Make no mistake about this axiom of life on planet earth. Everybody is out to get your money. Everybody. Every maker of whatever you buy, or every distributor of wherever you buy, wants to get the most money from you.
The same holds true for your boss, the government, your religion. Your boss wants you to work for the least amount possible. Your government wants you to pay the most taxes possible. Even religions ask you to give until it hurts. In a world where everyone wants a piece of you, how is it Apple’s customers are so satisfied after giving up more than any other customer group?
It’s The Package
Apple has received accolades through the years for being an innovative technology company with a long streak of market disruptions. Apple II, Mac, iPod, iPhone, iPad, Watch. Apple shapes how the computer industry– mobile or desktop and notebook– goes forward. In addition to driving the various segments of the industry Apple also siphons most of the industry’s profits with gadgets that are, in every case of substance, priced higher than competitors.
How does Apple defeat the scourge of cheap which infects their competitors so that only Apple avoids the low prices which have little or no gross margins and even less profits?
Think about it. Apple’s Mac has about 10-percent marketshare but more than 50-percent of the PC industry’s profit share. Likewise, the iPhone manages far less than 20-percent marketshare, but pulls in more than 90-percent of the smartphone industry’s profits. The story is much the same with every other product. iPad, Watch, Apple TV, iTunes. Apple charges more for similar products, but keeps the lion’s share of the profits.
How does Apple avoid going low price or cheap?
It’s the package.
The Apple II wasn’t the first PC, but it was the first that did more at an affordable price. The Mac wasn’t the first point-and-click graphical user interface PC, but it was priced right and set the stage for computers in the future. Likewise, the iPod wasn’t the first portable media player, but it was the first that did everything right– at the right price. Smartphones before iPhone had touchscreens, but Apple made the iPhone do more and do it easier than competitors. See the trend? Apple charges more for a packaged device that reduces complication and enhances usability.
It’s the package.
Think about how much extra money Mac, iPhone, iPad, Watch customers pay for their devices than competitors, but then compare what they get in return. Across the board, Apple’s devices are more secure, mostly easier to use, come with more usability, maintain higher resale value, and work better together than any other multi-platform devices. Add to that the support Apple provides at the Apple Store and Genius Bar– not replicated by any competitor that I know– and you can see where Apple’s walled garden ecosystem has a packaged advantage not easily replicated or compared by a competing device, but sufficiently better that customers are happy to pay more for the overall experience.
It’s not the hardware. It’s not the software. It’s how it all works together. It’s the package.
Competitors copy Apple’s hardware designs which explains why many PC notebooks, whether on Windows 10 or Chrome, look like the MacBook. It explains why nearly every smartphone looks and works much like an iPhone. Ditto for tablets and the iPad. Competitors copy the design and functionality of Apple’s products, but fail to copy the package.
Yet, it’s the package of components that work so well together that gives Apple the differentiation it needs to command higher prices, greater margins, and profits that exceed all competitors combined. Most customers only buy what is least expensive, or any product that is priced less than Apple’s comparable products. Apple doesn’t care because competitors do not copy the one ingredient that separates the scourge of cheap from profitability.
It’s the package.