Apple Pricing? Quit your Bitching!

by Chris Seibold Aug 14, 2008

The chances of finding yourself at Disney World well past the age of maximum enjoyment (somewhere after age 10) are disproportionately high if you have a child. You'll be shocked by the prices ($2.50 for the Coke machine), be nauseated by the pandering to children and amazed by the level of self-promotion (there is a channel that plays a show about the 7 top attractions at Disney 24/7). Once those feelings have subsided and you start hitting the rides you'll notice that a lot of the rides are the same, only the robots change.

Which brings us to Apple Inc. One of the constant complaints about Apple is that the company charges too much for what is merely commodity hardware inserted into cool looking boxes. That objection is easily dismissed on a fiduciary level, Apple is in the business to rake in profits and the company is awash in the green stuff, but not so easily dismissed on a more fundamental level. If Dell can sell a laptop with a 15-inch screen for $699, shouldn't Apple be able to sell one for $799?

Apple haters will gnash their teeth at the disparity while Apple fans will object strenuously, citing cost of Apple's R&D, advertising and the presence of FireWire ports. The moans of those who think Apple charges too much and the excuses of assembled Applemanity all lack when the cold light of logic is applied. Apple doesn't price products according to how much the product costs to make, the company prices products according to how much you'll pay. Should the cost to make a product exceed the price X number of users are willing to pay, the product, however cool, does not get made.

Let's try and refine this argument just a little bit by adding some numbers in. Dell's net profit is margin is 5%. Apple's profit margin is more in line with other industries at 15% (according to Yahoo! finance anyway). Now it is time for some wild oversimplification of factors. Assume Dell cranks out a computer consisting of $500 worth of parts. Dell charges $525 for the machine. Apple creates the exact same machine, rounds the corners and paints it white and charges $575.

In the previous heavily oversimplified exercise, Apple is charging $50 more for a shiny case. But that isn't the real truth, Apple charges more because people believe the company's products are worth the extra expense. How much is worth not to be confused by the various incarnations of Windows Vista? How much is it worth to be able to take a Mac to the Apple store and know that the problem is Apple's instead of being told you need to call Microsoft because it is a software problem not a hardware problem?

Other factors should be included but they become impossible to quantify very quickly. Is the look of OS X worth more than the look of Vista? If so how much? How much value do you put on the seamless integration of Apple branded hardware and OS X? You can't measure these benefits in the cost of circuit boards or by pixel depth but the value to many users is very real.

To illustrate this concept let us examine two rides that most would say are very different experiences. The Pirates of the Caribbean and It's a Small World. At the fundamental level the rides are the same: you get in a boat and float around in half a foot of water watching dated animatronic dolls put on a little show. But given a choice between meandering through the Pirates of the Caribbean twice in one day or two trips around the planet on It's a Small World I'd opt for the Pirates of the Caribbean every time. Well, unless I got to take a flamethrower on the second loop through the repetitive dolls of the world, that ride needs some serious updating. The same holds true with Apple products: Sure, they're just stock gadgets more or less but you're not paying for the gadget, you're paying for the experience. 


  • Another thing people forget is the difference in price between iWork and Office.  Both do more or less the same thing but Office is 4 or 5 times more expensive.

    WetcoastBob had this to say on Aug 14, 2008 Posts: 29
  • As someone who is over 40, enjoys visiting Disney World (and Disneyland for that matter) and owns a dozen or so Apple devices, this article didn’t really do anything for me.  Instead of comparing It’s a Small World to Pirates of the Caribbean, the author would have done better to compare Disney World (Apple) to your home town, run of the mill amusement park (Dell).

    In both cases, you pay for the enhanced user experience.  If you want crappy, carbon-copy rides that offer little more than a queasy feeling in your stomach, then by all means, the amusement park is for you.

    But I’m looking for an immersive experience that goes BEYOND just the roller coaster.  I want to feel like I’m actually ripping down the side of Mt. Everest.

    I buy Apple products because I like the way they just work.  I like that the company has taken the extra effort to make the interface pleasant to look at and intuitive.  Both Disney and Apple pay attention to the small details that other companies seem to ignore (or think you’ll ignore).

    I think I understand the point the author was trying to make, but the arguments used were hardly persuading.  The flamethrower comment was rather juvenile.  The author would have done better to do some research into the resale value of Apple computers on ebay and craigslist compared to comparable Dell machines.  Or for that matter, if the author insists on drawing comparisons to Disney World and Apple, then explain why Disney World gets so many more visitors a year than Universal Studios? If price is the only factor someone takes into consideration, then we’d all be just as happy with the mediocre amusement park.

    I’d say to the author:  quit bitching about something you haven’t bothered to research further.


    denvernative had this to say on Aug 15, 2008 Posts: 1
  • Research further? I just got back from Disney World (5 nights, Coronado) and I’ve spent plenty of time researching Apple products. Why I could probably write a book about it. It would probably be six hundred pages long and published by O’Reilly.

    That noted I probably wasn’t clear enough in what I was trying to say since I wrote it on the way back from Disney World. What I was really trying to get across was that Apple can take the same ingredients as everyone else and come up with something special. IT is a little like giving two people peanut butter, jelly and white bread and then discovering one person has made a really good sandwich while the other has made the standard pb&j;.

    But instead of peanut butter I went with Disney rides. I suppose the flame thrower small world thing was juvenile. In retrospect I should’ve said small world and samurai sword cause those doll heads floating in the water would just be awesome. Besides, it isn’t as if Disney never updates rides. Mr. Toads wild ride is now (from what I can tell) Pooh’s Windy Day. I preferred it as Mr. Toads Wild Ride but that was dated when i was a kid in the 70s!

    But there is a chance that I’m the only one who thinks its a small world sucks. If you actually like its a small world substitute some other ride.

    As for Disney compared to other amusement parks, well I live close to Dollywood (the fattest place on earth) and if you have to spend money to travel to a park I’d head to disney.

    Chris Seibold had this to say on Aug 15, 2008 Posts: 354
  • You pay more, but it comes with customer service. Last week I suspected that my internal hard drive in my iMac G5 had died. I made an appointment at the local Apple store, on line, to meet with a technician at the Genius Bar. He confirmed my suspicion and then proceeded to show me how to replace the hard drive at no charge. He even suggested a couple of local retail outlets that carry hard drives. He could have just as easily told me that it would be $250 to $300 to replace the original 160 gigabyte drive with another stock drive. Instead, with his advice, I purchased a 320 gigabyte Western Digital hard drive for $67. The entire repair, including the purchase of a #2 magnetized screw driver was less than $75 and fifteen minutes of my time. That’s customer service.

    flyboy had this to say on Aug 16, 2008 Posts: 30
  • “You pay more, but it comes with customer service.”

    My 18-month old motherboard in my iMac had to be replaced recently and it cost $800.  Anyone want to give me the apologist bullshit for why an Intel MB in this day and age costs $800?  Was it the awesome design that I never saw or the incredible user experience of shelling out $800 to fix it?  Because I’m just not seeing it.

    Beeblebrox had this to say on Aug 16, 2008 Posts: 2220
  • “Another thing people forget is the difference in price between iWork and Office.  Both do more or less the same thing but Office is 4 or 5 times more expensive.”

    This comparison seems to inadvertantly suggest that Apple’s prices on hardware are wholly unjustified.  Or are you saying that even though Office seems to do more or less the same thing, that really it does a LOT more that justifies the otherwise disproportionate price difference?

    Beeblebrox had this to say on Aug 16, 2008 Posts: 2220
  • To the point then, Apple uses superior IPS LCD panels in most of their products, they cost more and display the full range of possible colors that the eye can see.  Jonathan Berkowitz

    berkowitzjonathan05 had this to say on Aug 17, 2011 Posts: 8
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