Just over a year ago now, Apple changed tack in a pretty major way and released a low-end budget Mac without a display, keyboard or mouse. This move actually left a lot of computer-watches somewhat in the dark as to what Apple’s motives really were… They were making a reasonable amount of cash from the middle-range iMac G5, and anyone who really was strapped for cash went for a well spec’ed but quite big eMac or made a choice from the very active second-hand market for Apple kit (don’t forget, Apple’s hardware is put together by Apple usually from pretty high quality components that tend to last quite a while.
Their traditionally higher price point went on ensuring the basic level of hardware quality was high. Hence the active resale market). They must have seen the likes of Dell shifting tons of bog-standard boxes for peoples’ Mums and Nans to do web and email and thought ‘We need a piece of that action’. Endeavouring to keep the hardware quality high while still reducing the overall price, something had to give: so the ‘BYODKM’ (Bring Your Own Display, Keyboard and Mouse) concept came about. Apple could ship a box, just like Dell, that could simply replace customers’ existing Windoze boxes.
Maybe they did it to try and raise their market share? If you think of the shear number of Windows machines around you in the world - they are all but ubiquitous everywhere you go - there is obviously a market for a cheap computer that has a minimum requirement (Web, email, music), but isn’t required to do much more. Ideal first-computer territory. And, they had a price point to match: £350. That is a nice price for a basic system. Another £150 for display, keyboard and mouse, and you could set up your parents with their first computer that you could walk away from and would just work. This competes, to a degree, with the low-end Dell boxes too.
Not to mention the geek market. Windows fanboys who would never have considered a Mac before are initially attracted by the look of the user interface, or the fact that it has Unix under the hood (and you know how much geeks love to tinker). They could keep their Windows boxes for everyday use, and ‘play’ with this little Mac every so often in their spare time - for not a lot of cash at all.
One of the biggest problems Apple face in trying to increase their market share is that people already have pre-conceptions of how computers should be from using Windows. The thought of having to learn a whole new way of using a computer scares a lot of people, and they can’t see the value of switching as they can’t appreciate how much more useful using a Mac is. Get them using a Mac for a length of time, and they’re hooked - its just the getting them on there in the first place that is tricky. The Mac Mini’s price helped solve this as people could just about afford to give it a go, and in their own time. People would find themselves using the Mac for more and more (’actually, I kinda like the way Mail works. Its better than Outlook’ and ‘Yeah, Safari is clean and works, so I’ll use that for my web browsing) - then it becomes their everyday use machine, and the Windows box is relegated to the few apps that don’t run under anything other than Windows, and for games. So the geeks are introduced to both the Mac and Unix in a controlled way, in their own time, and come to see the benefits of the platform for themselves.
People would bang on and on about the price of Apple kit. The arguments about the quality of the kit just doesn’t wash with a lot of people. They can’t see past the price. £350 is a good price for this kind of Mac kit and brings it well within the reach of a lot of people.
With that in mind (price is everything at this end of the market), this is when it all seems to go a bit pair-shaped. Yesterday, Apple release an updated Mac Mini with new gubbins inside (new Intel processor, wireless networking built in, remote control, etc…). Great, you may say. Apple have a long heritage of updating their kit as hardware becomes better and cheaper. Problem here is that they also increased the price. If the increase had been only £50, a few more people would have thought twice, but the majority of people would have seen the extra gubbins as worth it and dropped the cash. Apple, however, decided to raise the price of their basic Mac Mini by £100, which means that Apple’s cheapest budget entry-level computer now starts at £450. Remember, that’s still without keyboard, mouse and display. Sure, all the new bits are great (wireless in all models, audio in, remote control, faster processor), but they really aren’t going to mean much to the average person buying their first Mac (potentially their first computer too). All they’re going to see is the £450 price point and go for a Dell that comes with a display, keyboard, mouse and printer for £300. No amount of apparent UI gloss and fancy posh computer trickery from the same people who made their iPod is going to convince them that the price of a Mac Mini system (Mini + peripherals) of around £600 is twice as good as a £300 Dell.
And for the geeks, they probably already have all the new stuff the Mac Mini offers in their existing Windows boxes, so won’t see the benefit of that either.
You see, I’m not really sure who this new Mac Mini is really aimed at. Its priced out of the budget of the first time Mac buyer market, people wanting a computer to connect to their TV as a media centre are doing to go with a much cheaper Windows-based solution (sure it may not look as nice, but its £200 cheaper!), people with a perfectly good existing Mac Mini are not going to see a huge difference between the probable resale value of their existing Mini and the £450 for this basic model and not bother (this is me), and the geeks are going to start costing up how much the individual bits would be to put their own box together, and put the new wave of improved-UI, more accessible Linux systems on their own-built kit instead.
In fact, if you cost in the price of all the extra bits you need (around £150 for keyboard, mouse and display) you’re up to around £600, and that’s only a bit shy of the price of a brand new (and really rather good) iBook at £700.
So, given that the Mac Mini is now £100 more expensive, what extra value are Apple going to bring to the table that replaces the price as the no-brainer decision to buy this computer? The rumours regarding Apple’s release of a new iTunes Movie Store (for legally downloading movies) are as yet unfounded. My old Mac Mini can play movies perfectly well right now, so this probably wouldn’t push me to upgrade - but it certainly might bring people to the Mac Mini to use it as a small, quiet TV connected box that does the whole movie business. To be honest, the Mac Mini is also perfect as a little box connected to a TV that can act as a PVR (Personal Video Recorder). I use Elgato’s EyeTVs software and hardware and watch and record all TV through my Mac Mini now. Its simple, just works, and is relatively cheap to set up. If Apple had released some kind of PVR-like functionality for the Mac Mini at £450, that would have tipped me over the upgrade edge. Alas, this hasn’t come about either.
All this leaves us wondering just what the real-world benefits of this Mac Mini upgrade really are? All the extra upgraded gubbins are all well and good, but most people really won’t notice the difference.
They will notice the significantly increased price however. What that means to the Mac Mini’s popularity, and Apple’s increasing market share can only be speculated over in the months to come…
© Copyright Craig Pugsley 2006
Published by MacShrine with permission
Craig Pugsley is a new addition to the team. He will be providing a new article every Wednesday for you folks!
March 2nd, 2006 at 12:51 pm
Nice article, I totally agree with you. In the aftermath of what I believe to be a poor showing on Apple’s part on Tuesday, the buzz word seems to be cost. A boombox that would double the cost of a top-end iPod, a leather case which costs a third of the iPod, which doesnt allow you to see the display, and an increase in the Mac Mini’s cost. A Mac Mini was something I was considering to buy, as a second Mac, and I wanted Front Row on it. However, an increase by £100 has dismissed all the reasoning I would have to buy one. I get the feeling these higher prices are a taste of things to come and we could see a hight priced Intel powered iBook in the coming months.
March 2nd, 2006 at 1:23 pm
People have pointed out time and time again that the Intel processors are more expensive than their Freescale counterparts were. Apple is also using the entire Intel platform which reduces Apple’s capacity to omit unnecessary components such as wireless LAN (and include them as lucrative BTO options). Then add components which were not present in the original Mac mini: remote control and infrared receiver and you might well have significantly higher component costs than with the previous model.
Apple will have done their marketing regarding price, just as they did with the original iPod. And just as was the case then, people will declare Apple’s pricing as ludicrous but it will probably sell anyway. And they’ll make some money while they’re at it as well (as opposed to Dell which barely can on a per-unit basis.)
The 100 quid price hike in the UK certainly is ridiculous though. It doesn’t compare favourably to the $100 hike in the US or 130 Swiss Franc increase here in Switzerland (about 60 pounds). But UK customers getting shafted by American corporations is another unfortunate story all together…
If you look at the dollar increase then I don’t think it changes the product’s central value proposition. It doesn’t look as pretty in the UK though.
March 3rd, 2006 at 11:29 am
Yes, these are all very valid points. Apple were getting better at reducing the equivalent pricing of their products across the US and Europe, but the Mac Mini is one of the notable exceptions (as is the price of iTunes purchases, even taking into account the extra VAT costs incurred here in the UK).
The difference between setting the price for a brand new product never really seen in the industry before (which, therefore suffers less from conceptions of acceptable price), and increasing the price of an existing product line that has well-established conceptions of price, is going to mean a difference in resistance from consumers.
People may react unfavourably to a new high-priced product, but then accept the price when they realise the value the product gives them. Accepting the price increase of an existing product relies on the fact that the average consumer must see significantly increased value in real terms of the new product. This is where I believe the new Mac Mini is at a significant disadvantage, as most of the improvements are to do with under-the-hood changes of architecture that won’t mean much to the majority of people.
I’m not saying that the Mac Mini concept is bad - entirely the opposite (I’m using it as my home machine). What I’m saying is that Apple need to appreciate who they’re selling this product to. They had a compelling budget-level machine that was a great in-road to getting people using Macs. People will be forced to gamble more money on trying a Mac - and not everyone is willing to take such seemingly long odds.
March 6th, 2006 at 9:56 pm
The MAC is dead. Deal with it. You can’t play the stock market with last month’s stock quotes and you won’t get far with yesteryear’s technology. If you want to make money, real money, you’ve got to shed your loserly ways. There was once a battle for the computer marketplace, and Apple lost. You can go pop a tape in your Betamax, or listen to your 8-track, and pretend it didn’t happen, or you can get with the program and let me show you the way to getting rich in the here and now… and it ain’t through MacApple. Gates would squish Mac but it ain’t worth the time to clean off the bottom of his shoe. If you wanna be a winner, you gotta run with the winners. However, some just choose to lose no matter what you tell them.
No offense intended. You’re all good kids. You got potential. I just want to see you succeed. That’s all. Richard Quick, Esq.
March 8th, 2006 at 10:59 pm
Dear Richard,
McDonalds bought Pret A Manger a few years ago on the hush, realizing of course that the fast-food paradigm is changing permanently.
they needed somethign to morph into, and as far the UK goes, Pret is it.
Your apparent ignorance of the fact that Bill Gates (and this time not so quietly) purchased a huge share of Apple a few years back means you therefore miss the point: Windows peak arrived and is dying out. Apple is the future. My advice is get with it now, or die out like the neandrathals.
April 15th, 2007 at 12:05 am
I think Apple has always been a genius! They just take a while to come up with something new, but when they do come up with something it’s pretty amazing!
June 14th, 2007 at 11:52 pm
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