After Hours

Can Apple outgrow its reputation as a luxury brand?

Apple has developed a reputation as a premium brand with an elitist bent. The company wants to transcend that. Here's a look at whether it's working.

During the past year, Apple's ascent to becoming the world's largest technology company has raised a number of important questions about the current state of the tech world and its future trajectory. But, the most prescient question for 2011 is whether Apple has committed to moving beyond its stronghold as a premium technology brand to become a computing vendor for the masses.

There is new evidence that Apple is moving toward lower-priced products and prepaid wireless data (for its mobile products) in order to make Apple devices more affordable for more people and businesses. On Monday, Research Analyst Toni Sacconaghi published a research note (read the summary on Forbes) following a recent meeting with Apple COO Tim Cook and CFO Peter Oppenheimer. Sacconaghi reported that the Apple executives have plans to put Apple's mobile devices within the reach of a lot more buyers.

Here are some of the highlights of the report:

  • Cook said Apple does not want its technologies to be "just for the rich"
  • Apple is likely to develop a lower priced version of the iPhone, Cook indicated
  • Cook said Apple was planning "clever things" to get the iPhone into the prepaid cellular market, including China where Apple is investing "huge energy" according to Cook
  • Expanding to more global wireless carriers is a priority for Apple, according to Oppenheimer, who also noted that Apple has deals with 175 carriers today versus 550 for Research in Motion (BlackBerry)
  • Apple is "not ceding any market" to its rivals in the mobile space, Cook declared

Apple prepares to unveil iPad 2 on March 2, 2011. Photo credit: James Martin | CNET

Those are strong words from two of Apple's most influential behind-the-scenes executives. However, there have been previous signs that Apple was moving beyond its established niche of well-heeled artisans, thinkers, and entrepreneurs, who have dominated the Mac ecosystem for two decades.

In fact, I don't think Apple ever intended to build a premium brand in the first place and I don't think the company has ever been totally comfortable being pigeonholed into that market. That's simply the group that bought into Apple's vision and was willing to pay a premium for it.

The original vision for the Mac

Don't forget that the Macintosh project started out with a very populist vision. Steve Jobs and his team wanted to build a computer that would be easy for the average person to set up and use and it would cost under a $1,000. Well, the Mac set a new standard for usability when it was unveiled in 1984 but it cost well over $1,000. It ended up being as expensive as most of the other computers on the market. The price tag plus the fact that it lacked software applications ultimately doomed the Mac to become a niche machine. Still, it's useful to remember that the Mac started out as the populist dream of an inexpensive computer for the masses.

The iPod was the first step

Fast forward a decade and half later when Apple unveiled its first iPod in the fall of 2001 and you see Apple once again debuting a product that was made for the masses, but the initial price tag was too high to become a mass market phenomenon. The first iPod cost $400, and Apple soon released a model with extra storage for $500. It was a very cool luxury product.

But, three years later, Apple released a smaller, cheaper model called the iPod Mini ($250) and sales began to really take off. Eventually, the iPod Mini was replaced by the iPod Nano and an even less expensive model called the iPod Shuffle. Apple went on to dominate the portable media market and sell over 300 million iPods worldwide by January 2011, expanding far beyond its original niche as a luxury gadget.

Take a look at MacBook Air competitors

While the iPod became a product for the masses, the Mac has remained the luxury car of the computer market. A 2009 NPD report suggested that Macs dominate 91% of the market for computers that cost $1,000 or more. While Macs continue to be priced at a premium today, the price disparity with Windows PCs is beginning to shrink, especially in some segments of the market.

For example, with Apple's MacBook Air, which the company holds up as the ultimate laptop for those who want maximum portability, the Apple system is not more expensive than its clones. I recently wrote a piece on Two great laptops for Windows users who have MacBook Air envy, and I discovered that the two best MacBook Air competitors that I could find -- the Sony Vaio X1 and the Acer Timeline X -- were both slightly more expensive than the 11-inch MacBook Air that I compared them to.

Of course, this is a premium segment of the laptop market where Apple has home field advantage, but it's interesting to note that Apple has priced its laptops very competitively here. There's no "Apple Tax" as we've seen in the past -- at least for the MacBook Air.

It remains to be seen whether Apple will go after the market for average laptop buyers between $500-$1,000 -- both consumers and business. I'm skeptical about whether we'll see that. I think it's more likely that Apple bets on a big chunk of that market switching to tablets and it tries to pick up those users there rather than selling them a cheaper version of a Mac.

In tablets, iPad is winning on price

The area where we can see Apple's aggressive new pricing strategy for wooing the masses is, of course, the tablet market. While tablet computers had been around for a decade before Apple launched the iPad in 2010, Apple made a simpler tablet with a multitouch interface and made it far less expensive than the other tablets. And, as I noted in my article The one big reason why iPad rivals can't compete on price, even the latest multitouch tablet clones are having a hard time matching its price tag.

In many ways, the iPad vision is the same vision that went into the first Macintosh -- build a computer for the masses and make it cheap enough for the average person to afford -- only this time Apple nailed the price tag. It also doesn't hurt that Apple has the most third party software for its platform this time, unlike the launch of the Mac. Nevertheless, the iPad's price tag is its greatest marketing asset.

In his report, Sacconaghi also recorded Cook saying that the tablet market would eventually become much larger than the PC market and Apple expected it to be intensively competitive since all of the PC and phone makers will take a shot at it. That's no surprise. But, it is a surprise that a year after the launch of the iPad, Apple still offers the tablet with the most reasonable price tag. That doesn't sound much like a luxury brand.

The big question then becomes whether people will associate extra value with Apple products because of the company's luxury brand reputation or if the masses will look at Apple and snub it as an elitist brand that doesn't apply to them. Naturally, the best way for Apple to control the conversation is to re-run the iPad play -- make a great product and price it better than anyone else.

About

Jason Hiner is the Global Editor in Chief of TechRepublic and Global Long Form Editor of ZDNet. He is an award-winning journalist who writes about the people, products, and ideas that are revolutionizing the ways we live and work in the 21st century.

37 comments
ndveitch
ndveitch

I would have to say that working with both Apple and PC, in all honesty, nowadays it boils down to personal preference. One thing I would consider is, what will happen to Apple after Jobs retires? Will they get a new boss who is only interested in the bottom line, and therefore moves the majority of the Apple business to the China. That will bring the price down drastically, and i'm sure everyone can guess what that will do to the reputation. At least it will then definitely out grow it's superior reputation :) among other things. Although I do not personally use an Apple I can see why people would spend the kind of money on them that they do. They are really good machines. So in today's world it truly is down to personal choice, as it should be seen as which machine you would prefer to use and not what other people shove down your throat.

tony
tony

dogknees, Please support your argument. "The argument about the price only holds water if you subscribe to the idea that you should replace your phone/tablet/... every 12-24 months." And no one, Apple included is requiring you purchase new hardware in these refresh cycles. Does Dell, IBM, HP, Acer, etc not refresh their product line at least as often? Would you then say they are suggesting somehow that you replace your current hardware. There are new products hitting the market pretty darn regularly from most vendors. You buy when you need or when that little something inside you says I just got to have. "It's only the early-adopters that renew things ever 12-18 months." Agreed, but the same case is true for any vendors products. There will always be those in any camp that just feel that they have to have the latest greatest bleeding edge device. Oh my .2Ghz faster, I just got to have that so I can keep my bragging rights. "The real problem is that Apple have built the value of the company on the backs of the early adopters and they don't have a business model for the average person that might only buy a new product from them every 5-10 years." Hmm Apple seems to be in a pretty sound financial position at the moment and I know quite a few folks running some pretty darn old Apple hardware. Again defend your argument and I might be persuaded. "They even try to exclude the average customer by requiring updated equipment to access the latest content, despite the fact that they could make it all backwards compatible if they chose to do so." Once again defend your argument. Yes there have been OS's and Apps that over time dropped support for old hardware. How long should any company support anything and everything ever made? Could Apple have continued support for PPC in the current incarnation of OSX? Well sure they could, but where is the advantage to that? Should you limit your forward motion just so that you may allow everyone to play in the same sandbox? Well then they should probably also build in support of 680X0 processors as well. Let's look at the requirements of Windows 7 1GHz processor, 1GB ram 16GB drive space. Sure you could get it to run on a machine speced to these standards, but what would the user experience be? So let's shoot Apple for realizing that while they could keep older systems supported a little longer the user experience on such a system would suffer. Now who get's the black eye for that. Not Joe user who's trying to run a modern app or os on old hardware. It would be Apple or any other Vendor for that matter because you told me it would work and, well it sucks, you lied. So again I say support your argument. Convince me with facts, examples. Simply stated something, doesn't make it so.

T3CHN0M4NC3R
T3CHN0M4NC3R

I have been an anti apple guy. Reason: 1) They been using x86 parts yet we can't replace or repair those parts like how we do that with the PC. 2) They been very closed and their support is hazardous to my bank accounts. 3) I can do a lot more on the PC than any MAC. And about the out-of-the-box experience, manufacturers just need to hire better applition packagers. 4) I don't want the IT world to be ruled by a dictator with an Apple flag.

suncatTR
suncatTR

I've worked for Apple. I like many of their products. However, they're moving so far toward style trouncing functionality and affordability, it's getting harder to justify the extra cost--and Apple's products remain expensive. iPhone is perceived to be classy, sexy, a computer, not just a phone--but it's a lousy phone, bad antenna, and very breakable, so I use Nokia phones for their excellent reception and sound quality. My Nokia smart phone has an easily replaceable battery, 5 mpix camera, and doesn't break when I drop it--the back falls off, battery pops out, put it back and the phone works fine. I like my iMac but dread the annoyance of taking an hour or two to replace the PRAM/BIOS battery, something I can do in our HP PC in minutes. Our iPods have died, or at least the batteries; it's a prying PITA to replace batteries, some even need to be soldered. I really like Mac OS X. I run Windows programs with Crossover Mac, and also have Ubuntu. With Intel Macs, the hardware exceptions are rare for multiple operating systems. Whenever I get so annoyed that I consider buying a PC, I work on a Windows PC and remember why I have an expensive Mac. It's insulting that Apple, primarily Steve Jobs, dares to make computers and devices that are difficult to open and repair, while it costs over $2000 to buy a Macintosh computer that's easy to open and upgrade/repair. All other Apple products are disposable. Too bad. I can't see the iPad as much more than a very expensive, breakable consumer device. I'd like to see something more like the Itronix tablet with full, not mobile, OS, but not so ruggedly expensive. I'm looking for the best PC to turn into a Hackintosh, like one of the Lenovo multitouch tablet notebooks/netbooks.

DSG7
DSG7

Someone I know has just got round to buying an iPad - around the same time the iPad 2 was released. He bought it for the luxury and prestige, rather than any sort of proper usability. So, with no real understanding of technology advances even in Apple products (he should have waited for the exact-same-price iPad 2) and no real aim for "working" with the iPad in a business sense, he still bought one - I don't think Apple will shake off the luxury brand image, since it is what shifts their products out the stores. I personally would want something I can work on and with - cheap to maintain, upgrade, and (if it comes to it) repair, and can run the software and games I like. "Luxury" could mean putting in a cooling system, or newer parts, or styling the case (or buying a prestyled case). For me, that isn't a Mac - Apple's products half depend on their styling out the box for a sale, while PCs depend more on their "functionality" and upgrade path. If Mac users seriously looked under the hood they'd find a 400 Pounds PC they paid 800 Pounds for, and the repair costs could get you a normal PC (case in point, the guy with the iPad has a macbook that went in to get the logic board replaced - for 400 Pounds. The problem? The network port stopped working). Before people talk about usability and ease-of-use of Apple products, the same guy as above can't use macbook; he frequently asks me to insert columns into spreadsheets, resize documents, print images off, find emails in his inbox and files on his hard drive etc. - again, styling and the appearance of "luxury" must have been a major factor in the purchase.

vitec
vitec

I still think they are priced to high for most people, in this economy where people have to cut back the price matters most.

Lazarus439
Lazarus439

Particularly in the computer arena, Apple can't allow itself to get too big. Arguably, Microsoft got to be a software monopoly, but aside from mice and keyboards, never set a serious foot in the hardware side of computers. If Apple allows itself to get too big in the computer arean, it will get slapped down as a classic vertical monopoly as it controls everything from supply chain to sales. That might be necessarily be all bad, however. Perhaps DoJ or the EU will force Apple to sell its OS without requiring it be be delivered on a computer.

Gis Bun
Gis Bun

Apple makes huge profits by selling "premium" hardware. And they know that the fanbois and fangurls will rush out to buy the latest and greatest Apple products because they are elitists, snobby, or just want to be ahead of the pack - even if they pay a premium now. I think the iPod Nano is dead because Apple wasn't getting their customery huge profit margins on them. Someone else said the actual cost to make an iPad 1 [since 2 was unveiled today] costs around $225 excluding, packaging, OS, marketing, etc. And they sell it for $500+. Apple also knows that if they don't buy the current model, they'll get the one after because the batteries in their products aren't [officially] replacable. Unsure but in the Us, but in Canada prices for any Mac book or desktop are higher than the Windows equivalent in hardware.

Juanita Marquez
Juanita Marquez

is what my personal image is of Apple. The marketing bible says you should show who you want your customers to imagine themselves being (look at the commercials with older children playing with toys simpler than what someone their age would find attractive, as well as the attractive women with bar soap) and according to the Apple ads, I should want to be a hooded hipster. I don't think being a hooded smirky hipster is necessarily a bad thing, but Apple's going to have to diversify from their image of either a turtlenecked snarky overlord or said hipster to sell to grandma and her bingo buddies or others who don't identify with the idea that the i___ is used for anything but sharp graphics. Lowering the prices will help anyone on more of a budget these days, so I can see them starting to inch forward in the marketplace by that. Personally when it is more of an option to do tweaks and not have to send devices in for battery changes, I might consider i___s, but I'm guessing that day will never come, at least while Jobs pulls the strings.

bboyd
bboyd

I think that if they think its time to go low margin it is time to sell my stock. I own a happy chunk of Apple stock and zero Apple products. Who knows if they get rid of the "Apple Tax" maybe I'll get a apple computer. Oh wait I still hate iTunes. Oh and if its the case, Apple, welcome to world of Dell, HP and Microsoft. edit for punctuation

ITOdeed
ITOdeed

Used to be that computers were obsolete when you carried them out of the store. So most folks bought only the lower priced ones knowing they would replace them soon. At least this is what has motivated me over the last two decades. I've always liked Apple technology, but have always thought it was just too pricey. Its sort of like buying a vehicle. If it gets you where you want to go, why pay more than necessary?

e-m
e-m

Apple has hit the "affordable luxury" jackpot with their luxury-esque image and pricing structure (just look at AAPL's market cap). Having a mixed, low-low to high-end product portfolio is exactly what damaged Nokia's brand differentiation.

dogknees
dogknees

The argument about the price only holds water if you subscribe to the idea that you should replace your phone/tablet/... every 12-24 months. This is not normal purshasing behaviour. Most people, the ones you are saying are locked out by the price, only replace something when it's broken. So, the iPod that you bought in 2001 has given you 9-10 years of service and the cost per annum is something most can afford. Most people only ever bought one or at most two Walkman's when they were the rage. Most only ever bought 1 or 2 CD players over the 20 year plus lifespan of that product. It's only the early-adopters that renew things ever 12-18 months. The real problem is that Apple have built the value of the company on the backs of the early adopters and they don't have a business model for the average person that might only buy a new product from them every 5-10 years. They even try to exclude the average customer by requiring updated equipment to access the latest content, despite the fact that they could make it all backwards compatible if they chose to do so.

AssemblerRookie
AssemblerRookie

With hack PC's out there from 5 to 8 hundred that will do all that is required of them plus even some low end games (or better with a graphics upgrade). Why would you buy an over priced Apple. Budget PC's are getting faster every year. I can think of many other things to spend my hard earned on.

ctsrajan
ctsrajan

The key question facing a brand sometimes is should I specialize or generalize. There are proponent and opponents both ways. Some say that a brand should never lose it's focus, some say that in today's challenging economic times, a brand should have various products or services to cater to all segments even at the risk of diluting itself.

ndveitch
ndveitch

I'm sure it is already there, well seeing as nearly everything else is made in the East :) lol

dogknees
dogknees

Regarding your last point, looking at other "premium" products, manufacturers do support them for a very long time. You can buy replacement parts for premium grade wood-working tools for many decades. I'm not talking about them supporting old hardware with new software, I'm talking about keeping the services available for the old OS/hardware combination and being able to get replacement parts for them. My comment was specifically about "content" not operating systems.

suncatTR
suncatTR

Mac OS can run on many peecees other than Macs or the 'iWhateverrrs" Forcing Apple to sell its OS separately is silly. You can already buy Mac OS X alone, but not the iOS. Who'd want to buy iOS separately anyway. It can't even fully multitask like my 5-year-old phone can, or android, or symbian.

Slayer_
Slayer_

Before Jobs dies and the value plummets.

Spitfire_Sysop
Spitfire_Sysop

There are certainly waves in the price/performance ratio. You really have to know a lot of details about the hardware you are investing in. Most companies release the different levels of quality in order before moving to the next generation of tech. Some times buying the next generation can put you so far ahead of the curve that your hardware is more than you need. Other times you can get a really good deal on the top of the line equipment from the previous generation and it ends up being much better than the low end of the new stuff. Your average person cannot make these decisions, lacking the knowledge. They rely on their IT friends or reviews. When it comes to Apple the price is not always justified yet those who subscribe to the cult of the Mac are always willing to pay for the product with the higher number in the name. Apple will have to start hitting those magic price/performance sweet spots with their hardware more often to really catch my attention. I have never owned a Mac but I certainly would. Lord knows I am not partial to M$. It's the PC hardware I'm addicted to. I would switch to Mac immediately if they fully supported me running their OS on my hardware. I have ran Hackintosh systems and I fear the reliability problems with the difficulty updating etc.

bojan
bojan

You are forgetting that the world is not US and Western Europe.

JamesRL
JamesRL

And back then, it was easy t make the argument that Apple had a better OS and the value was there for many people. That was the 80s, before Win95. Today, I don't "need" a Mac or an iPad. I'm sure if someone gave me an iPad, I'd use it. But I don't have a requirement for it. I do "need" a small netbook, but it has to be useful to my kids who are students, so they need to able to do essays, and thats easier on a netbook. So at this point in time no.

CharlieSpencer
CharlieSpencer

Neither will run the apps I want, regardless of the price.

Lazarus439
Lazarus439

When did Apple start selling OS/X as a standalone product? I was under the impression that the license requires it to be run only on Apple hardware and that there's something in OS/X that looks at the BIOS to make sure it is. As I recall, hacking OS/X to not make that check was the basis for Apple to shut down that company.

dogknees
dogknees

I live in neither of the locations you mention.

Spitfire_Sysop
Spitfire_Sysop

for the sake of Linux. Macs should learn how to play games too. Many children are given Macs as a first computer because they are easier to use. PC games are historically the best, with the exception of "The Oregon Trail" on the Apple IIe but I can play that on a PC now too.

Lazarus439
Lazarus439

I thought they were equal opportunity jerks. I gather they just don't like Microsoft and Intel.

bojan
bojan

European Commision is about as pocketable, and demagogic as any other group that is primarily political or buerocratic. I doubt that it will be EU that will be the first to force Apple into selling the OS as a separate product (if it happens at all). Apple has a healthy bottom line despite it's small market cap, and due to it's small market cap it's under the radar enough to be avoided. Tho their marketing efforts in last few years (and I mean product management as well as advertising) might come back to punch them in the face later on, I don't see the boxed version of MacOS that is PC-friendly on the shelfs any time soon. Especially since they can always weasle their way out of it by claiming that the OS actually NEEDS their hardware to run properly.

Lazarus439
Lazarus439

Since Apple is the best living example of a vertical monopoly, if it gets big enough, it will run afoul of the anti-trust laws in the US, Europe or maybe both. When that happens, it's fully possible it could be forced to "unrestrict" its OS. The EU is doing something very similar with it's requirement that MS offer multiple browsers in Windows 7/Europe. There are very few fan boys who claim that there is anything in inherently different about the hardware Apple uses to make its machines. Apples does use first quality parts, but those same parts are readily available to anyone else, except for the BIOS on the motherboard. When 99% of those who claim absolute superiority of Apple computers over everything else, they actually mean the OS, not the hardware it runs on. They may not say so explicitly, but it's clear from context. To be sure, there is lower quality hardware out there, but purchasing it rather than the top-of-the-line components is a choice, just as buying a Ford Fiesta in lieu of a Rolls Royce is a choice. Most PCs from top and even second tier manufacturers operate reliably long after they have become functionally obsolete. A client of mine just retired half a dozen Gateway Pentium III PCs that were manufactured in 2001. They still worked perfectly, but they simply could no longer run the software the client needed to use.

Spitfire_Sysop
Spitfire_Sysop

Yes sir. You can buy an OSX disc but it won't just install nicely on any hardware. The "hackintosh" images floating around the intarwebs are just as the name implys. Not only is installing OSX on non-apple hardware unsupported, it's agenst the TOS. This means you could certainly never sell a PC will OSX on it legally. Otherwise DELL (Or companies like this) would have been selling their own Macs long ago. This is the only instance I am aware of an OS that is crippled in this way. Generally hardware manufacturers don't make all of their software and vice versa.

CharlieSpencer
CharlieSpencer

and am happy with it. Why spend money on a replacement and / or time learning it? A nice spreadsheet is exactly what I DON'T want; I can create that myself (and have before). This is a nice database app where I don't have to do any data entry at all. It's $25 subscription renewal includes a web link that does all the team updating, scoring and reporting for me. (And I don't pay that myself; it's funded through the players' annual dues.) Again like Linux, in order for me to consider switching to a Mac it's going to have to do more than just duplicate what I can do with Windows and my existing apps. There has to be some additional feature or function that I personally find beneficial, some compelling reason for me to make that leap. But it now occurs to me I just bought a new Dell desktop with Vista about two years ago. I'm not going to be in the market for a new system of any brand or OS for at least three more years, possibly as many as five. Perhaps Apple (or Linux or someone as yet unseen) will have something to offer by then to change my opinion.

JamesRL
JamesRL

There are lots of WYSIWYG web page editors on the Mac, from Dreamweaver to a bunch of free ones. Quicken used to be available for the Mac, and now there is a new version. As for NASCAR, well I'm sure you can find a nice spreadsheet somewhere.

CharlieSpencer
CharlieSpencer

I have a WYSIWYG web page editor and an app that manages fantasy racing leagues. There are probably Mac apps that can replace my copy of Quicken, but not those other two. Those three account for around 75% of the use of my home computer. I think some of my Popcap games actually are available in Mac version.

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