The Apple Tax Increases

in Apple

Apple has a nasty little habit of updating iPods on a yearly basis, which means that your current iPod doesn't have very long to remain the latest and greatest. From a business perspective, there's two ways to look at it.

One, which is Apple's point of view, is that customers will buy iPods, then be tempted to buy the next, improved iPod as well. Apple thinks customers should buy iPods as often as possible. This of course, is how Apple has struck it rich with the iPod.

The other is the point of view that luxury car companies have (such as Mercedes, BMW, Lexus and Audi). They charge more (than the average product), and come out with complete redesigns every 6-9 as opposed to 4 for many Honda and Toyota models. Repeat business is important to most businesses, and in order to build customer loyalty, customer satisfaction is key. Being more expensive, Apple has had no but to go this route with their laptops, keeping the glowing Apple logo and other family styling cues.

The interesting thing is that Apple's products go through short life cycles AND are more expensive than the competition, for the most part! That's two profit strategies where there should be one, and it's easy to see why the number one complaint against Apple products is price. Every single Apple product is priced more than the competition, and this practice of overpricing has gained the title - The Apple Tax.

The Apple tax is essentially the premium you pay for the product being from Apple. The Macbook and Macbook Pro laptops are significantly more expensive than their competition if looked at component-by-component. So how is it that Apple continues to become more and more successful; why do people continue to buy Apple products?

People are suckers for styling, and so far, no company has been able to come close to Apple in terms of style across the line (not a one-off product like the Voodoo Envy). Apple's simplicity-based marketing approach has done a lot to capture people's attention, and the dislike for Vista has only helped their cause. Right now, there is a perception that Mac OS X is a superior operating system. This is not actually the case (in fact, it was shown to be less secure at hacker competitions).

Apple can gain more market share, increase the units sold as well as overall revenue by revising their pricing strategy and value proposition. They also need to consider the long-term effects of their current product life cycles - the market will not continue to respond to these things favourably forever.

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Loyhead Carmichael has 1 articles online

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The Apple Tax Increases

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This article was published on 2010/03/30