Apple's cultivation of invidious distinction

"Invidious distinction" is a term first coined by Thorstein Veblen, an economist who explored the reasons people buy the products they do and was endowed with a vocabulary so large that I had to keep a dictionary firmly planted next to me when I read some of his work back in college (which was, approximately, around the time Nero was playing his famous fiddle from his palace in Rome, or something like that).

"Invidious distinction" is a term first coined by Thorstein Veblen, an economist who explored the reasons people buy the products they do and was endowed with a vocabulary so large that I had to keep a dictionary firmly planted next to me when I read some of his work back in college (which was, approximately, around the time Nero was playing his famous fiddle from his palace in Rome, or something like that). It is used to describe the impulse among those with money to buy things that sets them apart from the masses. Such products tend to be expensive, because expensive products are something that ordinary people can't afford.

That seems to be the case with the iPhone. As pointed out by many bloggers (myself included), the iPhone is going to be expensive, topping out at $600 for the 8GB model, even with an obligatory 2-year Cingular commitment. I thought this was because of the big screen coupled with the horsepower to handle a stripped-down version of Mac OS X. According to a teardown analysis by iSuppli, however, (not sure what they are basing it on, as no production phones have been released, as far as I know), the total cost of the iPhone device comes in at around $281.

In other words, the high price of the Apple iPhone is purely OPTIONAL. That might seem weird to people accustomed to a market where device manufacturers yield thin profits off of low-cost devices, but isn't unusual in the market for luxury goods...and Apple has clearly positioned itself as a vendor of luxury good products. The previously linked article suggests Apple has a lot of room to lower prices in future, but that ignores the very real possibility that Apple might not want to. What value would Gucci derive from slashing the price of their shirts and stocking them in Sears stores across America? Very little, as lowering the price would erode the brand's luxury status.

Of course, phones are different, and it remains to be seen how utilitarian people truly are when it comes to phones. Anecdotal evidence suggests that phones are devices through which people express identity, suggesting a high price might be sustainable if ownership of a particular branded device created distinction that was sufficiently invidious. However, different regions display different degrees of utilitarianism. America is considered by most marketers as more utilitarian, at least with respect to electronics and technology, whereas Europe (with considerable variation within, Italy being the most fashion oriented) and Asia (also plenty of variation) being less utilitarian.

That might suggest, therefore, that Apple would have the best luck releasing the iPhone overseas sooner rather than later. That doesn't mean the other issues I identified previously aren't issues - such as the lack of an SDK or other company's ability to copy iPhone concepts - but that might not matter, as Apple isn't shooting for the business market.  Fashion often trumps business sense, which is why businesspeople in the upper reaches of their profession buy Gucci suits instead of the suit they found at Sears.

Yes, I do have to get off the Apple topic.  I will, eventually.

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