Numerous reports have been swirling over the past few weeks saying that Apple could be planning to launch a cheaper iPhone later this year. Originally, rumors suggested the device would also be smaller, but as of late, reports suggest it will be the same size as previously released versions of the smartphone.
In either case, a cheaper iPhone is nice to hear. For years, Apple has been the premium provider of premium products at a premium price. Even talk that the company is just thinking about selling its marquee device at a reduced rate speaks to the changes that must be going on in Cupertino.
But what about its other products? A cheaper iPhone is great, but most would agree that Apple’s other products tend to be overpriced. Wouldn’t it be a good idea for Apple to reduce the price of all of its products?
Yes, it would.
Read on to find out why:
1. The tablet competition is fierce
Apple’s iPad isn’t nearly as overpriced as some of the company’s other products. For as little as $499, consumers can get their hands on an iPad. But to get access to 3G from the iPad, they will need to dole out at least $629. Last year, that was fine. But this year, as new devices are prepped for launch running an impressive Android 3.0 “Honeycomb” and boasting dual-core processors, along with 4G connectivity, the iPad seems rather underpowered next to competitors. The time may have come for Apple to either release a new iPad or reduce the price of its current model.
2. Android is performing well in smartphones
It’s a good idea for Apple to reduce the price of its iPhone later this year. As recent market-share figures have shown, Google’s Android platform is performing extremely well across the world. And several devices, including the Motorola Droid X and the HTC Evo 4G, are appealing to customers who want to get in on the Android craze.By offering the iPhone for less, Apple can put more pressure on competitors and potentially reduce Google’s market share.
3. The competition won’t be able to keep up
Speaking of competition, it’s important to remember that Apple sets the benchmark by which all other products are judged. It releases the highly anticipated device, sets the price and rakes in the cash. The competition, on the other hand, tries to beat the company in most cases by delivering a comparable product at a reduced rate. If Apple can stop that from happening by selling a cheaper Mac or iPad or iPhone, the company can eliminate one of the few things that the competition uses to generate sales.
4. PC makers are selling devices on the cheap
Pricing on Macs has always been a topic of debate among consumers who say that Apple’s logo, and little else, pushes the price of its computers higher than they should be. To some extent, those arguments are valid. A comparably equipped HP machine is often hundreds of dollars cheaper than an Apple alternative. Such high pricing has undoubtedly pushed some consumers away. Maybe by reducing the price of its computers, Apple can do a better job of expanding its market in the PC business.
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5. What’s the incremental benefit?
It’s easy to look at Apple’s recent financial performance and say that the company doesn’t need to reduce pricing. It’s already selling millions of iPhones, Macs and other products every quarter, and it’s generating huge profits. But that’s a bit short-sighted. If Apple reduces the price on some of its products, it could very easily sell more devices. And over time, that could deliver even better financial performance.
6. What happens when Steve Jobs leaves?
One of the main reasons why Apple has been able to charge so much for its products is Steve Jobs. The company’s CEO has ushered in an era of “cool” that makes the higher prices seem justified in the minds of consumers. But as he recovers from an illness, one can’t help but wonder what will happen when he finally leaves Apple. Will the next CEO be able to carry that “cool” banner forward? And if not, how will that affect Apple pricing? Apple must think about the future. And it needs to consider whether or not its next CEO can lead in such a way that its high pricing is justified.
7. Apple has an opening in the PC business
As mentioned,Apple’s Mac pricing is high. And at such high levels, the company is missing out on a key opening that it could be capitalizing on: Most customers aren’t too fond of Windows. After Windows Vista was released, few wanted to switch to the new operating system. They were looking elsewhere to spend their cash. That resulted in people questioning whether or not they should continue to use Windows. It was the opening Apple needed. So far, at least, its high pricing hasn’t allowed it to attract as many customers as it could.
8. The recession continues to linger
Apple’s financial performance has been nothing short of astounding. Thus it’s hard to take issue with a company that’s doing so well. But the Great Recession continues to impact people around the globe. The average person has less money to spend on new products. And if they must get something new, they’re looking for the best deal. Apple, meanwhile, maintained its high price points. Its profit figures are up, but had the company reduced pricing over the past couple years, it could have done even better.
9. It’s unexpected
If Apple announced that it was going to reduce margins across its entire product line, the vast majority of people who follow the technology industry would be stunned. For years now, Apple has been selling its products at a premium. To some extent, it has come to be expected. But reducing margins on its products would send a message to the market that Apple is trying to engage more customers. It could change the perception among some customers who, without even seeing its products, believe that its prices are out of hand.
10. It gives Apple more choices
With pricing so high, Apple has no choice but to deliver products that push the envelope in one way or another. But if it can reduce pricing across the board, it might not need to work so hard to impress. Yes, impressing customers is part of what Apple is about. But the company is also a corporation that has a responsibility to shareholders. If it can take some of the pressure off and show that it can deliver solid products at a good price, while still delivering groundbreaking devices from time to time, it can go a long way in improving its market positioning.