The lower pricing model makes Apple a winner in the long run

Jan 31, 2015 21:51 GMT  ·  By

Steve Jobs had a few business rules. One of the most intriguing ones was to never be afraid of cannibalizing yourself. In his Biography written by Walter Isaacson, Steve Jobs is remembered saying “If you don’t cannibalize yourself, someone else will.

That seems to be one of the most important rules that today's Apple follows religiously. Tim Cook is a man of numbers and 17 years ago when he joined the company he probably wouldn't have acted like he does now. The last quarterly results are the best way to describe their success.

In the past few days since they have been announced, the results are still mesmerizing for financial analysts. Let's just remember how Apple was supposedly doomed a few months ago when Bend Gate fiasco showed up in the media. Everyone thought Apple is going to drop in sales and the new iPhone will be a total flop.

Guess what? Their latest financial quarter was the most amazing one for the iPhone. Apple sold 74 million smartphones in just three months and their profit raised up to $18 Billion.

Apple's newest approach and the iMac

Lowering prices for software and services and even the cost of hardware products. How can Apple make money that way?

Make no mistake: by giving stuff away Apple does not lose money. They gain followers and respect from their users and make other big companies face the fear of losing money.

Let's talk about the new retina iMac. It costs $2499 at it comes loaded with features and specs. You will not be wrong if you name it the top Apple computer on the market and even the top computer on the market, for that matter. There's no other all-in-one that offers a 5K display. Not for that price at least. And the Mac Pro is better, but you need to pay a higher price and buy additional accessories in order to use it.

Apple chose to price its top All-In-One at the same price tag I bought the unibody MacBook Pro in 2008. I believe I paid even more because I chose to have a larger capacity Hard Drive in that computer. The iMac has a gorgeous 27-inch 5K display and it comes with OS X Yosemite and iWork Suite.

What else can you get for the same price in the Windows World? Well, you can start with the Dell UltraSharp 27-inch 5K Monitor. Same screen quality and the same price as the iMac - $2499. Yes, it has exactly the same price BUT it is just a monitor. Nothing else. You need to hook it up to a computer that has a graphic card that supports a 5K resolution, you need to get two DisplayPort cables to achieve the maximum pixel count.

What did Apple do here? They cannibalized their MacBook Pro sales and lowered the price for a high-end iMac in order to compete to a monitor that offers the same performance for a pricey tag. That's how you win on this market.

Mac mini or iPad?

The Mac mini starts at just $499. The smaller package comes with enough specs to fit the needs of any young user. Hook it up to a display and you've got a cheap OS X running machine that is just as expensive as an iPad. Yes, the lower version of the iPad Air 2 starts at $499.

So if you are looking for a cheap entry way into the Apple world you can take the first step for just $499. It's a matter of choice. Do you need a computer that works fine, looks good and offers the basic software or a tablet device running iOS with millions of apps that are just a tap away.

If you look at the Apple's line-up for 2015 you will notice that their products don't just look the same when it comes to the color and materials used, but they fit into a matrix of price. The Apple watch will cost about the same like the iPhone and just $100 less than the iPad. The MacBook Air is about the same as the mid-range iPad (until the rumored new version comes out). Also, mid-range MacBook Pro costs just as a 5K iMac.

The free OS X and iCloud

Another important aspect of Apple's new way to deal with pricing is related to the Operating System. It's been 3 years now since OS X has been given away for free. In the beginning everyone thought this is because Apple blew it and didn't have enough features to justify the $20 price tag.

I'm not saying $20 isn't low enough, especially if you compare it to the $120 Windows used to cost. Nevertheless, Apple decided to give it away for free and when Yosemite came out we've seen why. Apple has redesigned the entire Operating System and has added new, great functionality like Handoff, Continuity and Notification Center and didn't ask anyone for a dime.

Microsoft makes only software so they have to sell it. Yes, Windows 10 will be free, but only for old customers. If you upgrade from a previous version of Windows you can get for zero dollars if not, you will probably have to pay for it.

Why does Apple do it? Because OS X and iOS are part of an ecosystem. Apple makes money by selling hardware, apps and music/movies. The OS and their software is just the best way to get people up to date so they don't have to support older versions of the operating system.

iCloud is another example of Apple cutting their own share. All financial experts have probably asked themselves why the Cupertino tech giant is taking the computer out of the equation and lets the user use iCloud to back-up and restore their smartphones. Some would say it is not a good business.

I can only find one good answer to that. Apple cares about the customer first, themselves second. That's why they make a lot of money each quarter.