great product, one that is desired, and market demand will ensure you always achieve the optimum price. Construct a sub-par offering and you must always play a sort of Big Business version of three-card monty.
For example, can you actually tell me how much you paid last month for cable? You’ve had cable television for years. They send you a bill every single month. Yet you aren’t sure of the price being charged? Really? How much does your HBO cost? ESPN? Cable without ESPN? These really should not be unanswerable questions.
Why did every single person on the very same flight pay a different price than you? Does that make you feel like you cheated someone – or were cheated on? Can all these various businesses really only succeed by using vastly superior computing resources to effectively steal from us?
Not Apple. Not Steve Jobs.
Yes, Jobs was a “product guy,” a visionary, a demanding SOB – one of the crazy ones. He was also a damn smart businessman. Jobs understood that gimmicks and obfuscation are the hallmarks of those unable to offer a truly great product.
Do not be fooled. The oft-promoted notion that our personal algorithms will latch themselves to various network bots and travel the “google” and buy what we need at the best price available, is a con.
You really think your “price bot” will ever out-compete Amazon’s or Google’s?
It’s time we use our sizable purchasing power – all of us – and disrupt Silicon Valley and the Big Data hegemony, which insists upon ever-changing prices, at inexplicable times, for unknowable reasons, based on their constant and hidden buying and selling of who we are, what we care about, and what we need. This is a game we can never win – because it’s been designed to work against us.
Of course, this battle cry should not be considered a call to revolution. Rather, a simple demand for the obvious: Show me your product. Tell me the price. I can then make the decision if it’s worth it. That’s all I’m asking for. And that’s exactly what Apple delivers. It’s just another way they make my life easier, better.
Steve Jobs was on our side. Too many others are not.
Image courtesy of Apple
131 thoughts on “Steve Jobs And The Radical Innovation Of Fair Prices For Great Products”
While I appreciate the notion, I immediately think of JC Penney and the recent attempts to move it away from “sales through pricing volatility.” Also, consider the case of Google Reader where, for desire of something free, the community of buyers forgot that an unsustainable service isn’t likely to survive. Then, there’s the unwillingness of App Store customers to pay reasonable prices for their software, instead rewarding freemium products that are “free” and more expensive at the same time.
And then, there’s “open source” software, which seems free, but sabotages development of new technologies since you have to be a schemer to make money with that software model.
Which came first? The obfuscation that causes stupid consumers to be taken advantage of, or the manipulative con artists and marketeers without scruples?
Re: freemium software, I don’t think the issue is that users are unwilling to pay the right price. There are two issues really:
1) there’s no incentive to pirate free software. Freemium kills piracy in its tracks. This is also a big part of the motivation for the Adobes and Microsofts of the world moving to subscription offerings
2) a small percentage of users are dumb enough to spend hundreds of dollars on mediocre games just to get an edge. Apparently enough of these users exist to drive developers into the freemium space in droves.
For the record, I hate the way most freemium games try to lure users in. I’d much rather buy a $20-50 game of console quality than get a free game which is completely handicapped until I reach into my wallet. I’m ok if the first levels are free to get users hooked, especially in simple puzzle games and the like. However, there are hundreds (thousands?) of games with phantom currency which is needed to advance. The multiplayer and adventure games are the worst!
Joe…no, “freemium” just moves the target. So, I get the product for “free”, but have to pay to get the significant features or to buy tokens or whatever…how long does it take until the pirates crack that part of the program? It’s already happening to some games where people “pirate” a million points. This is delaying the inevitable.
Adobe/Microsoft are moving to the subscription model because “recurring revenue” makes their balance sheets more stable and look better. Also, people tend to forget that they’re getting charged monthly for something. There are companies that quietly reduce their monthly charges to a few dollars after they’ve crossed a boundary just because customers won’t jump through hoops and spend 30 minutes on the phone to cancel something that costs relatively little.
Think about it. They aren’t going to adopt a pricing strategy that results in less income.They’re using psychology.
Good point. We may have gotten so used to the insanity that we demand it. I wonder if that means companies that want to follow Apple’s model must do so from the very start? That would be unfortunate.
Very Good Point Indeed
“I’ll trade you one Twitter re-tweet and a Facebook Like for two LinkedIn endorsements. Deal? How about if I throw in a recommendation on Yelp?” I’ll take it. You have my email address. Send instructions/links.
Look me up on LinkedIn! I’ll follow back there.
The last time I bought something from Google it was a Nexus 4 phone. I paid the full price upfront for an unlocked phone. Contrast that to how Apple and Samsung sells their phones subsidized by, and locked to carriers to obfuscate the real price of their devices.
These days Apple has sort of regressed to a jewel-company, that sells expensive bling that happens to come with a second-rate phone built in.
$649. That’s how much the current iPhone costs, unlocked, direct from Apple’s own website or any of thousands of others. I know, it’s confusing; they may charge sales tax or VAT too just to further obfuscate things, depending on where you live.
The practice of U.S. carriers subsidizing handsets long predates Apple’s entry into the market. Let’s not forget that when Apple introduced the iPhone in 2007, they tried to sell it unsubsidized. Customers balked at the $600 price and weren’t too thrilled even when Apple cut it to $400. It was only after carrier pressure forced Apple to accept the subsidy model and the iPhone was priced at $200–competitive with the BalcBerrys and Windows Mobile phones of the day–that sales took off.
Google’s Nexus phones have always (by design) sold in very low volumes.
In the U.S., only T-Mobile is really challenging the subsidy model for post-paid phones and it is not yet clear how well that is working for them.
I understand that. Apple is no worse, nor any better, than other smartphone vendors in this. People want expensive toys without paying the full price up front.
Actually, it’s a bit of both factors. The carriers did persuade Apple to do the subsidy, widening the market, but they also extorted higher monthly fees, limited the data amounts and capped the text messaging at the same time. My best friend Ron bought that first iPhone at full price. He was quite unhappy later when they began hiking fees and killing the plan if you upgraded.
In Europe, there is no carrier subsidy as the norm. You buy the phone, full price. Period.
What Steve was hitting at was the fact that anyone not upgrading immediately, upon each 2 year contract expiration, was actually paying $20 a month for a new phone they weren’t getting. The carrier is charging you for the phone subsidy, even when you don’t get a new phone. Someone holding the same phone, as my friend did, for 4 years just paid the carrier over $1,920 extra for nothing. How was Steve wrong here?
Once again proving that US carriers rape their customers.
Which is Brian’s main point. Steve was on our side, not the Carriers. I believe he called them, “Orifices”.
Steve clearly did not like the carriers much and he did succeed in making sure that Apple, not the carriers, controlled iPhone branding and the iPhone user experience. But he failed miserably in his attempt to change the carrier pricing model.
He didn’t fail to change it. It was changed. The fact that consumers were then hit by the worst economic collapse in 50 years in 2008-9 probably had far more to do with the inability of the market to afford the (cheaper) one time purchase up front.
We had droves of Americans suddenly losing jobs they held for 25+ years. My friend was a perfect example of that. It took nearly three years for him to find another job remotely near his living expenses, let alone his previous salary. I personally lost six figures off of my net worth in a matter of a year, just from my real estate holdings. Colleagues who once didn’t bat an eye at $600 suddenly were pinching every penny, and haven’t come close to recovering today.
This is a classic example of the myopia that people unfamiliar with the details of other fields often have when evaluation things. To ignore the biggest financial collapse in our lifetimes and the highest unemployment running the longest stretch makes no sense. in 2007, things were drastically different then they were in 2008 or 2009.
Sorry, but the action here took place in 2007, well before the economic collapse. Apple finalized its original deal with AT&T in early 2007 and AT&T unhappily agreed to an essentially unsubsidized arrangement because it wanted the iPhone exclusive so badly. The iPhone was introduced in June at $600 and in September Apple cut the price by $200 to boost sluggish sales. At the same time, Apple was trying to negotiate other carrier deals and finding few takers for an unsubsidized arrangement. So Apple moved to an old new model, a $200 upfront cost and higher monthly carrier charges to recoup the subsidy. This matched the model of other high-end phones at the time, and it’s where we have been ever since.
The above is based on my reporting at the time with the companies involved.
Steve, Why was my disagreement with you deleted? Is there a practice of censoring anyone not in agreement with you? I would hate to learn that your journalistic integrity has fallen to that level.
In your email to me, which I am happy to provide to anyone, you claim that your contacts in the Carriers told you a different story. However, that doesn’t disprove what I said.
You claim in your email to me that Apple couldn’t find any takers for their renegotiating contracts. That seems beyond belief, since the AT&T deal was exclusive for five years. Who exactly could Apple be negotiating with, since they were stuck under AT&T?
Look at business week’s reporting from the time. The cost change only moved consumers surveyed by 10%. It wasn’t a massive mistake.
Also, the leading edge actions behind a declared recession begin before it triggers that point.
I just looked in the deleted and SPAM folders for comments and don’t see anything from you. Perhaps Disqus had an error when you posted. Try again. The only thing we censor is foul language and needless personal attacks.
I never saw your comment and certainly didn’t delete it. Disqus, alas, occasionally eats comments. In any event, I welcome disagreement, as you will see if you look through some old comment threads.
The AT&T deal was a U.S. exclusive and Apple was looking for carriers elsewhere. At the time, the subsidy model was more widespread in Europe than it is today (it varies a lot by country.) As I recall, Vodafone was particularly resistant, although my memory could be wrong on that one.
Also, there was a lot of turmoil at AT&T at the time. The original Apple contract was with Cingular, which was a joint venture of SBC (which renamed itself AT&T after acquiring the wreckage of Ma Bell) and BellSouth. SBC acquired BellSouth at the end of 2006 though the deal did not close until 2007, and as the iPhone was coming to market, the company decided to rebrand Cingular’s service as AT&T.
Steve, thanks for so graciously clearing that comment confusion up. That’s honestly the first time I’ve come across that. Then again, I am new to Disqus. It was extremely disconcerting, since your email to me contained a response to it, but I couldn’t find it here on the web page anymore.
I see that you were referring to more the world markets, rather than here at home. I don’t think AT&T ever would have loosened their stranglehold the way Cingular was willing to.
It’s unfortunate that so many other companies, such as Google, ran in and re-empowered the carriers with Android. That is what shifted the balance of power away from many of the positive changes Steve had begun with the iPhone. The carriers desperately wanted a phone that was really about their needs, not the needs of the customers.
** repost ** (Just in case it got ate by Disqus)
He didn’t fail to change it. It was changed. The fact that consumers were then hit by the worst economic collapse in 50 years in 2008-9 probably had far more to do with the inability of the market to afford the (cheaper) one time purchase up front.
We had droves of Americans suddenly losing jobs they held for 25+ years. My friend was a perfect example of that. It took nearly three years for him to find another job remotely near his living expenses, let alone his previous salary. I personally lost six figures off of my net worth in a matter of a year, just from my real estate holdings. Colleagues who once didn’t bat an eye at $600 suddenly were pinching every penny, and haven’t come close to recovering today.
This is a classic example of the myopia that people unfamiliar with the details of other fields often have when evaluating things. To ignore the biggest financial collapse in our lifetimes and the highest unemployment running the longest stretch makes no sense. in 2007, things were drastically different then they were in 2008 or 2009.
Steve, look at this :http://www.calculatedriskblog….. That chart shows the very time period in question, latter 2007, early 2008, as the beginning of the largest drop across all retail in the history of the Census Bureau. Then it’s off the cliff for the next few years.
Look to Forbes: http://www.forbes.com/2009/11/…. “The National Bureau of Economic Research announced that the U.S. recession started in December 2007”. The iPhone was released in June 29, 2007. So, Steve’s experiment got a whopping four months of any reasonable test.
Of course carriers hated it, and did everything they could to make it look unreasonably expensive. It was letting customers finally get what they were paying for, and not pay for more than they got.
The same mistaken views were expounded in 1985, when the economy dipped just after the Mac came out. The same people blaming Steve turned around and credited Sculley as the economy began to return to normal.
Haters gone hate.
Well I guess they will. It’s just that your little story about Apples princing policy being fairer and more transparent that their competitors simply does not survive closer examination.
If my story does not survive close examination, then it should be easy for you to make your case. I read every comment to every article I write for every publication. I am prepared to accept where I am wrong. Make your case without trolling.
Lmao. I had to argue with editor over my using that as a chapter title in my new book on Apple!. Brian, you have my deepest props. 🙂
I paid full price for my iPhone 5 up front and unlocked. You can do that both from Apple and from some phone service providers. What on Earth are you yammering about?
Yes. I hate all the nonsense. Dell is a prime example. I always tell friends to never pay full price at Dell. I would feel like an idiot to pay full price for anything at Dell because there is always a huge discount waiting around the corner. Paying full price at Dell feels like going to a car dealership and just paying full MSRP.
But then it gets annoying, because if I want to buy something from Dell, I have to wait for the inevitable sale, to feel like I am not being ripped off. Even then when I buy it on sale, somebody in the forums will be bragging how he also used a coupon code and got for another 20% off. Dell adds to this effect by having a coupon code box for nearly every purchase implying you are not getting the best deal if you don’t have a code. In the end with Dell, you almost never feel like you got the best price even after you wait for it to go on sale. It is damn annoying.
Google actually has done it more Apple like with it’s Nexus devices. Selling at consistent price right up until the device is discontinued.
But some people do pay full price at Dell, people who care about 20% less than you, and the profit from those sales covers a lot of the overhead for dells design team, offices, staff, advertising, etc, so your discounted price can be closer to actual material cost to manufacture your order. If you think Dell is rough, ask your wife, sister, or daughter about department store designer label pricing, where a few people buy a dress for $200, then it fluctuates from $70-120 depending on the day of the week, and then last few people buy it for $25-50 a couple months later. The fashion company is just testing your ability to pay top dollar by whether you can wait weeks or months, clip a coupon, come in on a certain day with crowds, etc. If they just charged everyone $100 the working class folks could not afford the dress and the fashionable debutants would not consider the savings worth the hassle of having to fight the crowds, risking it being sold out, risking not being the first person their friends see wearing the new design. Variable pricing is good for everyone if properly executed.
Your example looks like the same mess. Charging everyone $100 would be better. The last few people getting the dress $25-$50 is not some great benefit to the working class, as it is more of lottery some small few participate in. So it is a purely fictional benefit. Unless you think lottery tickets are a benefit to the working class?
But lets stick to technology. What Dell does isn’t really all that beneficial. They have likely conditioned a lot of their customers to never buy full price product. I would love to be privy to the numbers, but I suspect Dell sells very little at MSRP.
Not only that but Dell destroys your resale value with their games. Try to sell a Dell product. The first thing someone will do is Google sale prices and determine, that there was a short sale of your item for 50% off. So they will demand that you sell it at some price less than that. It doesn’t matter if it was a some one day sale that most people missed, your resale is based on that. So customer residual value is destroyed by pricing games.
Grocery stores also routinely offer sales and coupons to let those who are willing to go through the effort and be flexible to save while those who can’t be bothered to worry about all that pay full price. Are grocery stores conditioning everyone to never be willing to pay more than $1.99 for Breyers Ice Cream if they offer a sale every once in awhile? Variable pricing strategies are an everyday part of American commerce in many sectors, Dell didn’t invent them, they applied to a new sector. Most normal people don’t resell their computers, they use them for many years until they are old, slow, crashed, full of viruses, and have a broken CD drive, and then may they get rid of them for $50-100 at which time nobody is googling slickdeals to figure out what to pay. Your ebay business strategies or gamer upgrades cannot dictate Dell’s larger business. As for comparing department store clearance sales to lottery tickets that don’t help the working class save, your analogy is completely flawed. The people who get the $200 dress for $25 aren’t lucky on a scratch off card, it isn’t a surprise, the sale price is printed on the tag. Those customers are the ones who were willing to wait until late in the season, come in on a specific crowded day, perhaps clip a coupon from their sunday paper, and take the risk of the item selling out or be flexible with other options if one does sell out, in order to get a price they can afford, that does help them, except in imaginary theory land where saving $75 doesn’t matter because everyone just needs things simple, even if its simply more than some can afford.
You go through the effort of clipping coupons in a newspaper, taking them to the grocery store, then giving them to the clerk. Why am I punished by waiting behind you? And further punished by being charged a higher price?
Because life is suffering. Actually I don’t know that you do pay a higher price. The grocery store that accepts coupons will attract additional customers that one that does not would not. Those additional customers allow them to buy in higher quantities and thereby negotiate better prices from distributors, get new products sooner, get better access to products in short supply, carry more variety, etc. The value customers that demand coupon acceptance also buy sale items of other kinds which help them unload excess inventory before it expires to manage their stock more efficiently. All of this helps them stay in business, and maintain the closest branch to you in operation. Plus, many coupons are issued by the manufacturer, who pays the retailer their value, and takes the cost from the marketing budget, in order to get people to try new things. But, if you don’t like it, you can shop at Whole Foods or some other luxury grocery store that has higher prices and doesn’t cater to the coupon crowd, you will be buying more convenience and service for higher price because you have the luxury to afford it. Finally, there is the Walmart model of attracting even more people by giving low prices without the effort/convenience filters of limited time sales or coupons as a main driver, and that results in even higher sales numbers and lower negotiated prices, but to give everyone such low prices they also have to cut service and many shop there and the store is crowded and its maybe not where you would want to go if you have more money. The market organically segments itself unless we impose fixed rules. BTW, I don’t have time for grocery coupons but I don’t have anything against people whose time is less valuable relative to their tight budgets. I do try to google coupon codes when I shop online or look at slickdeals.
Far be it from me to hate Apple (I have an iPad and I find it great), but guys… “Steve Jobs was on our side. Too many others are not.”
Haters are… Well, you see what I mean… But zealots too…
Perhaps. But time and again Jobs did what turns out to be for the benefit of his customers. This is far too rare.
And let’s be honest. He did so by offering high value to the customer, not necessarily by offering the cheapest. The customer then rewarded this strategy. He was on our side because he wanted to sell great products. And we showed him that’s what we wanted by buying.
I do not question the quality of Apple products (which I find superior to most other brands), but the tone that the author of this article uses to address the issue. There is a clear lack of objectivity and rigor on the part of someone who writes about technology. Apple is a company that offers good products at a certain price. It is not God, Steve Jobs was not His prophet and techwriters not His priests.
I don’t believe there is anything in this article to suggest what you state. You are projecting…
Not sure how starting a patent war with Samsung, HTC, Google, etc is in the consumers interests. It costs all companies involved a fortune that gets passed down to consumers and enriches blood sucking lawyers. Jobs himself talked about ‘going nuclear’ and now you are telling me that the fallout is good for us? Textbook price fixing was not good either. Jobs genius was in design and salesmanship, in other areas he did not benefit anyone.
I am sure all the companies you list are engaged in various trademark, licensing, patent and other legal battles. This article is about how companies price their products.
You made the broader statement about Steve Jobs benefiting customers time and time again, you expanded the subject not me. As for patents, Apple is clearly the aggressor against the companies I mentioned that would rather compete before consumers not judges. Sure, they counter sue, but Britain fired back on Germany in WWII also, it doesn’t change who the aggressor is.
Again, I’m just not sure you understand the industry other than Apple bashing. You think Google’s acquisition of Motorola was merely “firing back”? You think virtually every major Android vendor paying a fee to Microsoft is any different than what Apple is doing? What of Samsung suing Apple over standards essential patents? You wish to make this about patents, which it is not, and even there I’m not sure you are fully informed.
So understanding the industry means agreeing that Steve Jobs was benevolent toward customers and totally unlike all other recent CEOs who made more affordable, free, or open products that innovated in other areas? I did not defend Microsoft, what Microsoft did is bad. Apple imitating Microsoft, later, but on an even larger scale in more countries with more lawyers, is sad and shows desperation. Apple is following in the footsteps of failed has-been companies like Microsoft, Novell Netware, Sun, SCO, etc. Google bought Motorola so it could give aggressors like Apple some taste of their own medicine to bring them to settle for peace and cross licensing, but unfortunately Motorola was nice in the past and agreed to share patents. What was Google supposed to do, play Gandhi in the court room and go on a hunger strike while Apple takes all their products off the shelf with ridiculous broad patents like “technology for a little screen that displays html and lets users speak or gesture to it.” I guess with denying the standards essential patents, Google is saying that if you attack us, we cancel or are less cooperative with past treaties until you stop, and the lawyers disagree on whether that tactic is acceptable. Apple under Jobs decided against standards and for patent war. Remember when Facetime was announced and Jobs said that the ‘amazingly great’ thing was that it would be an open standard and others were free to make compatible software, and then he changed his mind and sued everyone?
Apple Derangement Syndrome. I fear there is no cure.
It’s less about the cheapest price, than it is about the actual value provided. Remember the old Gallagher joke about tires – ‘They tell you they’re $99. Then ask if you want those ‘extras’, like ‘do you want them on the car?’
There’s a certain respect in not gaming your customers.
I can’t tell you how many times over the years I had people tell me that Apple would cut prices to get rid of stuff just before new stuff arrived. It never occurred to them that Apple’s inventory is just two days deep. They don’t play those discounting games, because they handle their sh*t on an inventory side.
There isn’t any game theory you need to apply before buying a model, afraid it’ll be useless overnight. Apple ensures the big updates fit a two year cycle, that the models will handle the os updates for years (or at least three versions), and that the price isn’t going to move.
I paiid $450 for Vista Ultimate! But now thanks to that nightmare, I switched everything to Mac at exactly the right time 🙂 I have since enjoyed a fair price on software especially I feel… Logic X at $199! That’s 35GB of sample download…
What? What am I reading here? Where do I begin? First, let’s define Apple and Steve Jobs. Jobs was today’s P.T. Barnum. Get up on stage with your hippie T shirt and jeans in front of an auditorium of gullible zombie groupies and convince the world that it needs your products. I will admit, his stuff is good but a $75,000 Mercedes is good too. But do you really “need” it? Or can you do everything you need to do with a $20,000 Camry? BMW and Mercedes would love to have Job’s power of suggestion. They would love to convince everyone that they “need” a $75,000 car. Capitalism, you know, the thing we worship even more than Apple, is based on variable pricing. Unless you are Steve Jobs, you have a finite income and have to get the most from it. You can’t afford to pay the most for every thing you need. And you don’t need the best of everything. Your task is to balance price and quality. I absolutely love the idea that the same thing changes price in different places and times. To me, the lowest price of a product is the “real” price. As a consumer it’s my job to get the right thing at the right price at the right time. And it’s not that hard to do. Thank God for the internet and search engines. They have transferred vast power from the vendor to the consumer. Amazon and eBay are national treasures. Through them, hundreds of vendors compete (I love that word) with each other to give me the lowest price for the product that is exactly what I need. I reward the vendor with the lowest price (making a profit is his problem, no one is forcing him to offer his price) and punish the higher priced vendor. There is also the concept of buying things when you don’t need them. Buy wrapping paper the day after Christmas when it’s 80% off. Buy fish oil when it’s “buy one, get one free.” This is common sense. This is how you make limited financial resources go the farthest. This is Capitalism with it’s ruthless efficiency. This is how products improve: Apple’s competitors hustle to offer better quality at a lower price. And when they do, I’ll buy from them. Apple can keep it’s iPad, iPhone, iPod, iThis and iThat. My house is full of bargains I got at Amazon and eBay. I have never owned an Apple product and probably never will. I just don’t “need” anything they offer. Oh, and Apple doesn’t “care” about you by keeping their prices high. They care about their managers and shareholders. You are just a resource that they harvest to increase their wealth.
“My house is full of bargains I got at Amazon and eBay.”
I used to shop that way, too. And then my house got full of the dead bargains that didn’t last a year and had to be replaced by another bargain.
Then I decided to buy quality and now I have have far less clutter and buy far less frequently and yet still don’t spend any more.
Nice try cowboy. Let’s start with the car:
Let’s talk economics here. If you bought the $20,000 Camry instead of the $75,000 Mercedes, you would have $55,000 left to buy a blue chip stock that would pay you a dividend for the rest of your life. Your hard earned money would be making money for you instead of being in an asset that will eventually depreciate to zero. What side of that financial equation do you want to be on? Speaking of depreciation, there’s nothing wrong with buying a used Toyota. In fact, it’s the smart way to go. Let the first buyer swallow the most depreciation which starts the minute he drives it off the lot. Now to eBay. I bought a used Canon XSi DSLR in mint condition (photographers take very good care of their stuff) for a great price. He apparently wanted to move up to a new much more expensive camera. This one takes phenomenal digital pictures. It has more features than I will ever use. I just leave it on automatic. I bought a pair of used B&W 705 speakers again in mint condition (audiophiles also take good care of their equipment). They are very attractive in my living room and sound great (love those Brits). B&W makes a more expensive 805 speaker (something you would have a compulsive need to buy), but the law of diminishing returns kicks in here. I just don’t need them. I bought a used USB hard drive for $20 to back up my files from a guy who got a boatload of them from a legal office. It was used just once and works fine. I bought a book on Amazon for a penny in “used, like new” condition. On it’s cover it was priced at $27. when it arrived it was clear it had never been read. None of these are “dead bargains.” They are very much alive and well and serving my needs completely. The point of my first post is that if you are one of those technophile nerds who has to have the latest most expensive toy to show off to your friends, then go ahead. It’s your money. You worked (and worked and worked) for it. I find that “second tier” technology works just fine for me. And I have money left over to accumulate those high dividend stocks. Hell, I just might take an early retirement.
P.S. Steve Jobs reminds me of those preachers with their megachruches. They fill thousands of seats with gullible “disciples,” prance around on stage spewing their incoherent new age psychobabble. The preachers make millions of dollars while the disciples go home “inspired.” Nice work if you can get it.
You are using perhaps one of my favorite arguments to dissect and I will probably at even a deeper length here on our site in the future.
First flawed assumption is that cars are like PCs. I think there are similarities that showcase the nuances of large global consumer markets but the experience is drastically different. A Camry will easily get me to the same place as a Porsche exactly the same. I may “feel” different driving one or the other with the experience but on the roads, abiding by laws the function the same.
The PC as a computing device is also experiential but it is also something we spend way more time with than a car. Often base our lives work around, depend on for jobs, productivity, efficiency etc. In my line of work as an analyst I get to test and work with every computing product that comes to market. I have worked out which ones help me get my job done, quickly, efficiently, and painlessly.
Working with cheap notebooks and the hassles they bring with them in performance compared to one that is better built, higher performance, focuses on ease of use, etc, is drastically different. To use your car analogy using a cheaper phone, computer, tablet, etc, would be like driving from point a to point b with a car that keeps breaking down regularly to get work vs. one you pay more for that is no hassle.
Flaw number 2 is to assume that price, as a pragmatic term, is the only factor. For example Apple’s customer support far exceeds that of any competitor. We did a consumer interview and had to interesting points stand out. One guy who had a Samsung GS3 under contract broke his home button and had to pay $35 bucks to get it fixed. It was still within a year of owning. Another gal broke her iPhone home button and Apple fixed it for free. It was actually outside of its year warranty. These are just little anecdotes but a price can’t be put on but it shows that not all are equal.
Lastly, the flaw in the assumption is that you get the same thing for cheaper. Cheaper Android tablets do not have the app ecosystem of iPad, you do not get the same thing or have the same experience. The same is true of iPhone with many iOS only applications. You can not discount the discovery element of app stores and what I call the value of long tail apps.
The same is true with Macs vs. PCs. Just a small example is that Macs include iLife. Something that I have tried to piece together to have a similar experience across the board on Windows PCs and have found to have to pay more than $300 dollars to even have a solution that comes close. All this without the deep lack of integration both across software and ecosystem that Apple does.
So on paper, perhaps specs vs. specs it looks as though all things are equal when they really are not. While I appreciate a pragmatic viewpoint, I think it misses many of these non-tangible things that are actually important factors in many consumer buying psychology.
You didn’t really read what I wrote. The point that I was making can be summed up in one word: NEED. You obviously work in an environment that puts large demands on technology resources. Good for you. I’m sure you are happy with your career choice as I am with mine. I applaud your ambition. There are places like wall street, NASA, NSA and hospitals that depend on high performance technology and they are willing to pay for it. But I and millions of others don’t NEED that kind of performance and see it as a waste of money. I reluctantly bought a cellphone, an LG235C for $20. I use Tracfone for $100 a year. It’s worked perfectly the few times I used it. (Why do I need GPS on my phone? I know where I am. I’m in the grocery store or the barber shop). Like millions of others, I’m running Windows XP on an old Dell. Why did I make these choices? Because they’re all I NEED. And they work. If I and millions of other people were in your place we would buy a top of the line Mac and fill it with hundreds of apps. But we’re not. We buy affordable appropriate technology that matches our life situations.
I grasped that point and it is one I agree with. Although we must remember that NEED is an entirely subjective term. What is missed in the view you approach is what is valued. Some are willling to pay more for a smartphone, tablets, PC, car, house, boat, etc., because it contains things they value. MY point was that not all those things are easy to put price tags on. Things like service or support, or the experience, ecosystem, etc. Those may not be entirely comprehended analytically the same way I break them out, but they still have appeal to a mass market consumer.
Disneyland is 20 bucks more expensive per person than Great America, a theme park in Silicon Valley where I live, or Six Flags, but Disneyland yields a drastically different experience. One that is valued at a higher price tag.
So again NEEDs are one thing and its great to define but also establishing value amongst those needs is when we get closer to understanding mass market buying psychology. This is why no one should be concerned about Apple. They will live healthily because they strike a value chord and its shown over and over again. Many other companies will do the same. They will own a piece of the market and compete on value for share of compute time.
This market is large and will sustain many players using many different market strategies.
In that strain, you don’t really NEED a cell phone. People got along fine without them for decades, some over a century! Why do you even need a car? Why not bike or walk everywhere? Heck you don’t even need an old Dell with XP. You don’t really NEED a computer at all. How far down this line of NEED do you really want to go?
Here is one more example for you from our voice of the consumer research tracts we do.
We interviewed a guy who got the S3. He has told us that for the past 6 months he has been fighting with the device not working properly. Things like not ringing when the ringer is on, randomly restarting, not receiving text messages, not answering when he goes to answer the phone, etc. This phone is less than 2 years old. He said for the past two months he has had to restart it twice a day. His wife on the other hand still is using her iPhone 4 which is older than the S3 and it is working perfectly without any problems. He was remarking to us how his phone is not lasting and his wife’s which is older is working fine. He told us of friends who have similar experiences with Android. The gentleman was a ME at a major defense company and has all the traits of an engineering mindset since he is. The contrast in experience between his and his wifes was staggering and he told me his next phone will be an iPhone. He is the classic pragmatic buyer always looking for the best deal and he said he got the S3 because of the assumption that you get the same for less. He was happy to admit he was wrong.
Your calling a sample size of 2 research? Anecdotal evidence is anecdotal evidence regardless of making up names like “voice of the consumer.” In actual customer satisfaction polls with statistically significant sample sizes, the S3 is beating the iPhone, though perhaps the gap will narrow as we moved away from the Apple Maps fiasco. I know people with iPhones that broke. My 4S occasionally dims the crap out of itself since 6 months old and the battery is tanking after a year. Clearly most Samsung’s don’t need to be restarted every day, maybe defense guy got a lemon, got it wet, left it in the sun, put more wear and tear on it, took it to the beach with sand, or put it in his pocket with keys, and his wife kept her iphone in a padded bag in her purse most of the day.
No. My firm has a very large sample size for our voice of the consumer research tracks. Creative Strategies, has been doing focused technology industry research since 1969. That anecdote was just a sample from our large scale ethnographic research. Nice assumption though.
I am sorry for assuming your anecdote was an anecdote and not just an obvious sample of the large dataset you did not mention at all. However, this large dataset contradicts yours, and might be a bit more authoritative. http://www.macrumors.com/2013/08/01/iphone-5-topped-by-galaxy-s3-in-latest-customer-satisfaction-survey/ Is your data proprietary? Who funded it? What does focused mean and what is the distinction between focused and bias if you are focusing on something with two sides?
We are an independent industry analysis firm. I suggest you look up what an Industry analyst is if you are not familiar with it and are genuinely interested in how this industry works. We fund all our own research and analysis and provide it as a subscription service to the industry.
I have seen that survey and many from carriers and retail outlets to contradict those results as well. I am always highly skeptical of surveys because of having done market research for 14 years I know how surveys can be formed to get the answer you want.
Our research is not done by surveys but by what we call consumer anthropology. We do behavioral research using principles of behavioral science and behavioral economics. I interface with executives at every level of many industry leading technology companies and most agree observational and behavioral research is a much better way to understand consumers true needs, wants, and desires, in order to make products or employ market strategies that yield results.
If you are new to our site here and do actually care to engage in genuine dialogue, then I suggest spend more time reading articles from myself and others as it will help give more context to our thoughts, and opinions, which are all formed by deep experience in our areas of expertise. Our insights and opinions are not just random abstract thoughts but are informed by experience and by being around the block a few times in this industry.
But even here you aren’t showing that price is everything. Why not just get a Nissan Versa for $12k and have yet another $8k to invest? Go to the library and check the book out for free, or even, these days, download it to your phone or tablet from the library for free. Buying a DSLR for essentially point and shoot picture taking is an enormous waste of camera and money (never mind it is always the lenses that matter anyway). And I am sure I could buy a pair of KLH speakers and replace the drivers with JBLs far cheaper than you spent on the B&Ws on eBay.
So, even for pragmatic you, it isn’t just price, but a less expensive price for the same quality or _same_ purchase. If you had to achieve those same results with a company’s dynamic pricing model, you would either be one lucky guy or know the inside scoop of their pricing algorithm (and even then probably still need to be lucky to get the timing right). That’s the author’s point.
Steve Jobs reminds me of those “ministers” with their megachruches.
That’s because you are a simpleton. Using religious metaphors to try to get your tiny head around Apple’s success was boring in the 90s when it may have applied to Apple’s dedicated and fanatical user base that kept it barely alive til Jobs returned. If you still can’t grasp why Apple is so successful, stupid religious themes from 1994 are not going to help you.
You clearly suffer from what I call: Apple Derangement Syndrome.
I think the deranged people are the ones who camp out in front of the Apple store waiting to buy something that someone told them that they need.
“They care about their managers and shareholders.”
I will say you are the first person I’ve heard express this sentiment over the past year. Until now the general consensus (from skeptic analysts) has been that Apple doesn’t care one whit about their shareholders, thus the huge drop in stock price creating calls for Tim Cook’s head.
“Thank God for the internet and search engines.”
Also, you better believe Amazon knows if you used a search engine or price bot to find a cheap price. They have mechanisms in place to find and thwart people like that (re:alter search results).
Jobs was today’s P.T. Barnum.
Oh, #$%k off.
You are truly an idiot if you keep falling for the perennial bvllshit of “Apple the Fashion Accessory Maker”. Is it really so hard to finally realise after 15 years of the rebuilt Apple, that Apple has grown so large because it makes products people want to buy and holds on to those customers because it delivers value that goes beyond the sticker price?
I have never owned an Apple product and probably never will.
Then what the #$%k do you know about Apple?
That’s rhetorical. The answer is “nothing”.
While I share your frustration with such schemes (the airlines are my fave on this), there’s another perspective to consider here. While companies are indeed trying to maximize profits and, in some cases, market dynamics appear to “force” them to engage in dynamic pricing you’ve outlined, it is also arguable that the products or services might not be available at all at the lower prices if they didn’t do this. In other words these companies are attempting to also maximize the size of their market and customer base. They realize that some customers are only willing to pay $X (which if *everything* sold at this price, would not enable them to be profitable to stay in business), while others are willing to pay $X+Y%. The *average* profit margins work out to keep the company profitable and in business and, in theory, everyone pays the price they are willing to pay.
While my personal envy might make me bristle that the person sitting next to me on the plane paid 20% less, if I’m being honest, I paid what I was willing to pay. If the price was too high, I wouldn’t have paid it. Would I always like to get the same thing for less? Sure. But that’s not a particularly insightful observation about human behavior.
In the end, these companies (while some are spectacularly frustrating) are actually doing a service that provides some who are unwilling (or un*able*) to pay a higher price an opportunity to get the product at the lower price. You have to look at both sides of the pricing here.
Consider it this way. Imagine you were President/Dictator and could put an end to this dynamic pricing. You mandated that it must end. Each company could set its own price, but it has to be the same price for all customers. What do you think would happen to the average price? What would this mean for the more “financially challenged” customers in that market?
“What do you think would happen to the average price? What would this mean for the more “financially challenged” customers in that market?”
I think companies would figure out who they can and want to sell to and will price accordingly. Else they don’t sell. It wouldn’t mean anything more or less to those financially challenged. They would still be financially challenged.
And not all financially challenged are created equal. Some are so because they just don’t make the money. Some are so because they spend beyond their means. Which financially challenged do you want to be fair to? And at which level?
“in some cases, market dynamics appear to “force” them to engage in dynamic pricing”
This is the point, I think. The dynamic pricing is because the company _thinks_ this will make them more profitable. But compare Apple’s profits to just about any company, within and without the tech industry, with dynamic pricing and tell me who is making more? One would think Apple’s success would be enough to prove their model. Yet people still think in terms of needing to compete on price.
No one buys solely on price, really. As Shakespeare once noted “our basest beggars are in the poorest thing superfluous.”
You can turn your illustration around on the dynamic pricing company, too. Obviously they are “willing” to sell at a lower price. I just want them to be transparently willing to do so for me, too, and not hide the lower price in dynamic obfuscation. If they aren’t willing or able, then they shouldn’t.
I submit that you haven’t thought this through as fully as you could have.
The point here is a couple of things:
1. The lower prices are essentially being subsidized by the higher prices. Thus those that are willing to pay more are making it possible for those who are only able to pay less to buy the product or service.
2. The dynamics of the particular market may be such that the company cannot sell enough at the higher price to remain profitable nor can it sell enough at the lower margin (and “make it up in volume”) to remain profitable so it must resort to this kind of model. You simply assume this is not the case and that Apple proves it to not be the case.
3. Mandated static pricing would likely cause the prices to be set higher and this would reduce or eliminate the possibility for less financially able people to buy said product or service.
1. The conclusion that Apple’s success and profitability is due primarily (or even significantly) to its pricing model as a rather facile analysis. It also presumes (incorrectly) that this model would work in every industry and under all circumstances.
2. As for the company’s transparency, this is a fair point. If this is a critical part of your purchasing decision, then, I suspect, you’d not buy from such companies. If enough people felt this way the model would go the way of the buggy whip. Evidently not enough people care and are content with the prices they are paying and not so overcome with envy they become over-concerned that the next guy is getting a better price, they instead are focused on whether the price they are paying is a price they are willing to pay for the value they are receiving. Period.
As someone who works I an industry that has recently become enamoured with dynamic pricing, I can assure you, providing for the financially challenged is not on anyone’s mind. Accommodating for price sensitivity is, but that is not exclusive to financially challenged enough to be a different discussion entirely. It is easier and cheaper to offer a specific product to address financial challenges.
We’ll just have to disagree on the other points. Most dynamic pricing is about gaming the principle of supply and demand. Thus both our over simplifications trying support our respective positions are going to have vulnerabilities in this limited forum.
But gaming supply and demand is a philisophical complexity that Jobs opposed in his pricing approach. In that regard Apple’s pricing is pro-consumer than most other companies’s.
“I can assure you, providing for the financially challenged is not on anyone’s mind”
I didn’t say it was. It is merely a consequence or benefit (for some).
“Most dynamic pricing is about gaming the principle of supply and demand.”
Your pejorative use of the word gaming aside, yes, it is about trying to figure out the right balance of price/supply/demand. That you consider this a bad thing only suggests a failure to truly understand economics and markets.
“Thus both our over simplifications…”
Speak for yourself.
“But gaming supply and demand is a philisophical complexity that Jobs opposed in his pricing approach. In that regard Apple’s pricing is pro-consumer than most other companies’s.”
Maybe. But only when you assume that the consumers who cannot afford the prices don’t really matter.
In the end, the root of this complaint is about envy and fear: The fear that someone else might get a better deal than me and the envy that they have.
Maybe you don’t think you’ve over simplified. If that’s the case then you show you haven’t been part of any discussion to research and implement dynamic pricing.
LOL. Ahhh the assumptions you make.
Well, the assumptions we all make. Especially when conversing with someone we don’t know and no glasses of beer or mugs of coffee between us.
Fair enough, except your assumption (“you show you haven’t been part of any discussion to research and implement dynamic pricing”) seems to boil down to: Because I don’t agree with your assessment I don’t have any experience with actually dealing with this issue. You’re wrong. I do…every day in fact.
While I understand the principals of dynamic pricing, and while Big Data and real-time analytics enable it, the very notion still strikes me as anti-consumer. We can never have the resources, computing power and knowledge that the business has. It’s a rigged game.
And what exacerbates the situation is the consumer is never privy to the parameters to take advantage of dynamic pricing. So even if I am one of the “financially challenged” (however you want to define that) I will never actually know how to get the best price. Until someone spills the beans, who then gets sued or fired by the company for spilling the beans, and then they change the rules again. This is not about benefiting the consumer at any level.
The only “dynamic” pricing model I’ve seen that benefits the consumer is the “pay what you can” model that is creeping up more and more, especially in the arts.
But you seem focused on the wrong question. Isn’t the real question: “Am I willing to pay the price offered for the value offered?”
Sure we all want a better deal. Always. As mentioned previously, this is not a terribly insightful observation.
At the point of transaction the question is: “Is this price worth it to me?”
Not if the point is consumer benefit. Then the answer is “As long as I am getting the best price available.” In other words, most companies are not willing to offer to the customer what they seek increasingly in their own dealings with MFN clauses.
“Not if the point is consumer benefit.”
What the heck do you mean?
The only valid question here is at the individual level: “Is this price worth it to me?”
What’s your time worth? How much of what little remains of your day (after having had to work longer hours for the same salary) are you willing to devote to bargain-hunting so you can feel as though you’ve saved money?
What if, because of this dynamic pricing approach, some consumers are now able to afford the offering, where, without it, they wouldn’t be able to at all? Is that anti-consumer?
Define “can’t afford”.
Are you serious? Now it sounds like you wish to drop into a semantic or philosophical debate.
If you are as versed in economics, marketing, and pricing as you state, then this is a very real question. “Can’t afford” can mean any number of things which may or may not be addressable.
Do they just not make enough? Do they spend beyond their means? Do they have credit? Do they just not want to spend the cash? Do they have their money tied up in non-liquid assets? Are they busy paying for their mistress? I’ve sat in the classrooms and conferences (as tech support) that addressed this very question. It is amazing how many definitions there are for “Can’t afford it”.
Ultimately, unless someone’s cash flow is negative, everything is affordable. Some would say the exceptions are a new car or home. Although, Dave Ramsey has done an admirable job of showing even that is potentially a myth. If one has the discipline to save, and are in a positive cash flow, one can save up for anything.
It is almost never about affordability, per se, but it is more your second point about value. Do they see the value? “The only valid question here is at the individual level: “Is this price worth it to me?”
But even then, no one feels the price was worth it if they have reason believe they were wronged or cheated or conned, which is a decidedly different response from fear or envy.
Okay. Let me re-phrase it…WON’T buy at the higher price. That’s simpler and more objective. Ultimately the seller doesn’t care so much WHY, just that they WON’T. They lower the price, then they DO. That’s all they know.
“But even then, no one feels the price was worth it if they have reason believe they were wronged or cheated or conned, which is a decidedly different response from fear or envy.”
You don’t know that. Perhaps you are projecting your own feelings onto others. If the fear of “being conned” is a concern, then don’t buy. If fear of not getting the absolutely lowest price, then don’t buy. If fear that someone else might get a better deal, then don’t buy.
Now, if ENOUGH people make that don’t buy decision, the company starts to suffer and is forced to adjust its approach. If ENOUGH people chose to buy, then, apparently, the pricing approach isn’t enough of a concern for them to stop buying.
“Perhaps you are projecting your own feelings onto others.”
You call it projecting. I call it being mildly observant.
“I call it being mildly observant.”
Perhaps. But what I’m observing is that these companies are still in business, selling products and people are still buying them. So, apparently, the fear and envy isn’t outweighing their desire for the products and services.
Perhaps. My concern is that all the systems and data and people involved in that dynamic pricing effort are funded entirely by the (profit seeking) company. I am no match against them, right?
It seems as if dynamic pricing is a way to use Big Data to ensure the company knows the maximum I will pay (not the maximum I can save).
Of course that’s what they are concerned with. Again this is nothing new. That’s what businesses do. But isn’t that what we all do? Aren’t we all trying to get the best deal? Don’t we all try to get the best salary? The lowest price? So your complaint seems to be that they have the resources to “game the system.” But you have the final trump card: Don’t buy the product. They can’t *make* you do that. Don’t buy the product. Even use your blog platform to convinces other not to as well.
“Even use your blog platform…”
Ironically, this is what he is doing.
I understand. And that’s cool. There’s nothing ironic though here. I’m simply trying to present the other side of the issue.
This is the point, I think. The dynamic pricing is because the company _thinks_ this will make them more profitable. But compare Apple’s profits to just about any company, within and without the tech industry, with dynamic pricing and tell me who is making more? One would think Apple’s success would be enough to prove their model. Yet people still think in terms of needing to compete on price. jfutral
i hard for any company to emulate apple business model giving that it failed them in the past
short-term profit is rarely the best indication of a Good business model,
You do realize we are now well in the 21st century, right? This is not the 1990s.
It doesn’t matter, it still the same company, with the same business model
the luxury brand
as successful as Apple may have been over the last ten years, they still not that a dominant and competitive of a company as you may think.
Like Microsoft with windows and Google with search
Thanks. I think you make a great point. Still, as I note near the end of the piece, odds are high that us “users” will never ever have the computing power or data to ensure we get to “maximize” our savings when going up against those big businesses seeking to maximize their profits. I love how Apple tells the world: this is the price for our product, plain and simple, take it or leave it. I am not worried about buying my Apple device on a Tuesday, for example, or waiting until Best Buy has a big new shipment arrive. Makes life easier.
I’m engaged in a perpetual pricing battle with the local grocery store which sends me weekly specials, trying to slowly bumping up the price they charge for the staples I buy. I hate this.
I also hate the way Apple prices spec/RAM/flash upgrades: $100 for 4GB of RAM? $100 for 16 GB flash?
Give me an effing break.
The RAM and hard drives pass more stringent testing than their off the shelf same-brand counterparts. I know a director of engineers at Seagate and you should hear him complain about how fussy Apple is about the parts they buy. Bottom line, you want quality you have to pay for it. Don’t like it, don’t buy it. There’s plenty of cheap crap out there for those that want it.
Some folks here did not like the way I use the term “fair”. It wasn’t meant to imply “right” or “justified” or “best”. Rather, the price stands alone, for everyone. We can make a fair, rational decision.
I hadn’t thought about Apple’s RAM upgrade prices or the price of some accessories when I wrote this. Those often come with seemingly outrageous mark-ups.
The expression I used to use was “I’m prepared to throw money at you & you can’t figure out how much nor tell me where to aim it?” And note that it’s only Apple that makes a true announcement – what it is, how much it costs, and when it’ll be delivered.
Great line. Thanks.
A product has two costs, the cost to manufacture each unit, and the one-time cost to design and market it regardless of the number of units sold. Any sale of a unit over the cost to manufacture is better than no sale at all, but if no units are sold at higher margin it is impossible to make up the cost to design and manufacture, make up for less successful products that lose money, and turn a profit. Ideally for a company they could read customers minds and inspect their credit reports and adjust margin accordingly so the customers who would be willing to buy at a price that helps cover design and profit if that was the only option do pay that, while those who would rather not have the product than pay that price get a lower price that covers manufacturing cost with much more marginal profit. However, there is no way to do this, companies can’t read your mind or grab your credit report when you browse the web or store, and if people figured out that telling a sob story about your finances and mild interest in the product netted a 20% discount they would like to get it, so companies have to settle for lesser tactics. Coupons, deals, sales, tricks, promotions, etc create a way to filter affluent impatient impulsive customers from your customers more concerned about their budget, patient, and willing to trade the time to figure out a deal for a lower price because they are not willing to pay a higher price. People who have money, want the product now, and dont care to waste time on details pay a higher price, deal hounds pay a lower price, and the company can sell the product to more people more efficiently, helping out those living paycheck to paycheck, helping themselves with more sales, and helping the affluent customers by making the product they want sell enough to support future development. Airlines do this too, charging more for easier experiences (quick checkin), convenient flight times and days, the ability to reserve tickets days before a flight, flexibility, less connections, etc, while giving deals to the more marginal customers will to buy an economy ticket and fly the red eye on tuesday or whatever flight is underbooked. Flexible pricing benefits everyone and we need it more in our economy not less. If a CEO pays $5,000 for a fast track MRI appointment on Monday at 2PM and a low income customer gets a bargain $500 MRI at 2AM when they are texted that the machine is not in use, everyone wins, people trade price and convenience and the market expands. Apple refuses to allow deals because they don’t want value or convenience customers to interfere with their luxury branding, and that attitude is a big reason why they have been surpassed by competitors like Samsung.
They may have ONE price, but fair? Looking at Apple’s mountains of cash I don’t think so. Prices calculated with the customer in mind don’t have 60 per cent mark ups. So this is just another gushing article while we all wait for the latest hourly ‘rumors’ with bated breath.
So you’re outraged at Microsoft raking in a 66% profit margin on Office and an astounding 81% profit margin on Windows? What about them taking $284 in parts and selling them as Surface RT tablets for $599? (before the recent fire-sale) It’s amazing how everyone rages over Apple’s profits, yet never factually compares them.
I’m happy for any company that’s able to rake in money because people want their stuff. I’m talking about the article above, not Apple itself. I simply abhor the thousands and thousands of ‘journalists’ who do Apple’s marketing work for them – for free.
“Prices calculated with the customer in mind don’t have 60 per cent mark ups. ” I’d say that completely disproves your being happy.
So you rage at journalists promoting Apple, yet Microsoft’s massive media-protection-machine doesn’t bother you one iota, despite their making far higher profit margins than Apple?
i don’t know where your obsession with MS comes from but all i see are 80 per cent apple ‘news’ in the tech media. a single unfounded rumor can get more coverage than whatever MS does. all you ever read about redmond is how it’ll be dying any day now.
This is simple economics. Apple news drives page views, and many sites (thankfully not ours) are dependent on advertisers dollars via the amount of daily page views they get. Bottom line is Apple headlines sell. We write a lot about Apple because we analyze them from the point of what they mean to the industry. We do the same for many other companies but while Apple is the undisputed leader of computing they will be the focus of many sites.
If you think Apple products are overpriced, then don’t buy them. That’s what I love about Apple. They care enough about their products and me that no trickery is necessary. There is no giveaways to entice me to hand over my information. There are no freebies offered if I become a “member”.
The price of everything and the value of nothing.
What happened to all those manufacturers that made almost none or lost money on their products to appeal to the lowest common denominator? Healthy, are they?
The constant need to equate price with value is sad, and a product of a WalMart mentality. Yes, you can have a t-shirt for 5 dollars. How much is it worth? What value do you get out of it? Do you console yourself regarding buying cheap crap with the idea that you can buy many crappy products and throw them away regularly as opposed to buying a well made product that lasts for years?
The value of a thing is not related to it’s cost in money. Microsoft leaned this lesson the hard way. They sold a device at a price that made sense in economic terms, but the device itself had no value to the consumer. Anyone arguing that Microsoft could have made the Surface successful buy selling it at a loss is in the same trap. Price is irrelevant if the thing being sold has no value.
another article written by an isheep to the mainstream consumers. you sound like Rush Limbaugh everyday. Look how popular and convincing Rush is.
Apple makes shopping so much easier and immeasurably more pleasant. Go to any PC manufacturer’s website, and where are the prices?
If you can’t tell me the price of your product – upfront – that is a warning flag.
“Starting at $599!”
Go to an independent mountainbike companies website and look for the price. They probably won’t list it because their distribute to dealers who they don’t want to piss off. Of course, I am sure the real explanation is that the independent mountainbike companies are evil corporations unlike Apple, the largest publicly traded company in the world, that just happens to run its own stores so it doesn’t have to worry much about a few dealers.
Good point. And worse than that, the Illusion of Choice is hard at work on Dell’s (or any PC maker’s) website. This system where the act of buying a laptop has 30 thousand possible variations, is broken, has been broken for years and hasn’t worked to keep manufacturers in the black. The PC manufacturers are so terrified to make a decision based on an obsolete demographic (the box assembling IT know-it-all) that everything possible screen size and RAM and HDD combination has it’s own model line.
Just like automakers who make a few dozen variations on the same model year to let you pretend you have pricing power, It simply cannot be cost effective to maintain this complexity over just picking some standard features and be done with it. Is there really a demographic out there that would need to have the choice between 320 and 500 gig HDD? Just as the idea that there is a demographic that wants only one window to have auto down?
“Steve Jobs was on our side. Too many others are not.” – Amen, Brian. From a business standpoint, the whole concept of integrity that gets embodied by this clear policy is vital. In a digital age, we all too easily forget what it’s like to deal with a craftsman (which Steve was) that isn’t playing games. I remember a sign in a plumbing shop from years ago. It said, ‘Of course our competition charges less. Who better knows how many corners he intends to cut?’ I never forgot the point, lol.
A better title would be:
“Steve Jobs And The Radical Innovation Of Disciplined Prices”
Saying “Fair” just brings out the: “But Apple charge x% more product Y” arguments, which misses the point.
Pricing discipline is what Apple does that few others do. Discipline is hard but it has benefits.
For Apple is offers consistent returns on inventory, it even allows Apple to sell refurb products at a decent return as they aren’t being undercut by sales.
For the customers, it frees them from games, and frees them from feeling ripped off, when the next guy scores a better deal. Finally it gives customers strong residual value for their products. Because Apple is so disciplined with pricing you can count higher used prices when you sell your Apple products.
Disciplined pricing is generally a better experience all around.
Even though I think Jobs often used “fair” to describe Apple pricing, especially when iTunes Store first started up and the whole .99 for all songs hit the scene.
But in broader discussions like this everyone brings their definitions of “fair” to the table.
Great points. Discipline is hard. I used “fair” because as the customer, I can make an informed decision when it comes to Apple products. No games, no tricks. No throwing in freebies. It’s actually quite liberating.
Robin Hood, price fixer. How noble of Steve. You know, Apple tried to introduce this noble practice to college kids textbook pricing, and the courts didn’t like it.
If you are resorting to clipping coupons (usually done in grocery stores as you point out below) you probably shouldn’t be buying unnecessary tech gadgets. You need to stop comparing to non-applicable markets.
If Apple were going to play the Dell game, they would have to raise prices to accrue the same earnings.
Disciplined pricing means a lower everyday price, and really this is benefits the majority of people who really don’t want to play pricing games.
Bestbuy, Office Max, Office Depot, Staples, etc all regularly print coupons which value-oriented customers regularly redeem to help them save money. These stores can’t afford to just give everyone the discounts, but the value-oriented customers the discounts draw in help with the overall balance. Online coupons serve the same function. As for the idea that people who use these coupons must be dirt poor and shouldn’t buy any tech products, what you are saying basically is that blue collar working people and their kids have no right to listen to music, browse the web, make phone calls, watch a football game, etc, and you should only do those things if they are rich enough that a 20% difference in price is insignificant to them. Tech bloggers are just out of touch with consumers who don’t work in Silicon Valley or drive Teslas. It’s perhaps true that the pricing game does raise the prices for people who don’t play it, maybe they pay 5% more because they seem willing to, and that supports the overhead at the manufacturing/designing company that the coupon buyers are not willing to support, but what it amounts to is one person paying 5-10% more, another paying 10-20% less, enlarging the overall size of the market by pulling in value customers without losing margin from convenience customers, and decreasing costs from increased volume.
Lotto tickets are a “tax on stupidity”, and spending your time waiting/searching for a coupons to save a little bit, isn’t much better.
What I see with this is exactly the same lotto mentality. Instead of spending small amounts of money, hoping for big rewards, people spend big amounts of time, hoping for small rewards.
Luckily there is a choice. If you don’t like playing the lotto with your purchase price, you can buy an Apple, if you do like this pricing gaming system, Dell is the company for you. Enjoy Dell.
You are comparing a fairly probable return from using coupons to an almost certain loss from buying a lottery ticket. You are comparing a lotto ticket that you dont know the value until after you buy to a sale where the value is printed in your Sunday newspaper. You need to think mathematically. If someone makes $10 an hour and they spend an hour figuring out how to save $10, thats break even. If their job is physically grueling and stressful, and they can figure out a coupon in 15 minutes which watching TV, and the coupon saves them $20 not $10, its an obvious decision, and has nothing to compare it to the lotto. Now if they make $200 an hour and drive a Tesla so their air conditioner office where they play golf with the other managers, the coupon is just a waste of time because their time is worth a lot more than the money in question. Should cars have a fixed price? Should houses have a fixed price? Everyone has levels of cost that are worth them worrying about and other levels that are not, but you need to understand those vary, even if you think everyone earning under $50 an hour is stupid. Most companies want to expand their market and volume by offering discounts but make those discounts a little bit hard to get so affluent convenience-focused customers will buy at higher margin prices. Apple doesn’t choose this strategy because they want to be more of a luxury brand, but you should not dismiss the strategy when it provides value to many companies and customers.
If you want to buy a Tablet today, the probability of you finding a coupon for it today is negligible. You are playing the lotto. So what do you do, delay indefinitely, checking for deals/coupons every day? That IMO is an idiots game.
BTW, Google “paragraph” and learn to apply it.
If you want to buy a tablet today, and you are not set on 1 specific model, you can definitely find several options. If you are set on a specific model, there was a deal this week on the nexus 7. Apple doesn’t have coupons, we get that, but besides Apple you are kinda wrong. Also, lots of people don’t have to have everything ‘today.’ If you want to find a house, car, girlfriend/boyfriend, new primary care physician appointment, etc today you may get a lot less value than if you are willing to keep your eyes out for awhile to find the best value when it comes around. If that is the lottery, most of life is a lottery. I like to wear Brooks Brothers dress shirts to work, because they have a good fit and they are easy care. But I also know they offer 20-40% off sales a few times a year, and I buy them then, because saving $20-30 a shirt is significant to me and I can wait. Someone who makes 2-3x what I do may not care and pay full price. Brooks Brothers makes a profit on both sales and leverages their different groups of customers as best as they can for each. What the problem with that? Everyone wins. If the customer who doesn’t care about price and needs the shirt now go the same medium flat rate as me, they would increase their risk of the item being out of stock and having a line because I might buy that day too if I still decided to buy, this way they get convenience and I get value.
Perhaps. It’s a good point, provided you *know* this stuff. I don’t. I make the decision on an item based on its price, not what I am expecting its price to be at some point in the future.
I’m not no longer an Apple User, but the one thing I like the most about them is their consistency on price and product cycle, which I think is one of their greatest strength
“Show me your product. Tell me the price. I can then make the decision if it’s worth it. That’s all I’m asking for.”
Show me respect, earn my trust.
Forgive me for being late with the comment, but I think this is particularly relevant to the discussion:
Essentially, the strategy of multiple price points for goods is a profit-maximising approach; Steve was famously product-maximising.
Product-maximizing vs profit-maximizing is a great way of separating Apple from the competition.