Monday, 10 Dec 2018

Your Apple products are getting more and more expensive. Here's how they get out of it.

(Washington Post / iStock staff illustration) (Washington Post / Washington, D.C. staff)

You can not put a price on loyalty. I'm kidding, it's $ 1000.

Apple has become this year a company of one trillion dollars. But it has also become a thousand dollar business: it takes at least 10 Benjamins to get the best new iPhone or iPad Pro.

Apple has never done cheap stuff. But this decline, many of its prices rose 20% or more. The MacBook Air has gone from $ 1,000 to $ 1,200. A Mac Mini has gone from $ 500 to $ 800. We had the impression that the value proposition that made Apple products obvious could crumble.

To give you an idea, we have listed the prices of recent years for some iconic Apple products. We then compared them to other brands and proprietary data on American phone buying habits in the United States. BayStreet search.

What we have learned: Being loyal to Apple is expensive. Many Apple product prices are rising faster than inflation, or even faster than those of prescription drugs or college education. Yet when Apple offers cheaper options for its most important product, the iPhone, Americans tend to take the most expensive choice. Thus, even if Apple does not charge more for all customers, it definitely gets more money from frequent updates.

(Andrew Van Dam and Geoffrey A. Fowler)

Apple says prices are rising because it introduces new technologies such as Face ID and invests in sustainable product manufacturing. Yet he clearly felt the price discomfort of some circles. This week, faced with late sales that had the effect of pulling out of the club's stock of billions of dollars, he dedicated his home page to a technique of selling used cars that is not characteristic of a ambitious luxury brand. He proposed a "limited-time" contract to exchange an old iPhone and get a new iPhone XR for 450 USD, a discount of 300 USD.

Apple now offers exchanges for many products. And not everything has gone up in Apple's prices: an entry-level iMac and iPad have become cheaper since 2014, although in both cases the company has since added a new "top-of-the-line" version. range "(and at a better price) to its range. .

It's a good time to take stock of what you pay for. In late 2014, when the iPhone 6 came out, the average price of an iPhone was $ 634, according to BayStreet. This year it will be $ 898. (Samsung's owners have gone from $ 635 to $ 710 over the same period, ignoring promotions.) Add services like iCloud storage and AirPod headphones, and our Apple bill goes up even more.

Our charts of Apple's price rise look like a Rorschach test: some see a technology giant taking away more for great upgrades. Others see the increasing utility of Apple products in our lives.

What we see is a reflection of a new reality for mainstream technology. Most Americans who want a smartphone, tablet or laptop already have one and are not interested in switching to a new system. In the absence of large subsidies from telephone operators and the slowdown in product innovation, it does not bother us to keep these products for at least three years. Apple, hoping to charge more each time we buy, changes the way we get money. We must therefore change the way we think about its value.

Why Apple charges more

Most technological products are products whose price decreases over time. Apple worked very hard not to become a commodity.

Take the MacBook Air, the entry-level laptop, which, at a cost of $ 1,000, has become more common than futons in American university dormitories. After leaving the features of his laptop languishing for years while focusing on more expensive models, Apple updated the Air in October with a new screen, a processor and a fingerprint reader. Oh, and this price increase of 20% too.

The competition between laptops is fierce and, in many ways, the new Air can not compete with a leading Windows 10 model, such as the Dell XPS 13. For the same price as a new Air, the Dell offers a faster processor, more flash storage less, too.

But specifications matter little. As any member of the Apple tribe will say, it sells more than just sexy gear. It's an operating system reserved for Apple that works with all its other elements, such as iMessage and iCloud – a (mostly) happy trap that is hard to leave. You purchase access to all of these Apple Store and customer services, not to mention Apple's aggressive privacy stance.

Of course, there is no better product for Apple, including smartphone cameras and voice assistants. Even if one of these functions or services is not as efficient as a competitor, it does not move the needle much – the sum is much larger than the coins.

Apple does not totally ignore buyers in the budget. The iPhone is now available in a wide price range because Apple retains its old models and lowers its prices. You can get an iPhone 7 priced at 450 USD (and a 6S or SE for even less at a retailer) or an iPhone XS Max at maximum up to 1450 USD.

The paradox is that many Apple customers think that they must have the latest technology, trained by Apple Marketing to prepare for the future. So, this year, instead of buying an old iPhone 8 at a reduced price or an iPhone XR (a much cheaper compromise for the biggest iPhone XS), many customers abandon their upgrade completely. "People see R as the product of progressive reduction. It's less a smartphone, "said Cliff Maldonado of BayStreet.

It makes sense if you consider Apple a luxury product. When you spend so much, who buys the business from last season? (No surprise, Apple's chief retailer was the CEO of Burberry.)

The question that arises is: until where can go the last and best prices of Apple? "Apple is becoming aggressive, perhaps overly, in the pricing of high-end models of its products," said Rafi Mohammed, a pricing strategy consultant. And this "jeopardizes his faithful relationship with his main customers".

What's changing?

In 2014, Americans waited about 24 months to upgrade their phones at national carriers, according to BayStreet. We are now waiting nearly 36 months. People will use their iPhone 6S until its wheels come off.

The reality is that smartphones, like laptops and tablets, do not improve dramatically. Interesting new technologies are on the horizon, but over the last three years, it has been difficult to see progress in processing speed and capacity. This was not true at the beginning of smartphones.

"I could see it last four years" for phones, says industry analyst Ben Bajarin of Creative Strategies. Especially when software updates arrive constantly: the latest version of Apple, iOS 12, still works on an iPhone 5S from 2013.

From our point of view, we are getting more out of a phone than we keep for three or four years. It's just a hard thing to see.

And Apple has another trick to force us to spend more in the years between major upgrades: services and accessories. AppleCare + allows you to store all the photos that no longer fit on your phone, Apple Music for entertainment purposes – and probably more to come in 2019. Then there are stockings like cases, dongles ridiculously too expensive, or, if Santa feels very generous, AirPods and Apple Watches. A certain logic Apple is committed: I spent so much money that I will perhaps spend even more to get the most out of it.

In the last quarter, Apple generated 16% of its service revenues and announced that it was now a new priority by announcing that it would no longer disclose the number of phones sold.

So what should you do if the price of loyalty to Apple becomes difficult to swallow? There is always the possibility of switching to another technological tribe. It's hard to find an alternative to all of Apple's issues, even if 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, little evidence has attracted many people. "I do not think people will say it's too expensive, so I'm going to switch to Android," says Bajarin. "Your usual consumer just wants guarantees. They want to know that what they have bought works and rarely deviates from what they know. "

Instead, you might ask yourself: How many Apple products do you really need? Having an iPhone does not mean that you need the $ 350 HomePod to listen to music. (It's now easier to avoid this material: Apple announced last week 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 desire to upgrade. Apple devices really last a very long time, especially with the inexpensive replacements of batteries offered by Apple until the end of the year. If your iPhone goes down, the devices available on eBay can still work effectively for a lot less money.

Or: before buying the new product after one of Apple's launch events, wait a month for the buzz to subside. If the product still does not seem very revolutionary, save your money by keeping it for a year. Or four.


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