Apple can stay aloof – at its own risk

For a long time now, Apple has priced its products so as to differentiate them, making them stand out as must-haves for customers who want to turn heads and look affluent. Good or bad, it’s a normal business strategy. Oftentimes, products that differ little in quality differ hugely in price. Brands rely on image and perception, which can reflect strong products but also simply blatant lies.
Visit any convenience store and you see why iPhones and their accessories may be about to become a lot cheaper. Chargers can be found at less than Bt50 apiece while earphones are so cheap that you can just shrug if you lose them. The quality is far short of Apple products, of course, but they will get there.
Apple says cut-price iPhones are on the way, in response to “weakening purchasing power in certain markets”. That move has little to do with sympathy for potential buyers, of course, and everything to do with the company’s own survival.
Apple has been facing increasingly stiff competition as its hard-to-make products lose their unique sheen amid a sea of cheaper and equally cool rivals.
The Silicon Valley touchscreen technology was replicated years ago by technicians in emerging economies. App makers once thought only of iPhones when crafting their innovations, but that is no longer the case. Cheaper phones can take photos of equal or even better quality.
Apple’s phones used to be special, but mass production of similar products and accessories means a tipping point is looming for the niche market. The same happened for cars, flat-screen TVs and other items. Apple can maintain its high-price policy, but it will only drive potential customers elsewhere. Big names in tech have already gone belly-up this way.
Amid heavy hint-dropping about the price cut, Apple’s marketing apparatus has neglected to mention one important detail. Even if prices are reduced significantly, Apple will still make handsome profits. And that will show that iPhone buyers have been paying inflated prices for the firm’s products.
On one hand, the high-price strategy makes business sense. You charge big money for goods or services that are special.
On the other hand, there has always been a question of whether customers were being charged unfairly. In other words, could iPhones have been cheaper and still made Apple significant profits? The suspicion has lingered, fuelled time and again by the regular upgrading of iPhones. Customers loyal to the Apple brand have become frustrated by the enticement to keep buying upgraded models with a frequency that is not to their liking.
The brand loyalty cherished by corporations is now facing an acid test. As the number of consumers who possess the latest technology grows, so does the number of cheaper products of similar quality. Apple’s business rivals are now demonstrating what their marginally cheaper products can do that iPhones cannot. That’s good news for consumers. But the bad news is that the competitors are showing every sign of adhering to the same business strategy – keeping retail prices far higher than production costs.
Flat-screen TVs used to be expensive playthings of the rich. Today, every household has one because mass production tipped the market scale and forced manufacturers to sell at far lower prices. Ultra-high-definition screens still cater to wealthy buyers but you have to be an expert to tell the difference, and producers of high-price TVs risk missing out on the burgeoning mid-price market.
Apple has a choice to make. Its products are up against cheaper alternatives and the “pride” at being an Apple user is shrinking. Its high-price strategy may remain workable for a time, but the tipping point can be very punishing to business.
Steve Jobs was an archetypal big dreamer, whose journey began in his garage. Ironically, the company he co-founded now has to battle with “garage innovations” stemming from the very same opportunities that gave him ideas and equipped him with technology to compete with the big boys. How would Jobs have responded to the present business dilemma, so familiar to his younger self but now a serious threat to the company he built?