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http://www.insanely-great.com/news.php?id=693
Does Apple Need to Duplicate Gateway''s Cut-Throat Pricing?
By Remy Davison, Insanely Great Mac
July 22nd 2002
The numbers game.
As Dell and Gateway offer discounts and slash prices to keep revenue up, does Apple
need to go further than the minor price cuts offered on the iMac at MWNY?
Evidently, CEO Jobs and other Apple executives don''t think so, as the iMac DVD-R was
reduced by only $100, while the 17" iMac was intro''d at $1,999.
Apple is currently offering deals on Power Mac G4s, but you''d be forgiven for
thinking that Apple hadn''t noticed a slump was on and that inventory was clogged with
15" iMacs.
Evidently, Apple has opted for high profit margins per unit over strong profits
themselves. And Apple, strictly speaking, isn''t even going for market share by
plunging into the loss-making cheap-PC end of the market.
Gateway has recently dropped its base desktop to under $600 with CDRW and 17" CRT for
a limited time. Its baseline Solo notebook now goes for a mere $999. Meanwhile, Dell
gives away fists full of dollars to passing students at mall kiosks in an effort to
get with a Dell. Dude.
Sure, we know they''re not even vaguely comparable to eMacs or iBooks on a
feature-by-feature basis. But that misses the point: when non-techie people go
shopping, they don''t see twice the value in the twice-as-expensive eMac.
So far, Gateway''s strategy has cut both ways, according to a story on CNN. On the
plus side, Gateway reckons they''ve gained market share in a declining market; on the
negative side of the ledger, they''re still $58 million in the red for the most recent
quarter.
Despite the apparent inaction of Apple on the pricing front, I think that they''ve
made the right call. In the mid-1990s, Apple tried something called the Performa (you
probably still have three of them). Low-price, low-margin, strictly-speaking not even
a Macintosh. So low, in fact, Apple couldn''t sell them by late 1996, while there was
over $1 billion in back orders for high-end Power Macs - which Apple hadn''t built.
The PC market isn''t like ''96-97 now. It''s saturated. My workplace (and many more I
know of) are filled with white box PCs as IS managers work with reduced budgets.
Moreover, IS managers with a clue have always known you can build a white box as good,
or better, than any name brand, if we''re talking mere PC workstations. After all,
that''s what most of them build at home.
How does this impact upon Apple? It commodifies the PC, but the Mac still has its own
space. Apple just has to go on convincing enough of the market that its products are
not only elegant on the outside, but represent a better value proposition than any
white box or branded Windows machine. You pay for quality, Apple implies.
Many will dispute this and argue that Apple merely uses standard PC componentry; the
ROMs and the OS are all that''s unique. But this is Apple''s selling point:
"everything is easier on a Mac"; "it just works".
The question is whether that convinves enough people to buy that $1,049 eMac over the
$599 Gateway (yes, I know there''s a cheap iMac CRT, but that hardly counts).
No, we say. Leave Dell and Gateway to slug it out at the high end; we''ll occupy the
high-priced (moral) ground.
Post your comments at:
http://www.insanely-great.com/news.php?id=693
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