Apple has posted huge numbers for the previous quarter, and even so there's no stopping claims that the company is headed for a fall. Many reasons are given but the old standby is flying around. That's the one that claims Apple's products are overpriced, and that will bring the company to the brink.
This is funny. No matter what you feel about Apple, its products, or its practices, there is no denying the fact that it keeps racking up massive sales. Whether it's the iPad, iPhone, or Macs, tens of millions of them keep shipping to customers.
The latest quarter was somewhat of an exception. Those numbers were even higher than anyone expected due to heavy iPhone sales. Of course, that leads some to claim that dependence on high sales of a single product is troubling. Maybe that's true at some level, but in the profit arena not so much.
To put the "Apple products are overpriced" argument to bed, let's look at what that means. If by overpriced people mean compared to the competition, perhaps they are priced too high. Actually, if a product with a high price sells in high volumes the competitor's pricing doesn't matter. Or if overpriced means products are too expensive for some to afford them, then in a way they are overpriced. For those customers, anyway.
But in the business world, it's obvious to this writer that Apple is pricing its main products just right. How can that be?
Every company has a duty to shareholders and to customers to provide value for every investment. Pivotal to this effort is the proper pricing of products, which involves meeting three criteria:
- Quality design and build quality that provides sufficient value to customers.
- Pricing the product at a price a lot of customers are willing to pay.
- Price point yields the desired profit margin.
That's a simplification, but it's the basis for good pricing practices. The quality criteria is a prerequisite for the second requirement. The easiest way to fulfill the profit criteria is to price products as high as the first two requirements will allow.
When a company meets all three requirements and posts sales in volume, then the pricing is good as gold. If the value is not there for customers, they will not buy the products.
Apple's customers see good value in the products as big sales numbers consistently prove. Take the last quarter alone: over 74 million iPhone purchasers happily paid the price that others will claim is too high.
That this many consumers were willing to pay Apple's prices for the iPhone proves it was well priced. It also makes a rather strong case that had the prices been lower then the company would have failed to meet its responsibility to shareholders. Other companies may be happy to leave money on the table, but not Apple.
No matter how many people say it and how often they do, Apple's products are good enough to justify the prices, even though they are often higher than the competition. The perceived value is there at purchase time, and the millions of repeat customers prove it's there through the product lifecycle.
The high sales volume over time clearly demonstrates that Apple has this pricing thing nailed down. High enough to generate huge profits, yet low enough to get long lines of customers to buy its products. That's not overpricing, that's right pricing.
You may feel that the iPhone is overpriced, but 74 million others disagree.