The Truth about the “Apple Tax”
The most obvious way for Apple to increase its share of the computing pie, most aver, is to offer ever-cheaper computers. It makes perfect sense, assuming a somewhat elastic demand model cheaper Macs mean more sales. More sales, of course, means more market share. And Macs with 20% of the market gives, apparently, hard-core Mac users a warm and fuzzy feeling.
Apple, as many continually lament, just doesn’t sell low-end Macs. The mini is Apple’s cheapest offering but doesn’t come anywhere close to price parity with Dell’s lowest end offering. At this point the clever among us will argue that Apple can’t match Dell’s prices thanks to economies of scale, the zealosphere* will opine that Apple simply won’t offer a less-than-stellar computing experience, and the cynical will say that Apple will never settle for a profit margin that isn’t in the double digits.
The economies of scale argument proceeds thusly: Macs can’t be close to the prices of Dells because Apple’s purchasing power in the componentry arena just isn’t as big as Dell’s. To use a fictional (wildly exaggerated) example, imagine Apple buys 50 hard drives a year while Dell buys five hundred thousand hard drives. The supplier of said devices will sell the hard drives to Dell for a much lower price just because the volume is so much larger. Apple might be able to buy a hard drive for $50 each while Dell would be able to buy each hard drive for $10. It is simply more efficient for manufacturers to produce incredibly large volumes of devices for a single purchaser and the folks who buy the most get the best price.
There is undoubtedly some truth to the economy of scale argument, but it isn’t the sole motivator of Mac and PC price disparity. Apple doesn’t make computers anymore, sub-contracted factories do that. The sub contractors aren’t small companies and those guys are buying plenty of hard drives to get fantastic deals. For more evidence, see the MacBook. Sure, Apple saved a lot of money by not hiring an English major to come up with a better name but the product is very competitive with comparably equipped Dell offerings.
Next, we must disabuse ourselves of the notion that Apple simply refuses to offer users a less than stellar computing experience. On the surface, the argument seems unassailable, take a look at Apple computers and you see fairly capable machines across the entire line. When Steve Jobs said the mini would do the job for 90% of the Mac users out there he was only off by 9%, there are very few who wouldn’t find the mini more than adequate. You, of course, wouldn’t but you’re a computing pro who absolutely needs the power. Rest assured, you’re the exception. Most people spend most of their computing time on the ‘net or writing and the mini is more than adequate for those tasks. It might be worthwhile to note that there are plenty of Photoshop pros still muddling by with G4’s at work that are outperformed by the mini… not saying you fell for the marketing hype or anything.
Add to that the solid evidence that OS X runs at a nice clip on single proc Intel based equipment and you start to see that the specs aren’t really there to assure a quality user experience so much as they are there to let people know they aren’t buying yesterday’s technology at today’s prices.
The last argument to contend with, and dismiss, is the profit motive argument. Those that opine that Apple has some ingrained penchant for high profit margins are foolish. Apple exists to make money, ten billion computers out the door at $10 profit per box is just as appealing as selling one computer for one hundred billion dollars. Jonathan Ives and Steve Jobs may pay lip service to the idea of making the coolest stuff on the planet but that is just more marketing. Apple would rather make “profit” more than “cool” any day of the week, and rightly so.
All that leaves us wondering, if Apple could sell a much cheaper computer, and obviously, they could then why don’t they? Why is every computer saddled with Bluetooth and fancy processors when they aren’t, strictly speaking, needed? The answer is painfully simple, because Apple knows their market, and they know it better than you.
Apple’s market is the elite. Apple’s job is to separate their customers from as much cash as possible and they are doing a fantastic job. Apple will never sell computers to those shopping mostly on price because that market is interested in low price and compatibility. Sure, they want the cheapest computer possible, but faced with a choice between an identically specced Dell and Mac, they’ll take the Dell. The Dell runs windows without Boot Camp, the Dell can run software lifted from work, the Dell, for the average user, is the better choice. For more evidence that price doesn’t always win remember that Wal-Mart sells Linux based boxes that haven’t set the computing world aflame.
Apple understands all this, they know they can’t compete with Dell for people who don’t care about computers. Choosing a Mac is a conscious choice and most buyers don’t want to make a tough decision when buying a computer, they want the same thing everyone else has. That is the big market market, the mass of disinterested computer buyers, that Apple will likely never convince. These people don’t want to learn a new system, hell they don’t want to learn a system at all. They want a machine to gank music, work with their iPod and browse the net. Sure, a Mac will do all that but to realize that the consumer who have to bother learning about computers, something they don’t want to do.
With that realization, we see why Apple doesn’t sell a truly minimal Mac. People who consider Macs are the same people who don’t consider Dell’s rock bottom model. They are the folks who are certain that they need much more than what the lowliest computer has to offer. These are the people who whine about the video card and amount of VRAM on an iMac. That complaint is about a computer that, until recently, wasn’t exactly able to play the latest games and has always come with a built in monitor. It’s much like complaining that your BMW 3 series doesn’t come with off-road tires.
All this said, Apple is not doing anything wrong, Apple is being smart. The company understands that it isn’t going to supplant Microsoft or Dell anytime soon. Once that realization is reached the path becomes clear, selling super cheap computers might move a few machines but wouldn’t maximize profit. The Mac mini, a product which Mac fans had been pining for since the introduction of the original iMac, wasn’t the smashing home run everyone in the Mac sphere was convinced was a near certainty. The secret to the Apple tax is this: Once people know enough to want a Mac, they know enough to think that they need something much better than a truly low-end option. Since they aren’t going to be buying the $299 Dell, why should Apple bother making an equivalent machine? The answer is that Apple shouldn’t, the company exists to rake in all the cash they can not to make your computing experience any less costly. You can call it the “Apple tax” but in the business world it is called “knowing your market” and it is smart business.
*a great descriptive term coined by Chris Howard
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Comments
Why be belligerent in a way that is so counterproductive to any kind of constructive discussion?
As long as it’s okay to slag off Windows users, low-end users, Bill Gates, Creative, and basically anyone and anything else that isn’t in the acceptible Mac-approved universe, then what’s the problem with the way I speak to anyone in particular?
“Let me give you an equally valid hypothetical. A Friday-night get-together in which a Dell is the center-piece of many conversations. You wouldn’t see that happening with a Mac. THEREFORE, the Dell is of superior asthetics and design.” - Beebx
I think therefore I am. Sounds like an irrational and, to a greater degree, an invalid point from a PC cynic. This scenario is not even hypothetical because it will never happen. That’s right, Beeb, accept the fact that in your hypothetical parties, your PC hyper-processing capabilities will not be discussed because in your parties, No One Cares! A bunch of PC people do not talk about their terabyte memories and googolplex speed CPUs because those are humdrum topics, don’t you think?
No Mac and ordinary folks talk about better things, higher-plane discussions such as aesthetics, form-factors, simplicities, svelteness, to “Why my PC can’t do that?” or “I wish my PC is that way”, what Oprah was wearing, or why Dwayne Wade did that fade for, such and such and such.
Stop glorifying your PC rig because it will never be compared to my Macs. Relegate your white-boxes in the garage where they belong. Gotta go have fun with my Core Duo minis. Ciao!
“Is that what really constitutes a point around here?” -Beebx
All opinions are valid, Beeb. Not just your own Maybe in your part of Cybersphere it is. You can stay there because no one, not me, not your buddy Oskar, can change that.
What we need from you is a constructive criticism not cynicism. Not half-assed comments like the usual. Remember I am not alone watching you.
“All opinions are valid, Beeb. Not just your own Maybe in your part of Cybersphere it is…” -R.I.
Let me correct myself. It should be phrased as: “All opinions are valid, Beeb. Not just your own. Maybe in your part of Cybersphere Mac folks’ opinions are void since you exist in a worm hole.”
My brain parallelism is apparently faster than my finger strokes. My apologies.
Here’s the thing.
B’x: I like Macs, but I don’t worship at the altar of Steve Jobs, I don’t treat Apple talking points as facts, and I don’t chuck away cognitive reasoning in order to arrive at the foregone conclusion that everything Apple does is the way it’s supposed to be.
Neither.
Do.
I.
And I give you, personally, Mr. Beeblebrox Esq, the one and only, due credit for influencing my thought processes about apple in this regard. Thank you.
But when you say ‘I don’t see how you’d be happy to engage me in a “debate” since this is about as far away from a debate as one can get’ I just die a little inside, because, although you deserve lots of credit for not being willing to bow down and drink the kool-aid and having your own opinions, I really genuinely do want to engage in a proper debate about these things, and I think Robotech Infidel does too. And Gates knows that Apple Matters isn’t perfect but it’s the place I’ve found to come closest to having real, frank discourse about these sorts of topics.
And spank me if I find the greatest opponent to having these sorts of discussion is not unquestioning allegiance to the Jobs brigade, but the voraciousness with which everything is denounced as being so.
B’x, post 16: Are you serious? RI’s creates an imaginary party in which the Mac is the center piece of many conversations, and then RI turns around and criticizes Dell because you don’t see that happening with their computers
What I took RI to be imagining was a situation where the Mac might be a talking point. That is, he was illustrating the fact that Mac design is impressive by showing it is conceivable that a mac could become a talking point for people having a “get-together”.
Possibly you don’t understand that people can use hypotheticals in this way to highlight such things, in which case your comments are excusable. Otherwise I have to chalk it up as disingenuous.
As long as it’s okay to slag off Windows users, low-end users, Bill Gates, Creative, and basically anyone and anything else that isn’t in the acceptible Mac-approved universe, then what’s the problem with the way I speak to anyone in particular?
Fortunately I’m not a housewife from the 19th century and I don’t actually take offence at your tone. This isn’t a personal backlash. I think your points are often very good and I agree that components of the Kommunity do rush to praise & justify everything Apple does in a way that is sycophantic. So let me be quite clear that what I think is “the problem” is you’re too quick to try to denounce people as being like this, when actually your wish to be balanced if correctly applied should be a powerful catalyst to having good discussions, not an obstruction on the grounds that such discussions are impossible with prejudiced runts such as me and RI.
What I took RI to be imagining was a situation where the Mac might be a talking point.
Well, no, that’s not his point. Note his response to my hypothetical. Remember, we’re talking about imaginary situations here:
This scenario is not even hypothetical because it will never happen. That’s right, Beeb, accept the fact that in your hypothetical parties, your PC hyper-processing capabilities will not be discussed because in your parties, No One Cares! A bunch of PC people do not talk about their terabyte memories and googolplex speed CPUs because those are humdrum topics, don’t you think?
Forget for a moment that some geeks DO care about those things and talk about them at parties.
Get it, Ben? His own hypothetical is not only NOT a preposterous fantasy, but actually proves a point that Dells are inferior. My hypothetical is not only not plausible, but IMPOSSIBLE.
To which he concludes, “All opinions are valid, Beeb.” Well, apparently not. For example, the opinion that someone might appreciate the power or design of a computer other than a Mac—- simply not possible.
Such is the mind of the kool-aid drinking fanatic.
And I’m supposed to consider this a debate or discussion of some kind?
You’re cool, Ben, and I truly respect your opinion. But you cannot single me out as belligerant while entertaining deranged rantings like RI’s as some kind of legitimate argument. It only serves to confirm what I constantly point out as the modus operandi of the Mac-fan community.
OK well a more measured response from RI might have been better
I just want to say, you are indeed powerful - but IMAGINE WHAT YOU CAN ACHIEVE with un peu plus de tact!
I wanted to comment on this quote, but I deliberately waited for Beeb to respond, so I don’t step on his reply.
He notes it in his reply, but I want to expand on it. All opinions are not valid.
If a opinion is formed on bad data, flawed assumptions, prejudices or the like, its value is nil. Say if my opinion is that Macs are terrible computers because they are too expensive, unstable and slow. Say that I base this opinion on machines I used 10 years ago, loaded with conflicting extensions and ill-maintained in general. Would you think my opinion has any validity today?
“I just want to say, you are indeed powerful - but IMAGINE WHAT YOU CAN ACHIEVE with un peu plus de tact!” -Mr. Hall
Look, I have only been participating here at A.M. for several months and during those times I still have to see an intelligent opinion (very rare) and comments coming from the side of the worshiped Beebx. Not one opinion worth anybody’s valuable time to digest. So, why even bother to comment when you can’t constructively add to the discussion. We are talking about “Apple Tax” and what you do, take a jab at my so, so, hypothetical party scenario. Why not come with originality Beeb and flood us Mac “nerds” with your oh-so “powerful” wisdom. I’d like to share my knowledge in all Macs and PCs as I have been a “nerd” and a tinkerer since your were wetting your diapers. I know every detail of the PC and Mac and I want to share with y’all here at A.M. because I found this place to be a good place for a Mac dude with a wealth of ideas, knowledge, and experience to share.
“Say that I base this opinion on machines I used 10 years ago, loaded with conflicting extensions and ill-maintained in general. Would you think my opinion has any validity today?”-S.N.
So, you’re implying here that the logic of your counter-opinion was VALID 10 years ago? So, by your very definition, an opinion’s validity has some kind of time-sensitive nature? If someone’s opinion is subjective (in your case) then it must be invalid? Subjective or objective (backed with real analytical data as proof) are all valid. The precision of the opinion is what is separated by the anylytics. Even opinions, polls in particular, will not declare 100% precision for this very reason. There is no 100% correct opinion. Therefore, the conclusion is ALL OPINIONS ARE VALID.
“More sales, of course, means more market share. And Macs with 20% of the market gives, apparently, hard-core Mac users a warm and fuzzy feeling.” -C.S.
I am warm, fuzzy all over right now and it is only 5% US and climbing. Can’t wait ‘til its 10%. I will be throwing my hypothetical party here at A.M. and everyone, even the great Beebx, is invited. But do not bring your white-box PC pleeze. The Mac mini is permissible.
So, by your very definition, an opinion’s validity has some kind of time-sensitive nature?
I’m sorry, and don’t take this as siding with anyone, but an opinion’s validity clearly does “have some kind of time-sensitive nature”, if it is an opinion about the changing “time-sensitive” status quo.
There may be a “100% correct opinion”. Example.
Premise: Person 1 is not a hover-squid.
Person 1: I am a hover-squid.
Person 2: You are not a hover-squid.
Person 3: You may be a hover-squid but only at weekends.
What does it mean to be valid? If it means anything, it means that the opinion must be based on a rational viewpoint. Now if we define the state of being rational as having good grounds for believing or disbelieving something, then you can understand where Sterling North is coming from. Simply, people hold opinions for certain reasons, subjectively perceived. An opinion without good reasons to support its belief is invalid. An opinion with good reasons to support it is valid. Clearly, what SN means is that an opinion of Macs based on consideration of Mac hardware from, say, the Dark Ages, is invalid because such considerations do not provide good justification for an opinion of macs today.
(I’m not disagree that many topics can’t have 100% “right” opinions. Most issues are not as simple as whether or not you’re a hover-squid. But anyway the link between “valid” and “right” is somewhat unclear, insofar as it IS possible to have good grounds to believe something that is NOT true.)
We’re quite a way off topic here…
“But anyway the link between “valid” and “right” is somewhat unclear, insofar as it IS possible to have good grounds to believe something that is NOT true.)” -B.H.
Well said Mr. Hall. An opinion is valid when your ground point is rational (and that can be both false or true) but invalid when it isn’t. Say, for example, I propose that a long, long time ago, the Dodo bird was the first extra-terrestrial being on Earth. In this happy case, neither my proposal is true or false, and it is irrational. So, in this regard, it is an invalid thesis. And btw, my proposed thesis does not have any “time-sensitive” nature to it, just to point that out.
Regarding your “hover-squid” scenario, the opinion was not “100% correct” to Person 1 and perhaps 99% correct to Person 3. My counterpoint in post#24 still holds a nice mug of Irish ale, you agree? Well, then…let’s go to the pub and boogie!
So, what about “Apple Tax”? I hate that term for intellectual reasons. Chris, can it! Come up with a better, catchier term.
Regarding your “hover-squid” scenario, the opinion was not “100% correct” to Person 1 and perhaps 99% correct to Person 3. My counterpoint in post#24 still holds a nice mug of Irish ale, you agree? Well, then…let’s go to the pub and boogie!
I’m not sure quite what you’re arguing here: are you really trying to say that person 2, who says that person 1 is not a hover-squid, is NOT 100% correct? Even though person 1 is not a hover-squid? That somehow despite the fact that person 1 is not a hover-squid, person 1 is a hover-squid? That person 3 is 99% right to believe that person 1 might be able to break the laws of nature and physics to transform into a hover-squid two days out of seven - and back again for the other five?
My counterpoint in post#24
Which bit exactly do you mean…
“Subjective or objective (backed with real analytical data as proof) are all valid. The precision of the opinion is what is separated by the anylytics. Even opinions, polls in particular, will not declare 100% precision for this very reason. There is no 100% correct opinion. Therefore, the conclusion is ALL OPINIONS ARE VALID.” -from my post#24.
And for clarity’s sake:
“There may be a “100% correct opinion”. Example.
Premise: Person 1 is not a hover-squid.
Person 1: I am a hover-squid.
Person 2: You are not a hover-squid.
Person 3: You may be a hover-squid but only at weekends.” -Ben Hall
Your premise declares or proposes that Person 1 is not a “hover-squid”, yet Person 1 admits that he is, so right away, your thesis is < “100% correct” even if it is only 99% correct by Person 3’s accounts - whenever that may be convenient in his mind.
I am not saying your proposal is at all irrational because it is either true or false based on its accuracy (<100% accurate?).