You can not put a price on loyalty. I'm joking, it's $ 1,000.
This year Apple has become a $ 1 trillion company. But it has also become the thousand dollar company: all of a sudden you need at least 10 Benjamins to get the best new iPhone or the big iPad Pro.
Apple has never done economic things. But this decline in many of its prices has increased by 20% or more. The MacBook Air went from $ 1,000 to $ 1,200. A Mac Mini jumped from $ 500 to $ 800. It seemed that the value proposition that made Apple non-brainers products could disentangle.
For a certain perspective, we have analyzed the last few years of pricing on some iconic Apple products. Then we compared them with other brands and some proprietary data on the buying habits of the American phones by the mobile analysis company BayStreet Research.
What we have learned: being loyal to Apple is becoming expensive. Many Apple product prices are rising faster than inflation, faster, even faster than the price of prescription drugs or going to the university. Yet when Apple offers cheaper options for its most important product, the iPhone, Americans tend to take the most expensive choice. So while Apple is not charging all the customers anymore, it's definitely extracting more money from frequent updates.
Apple says that prices rise because it introduces new technologies like Face ID and invests in the creation of products that last a long time. Yet he has clearly felt the discomfort of prices from some environments. This week, among the late sales news that brought his stock away from the trillion dollar club, he has dedicated his home page to a used car sales technique that is not characteristic of an aspirational luxury brand. He offered a "limited time" deal to exchange an old iPhone and get a new iPhone XR for $ 450, a discount of $ 300.
Apple offers trade-ins for many products now. And not all that Apple has increased in price: an iMac and entry-level iPad have become cheaper since 2014, although in both cases the company has added a new "Pro" version of higher end (and of higher price) to its lineup.
It's a good time to take stock of what you're paying. At the end of 2014, when iPhone 6 came out, the average price paid for any iPhone was $ 634, according to BayStreet. This year will be $ 898. (Samsung owners in the same period have gone from $ 635 to $ 710, not counting promotions.) Add services like iCloud storage and AirPod headphones, and our climbs on Apple Bill even higher.
Our charts of Apple's price increases are like a Rorschach test: some see a technology giant that is most impacting us on ho-hum upgrades. Others see the growing utility of Apple products in our lives.
What we see is the reflection of a new reality for consumer technology. Most Americans who want a smartphone, tablet or laptop already have one and are not interested in switching to a new system. Without large subsidies from telephone companies and the slowdown in product innovation, we do not bother to keep these products for three or more years. Apple, hoping to charge more every time we buy, is changing the way it gets money from us. So we have to change the way we think about its value.
Because Apple charges more
Most technological products are raw materials that fall in price over time. Apple has worked hard to not become a commodity.
Get MacBook Air, the entry-level laptop, which at $ 1,000 has become more common in dorms of college students in the United States than in futons. After leaving for years the characteristics of the laptop while focusing on more expensive models, Apple has updated Air in October with a new screen, a processor and a fingerprint reader. Oh, and that 20% price bump too.
The competition on laptops is fierce and, with many measures, the new Air can not compete with a model of Windows 10 leaders like Dell XPS 13. At the same price as a new Air, Dell offers a faster processor, more flash memory and weighs even less.
Of course, there are things that Apple is no longer able to do, including cameras for smartphones and voice assistants. Even if one of these features or services is not as good as a competitor, it does not move much the needle – the sum is much larger than the parts.
Apple does not totally ignore budget buyers. The iPhone is now available in a wide range of prices, because Apple keeps the old models and lowers prices. You can get an iPhone 7 for $ 450 (and a 6S or SE for even less through a retailer) or a maxi-out XS Max for $ 1,450.
The paradox is that many Apple customers think they should have the latest, future-proof Apple-trained marketing to ourselves. So this year, instead of buying an iPhone 8 year old at a discounted price or an iPhone XR (a much cheaper compromise for the iPhone XS at the top), many customers are jumping off an update altogether. "People are looking at the R as a step-down product, as if it were not a smartphone," says BayStreet's Cliff Maldonado.
This makes sense if you think of Apple as a luxury item. When you spend so much, who buys the stuff from last season? (No surprise, Apple's chief sales officer was Burberry's CEO.)
The question is: how much can Apple's latest and greatest prices get? "Apple is becoming aggressive, perhaps excessively, in pricing the top-of-the-line models of its products," says Rafi Mohammed, a pricing strategy consultant. And that means "putting your loyal relationship with your main customers at risk".
What is changing
In 2014, Americans waited approximately 24 months to update their phones at national carriers, according to BayStreet. We are now waiting almost 36 months. People will ride their iPhone 6S until their wheels come off.
The reality is that smartphones, like laptops and tablets, are not improving significantly. There is some interesting new technology at the horizon, but progress in processor speed and other features has been difficult to hear over the last three years. It was not true in the early days of smartphones.
"I could see it coming up to four years" for phones, says Ben Bajarin analyst from Creative Strategies. Especially when software updates continue: Apple's latest, iOS 12, still runs on an iPhone 5S starting in 2013.
From our point of view, we get more life from a telephone that we keep for three or four years. But it can be hard to see the value in keeping the old technology around for another year.
And Apple has another trick to make us spend more in the years between the big updates: services and accessories. AppleCare + is available when you create a screen, iCloud to store all the photos that no longer fit your phone, Apple Music for entertainment – and probably others in 2019. Then there are full stockings like cases, incredibly expensive keys , or, if Santa feels very generous, AirPods and Apple Watches. Enter into a certain logic Apple: I spent so much on this, maybe I will spend even more to get the most out of it.
Apple earned 16% of its revenue from services in the most recent quarter and reported that it was the company's new focus by announcing that it will no longer reveal how many phones it sells.
So what should you do if the price of Apple's loyalty becomes difficult to digest? There is always the possibility of moving to a different technological tribe. It's hard to find an alternative to all the problems fixed by Apple, even though Google is trying to replicate some aspects of the experience with its Pixel smartphones and Home speakers. (However these products are not much cheaper).
So far, there is little evidence that many are interested in changing. "I do not think people will say that this is too expensive, so I'm going to switch to Android," says Bajarin. "Your habitual consumer only wants guarantees, they want to know that what they have bought works and seldom stray from what they are familiar with."
Instead, you might ask: how many Apple products do you really need? Just because you have an iPhone does not mean you need the $ 350 HomePod to listen to music. (Now it's easier to avoid hardware: Apple last week announced that it would make Apple Music subscriptions available on Amazon Alexa devices such as the $ 50 Echo Dot speaker).
Beyond that, it's about recalibrating our drive to upgrade. Apple devices last a long time, especially with the cheap battery replacements that Apple offers until the end of the year. If your iPhone breaks down, the used ones available on eBay can still work great with much less money.
Or: before buying the new thing after one of Apple's launch events, wait a month until the buzz resolves. If the product does not seem very revolutionary yet, it's a safe bet to save your money by holding back for another year. Or four.