What would you think of a company that has been wildly profitable for a decade; has over a billion customers, but gives away billions of dollars, or lowers prices on older product instead of introducing new and innovative products?
I’d say that company has lost its creative edge, wouldn’t you? We can argue the merits of Apple’s track record for another decade, but one thing should be clear. There isn’t much that’s new under the Cupertino, CA sun. Apple’s new strategy for moving old products is to cut prices.
Shareholders, Dividends, Margins
Let me cut to the chase. The last new product category that Apple introduced to the world was the iPad in 2010; the device that Steve Jobs used to usher in the post-PC era. I can argue that the iPhone was the gateway to the post-PC era, not the iPad, because the iPad is just a big iPhone without the phone.
Since Jobs died in 2011 Apple has upgraded most of the product line. That’s what ongoing iterative innovation means. Improvements. We can argue whether Apple Watch is a new product category, but it’s also an iPhone accessory, fully dependent upon Apple’s iconic post-PC era device. For now. Watch equals accessory. AirPods? Accessory.
In place of innovation and market disrupting products like the Mac, iPod, iPhone, or even the iPad (Apple sold about 300-million or so), Apple seems to be on autopilot. Instead of a line of new products, Apple has given away tens of billions of dollars in dividends, wasted tens of billions of dollars more on stock buybacks, but other than Watch, hasn’t done much to set an industry on its heels as it has in the past.
Without much new coming out of Cupertino, CA these days, Apple’s new strategy seems to be price. No, not raising prices so more profits flow into the bank or executive bonuses. Low price. With the exception of the iPod, Apple hasn’t been too competitive on price in the past, so what changed?
Watch – Yes, it’s an accessory and an expensive accessory, but Watch has upended the smartwatch segment and the watch industry as a whole. Who makes more money selling watches than Apple? Yet, look around and you’ll find smartwatches with similar price tags. Apple is competitive on price.
AirPods – Yes, it’s an accessory and a somewhat expensive pair of wireless earbuds, but check around and you’ll see what I see. Competitive devices are priced about the same as AirPods, sometimes even more expensive.
iPad – instead of making the iPad a PC replacement as Apple’s advertising implies it should be, and instead of building in ever more features to make it a compelling device to buy and use, Apple went the other direction. Cheap. iPads now start at $329. That’s competitive with all but the cheapest tablets on the market.
Here’s the problem with price as a major strategy. First, it implies that Apple is out of creative new ideas and doesn’t have much that is innovative or disruptive in the pipeline, so it relies on what it hasn’t done much of in the past. Compete on price. Second, competing on price also means lower margins, which translates to lower profits. That’s new territory for Apple, too.
Everyone knows that Macs and iPhones are priced at the high end of their respective product segments, so if Apple doesn’t have new products to disrupt markets, the only disruption left is price. We’ll know this is the once and future strategy when Apple gets down and dirty with future Mac notebooks, iMac, Mac mini, and Mac Pro; most due an upgrade this year or early next.
If Apple manages to upgrade the entry-level iPhone SE and keep the much anticipated iPhone 8 under $1,000, then we’ll know the company is serious about using price as a strategy.