Why Apple doesn’t care about its competition

By Felix Salmon
October 24, 2012

The world divides into people who think of Apple as a company, and people who think of Apple as a brand. The former group includes all stock analysts, of course, but it also includes most technology journalists. The latter group is, well, most of the people who buy Apple products.

The difference between the two can be seen quite clearly this morning, in reactions to the launch of the iPad mini. The WSJ — which naturally skews to the Apple-is-a-company view of the world — runs its story under the headline “Apple Drops an iPad Mini on Rivals”, and leads by saying that by announcing this new product, Apple was “seeking to blunt an advance by rivals”. They even have a “Tablet Wars” interactive graphic, which is based on the implicit assumption that consumers are hyper-rational shoppers, carefully comparing the iPad to various alternatives (Nook HD+, Kindle Fire HD, Galaxy Note 10.1, Google Nexus 7, Microsoft Surface) who are likely to then buy the option which hits their sweet spot when it comes to price and features.

The NYT coverage, from Brian Chen, takes a similar tack, under the headline “Apple, Facing Competition, Introduces a Smaller iPad”:

With all the action in the tablet market lately, smaller models have become impossible to ignore. Google, Apple’s fiercest competitor, recently released its 7-inch Nexus 7 tablet for $200. Amazon recently introduced seven new Kindles, including a 7-inch tablet for $160 and an 8.9-inch tablet for $300. Barnes & Noble’s Nook tablet, which starts at $200, has also sold well. Combined, the three companies have sold about 15 million of these smaller, cheaper tablets.

But if you look at what actual consumers are asking, it turns out that only an ultra-geeky minority is out there weighing up the relative merits of the iPad mini and the Galaxy Note. Note Nick Bilton, today:

Now that the Apple iPad Mini is here, I’m fielding one particular question from friends, family and readers: Which model should I buy?

The point here is that Apple has already done the work of persuading people to buy the iPad mini — it’s done it through many years of creating products which are a pleasure to use.

Which is why the bellyaching about the iPad mini’s pricing is very weird to me. Apple’s job, when it developed this device, was not to create something to compete with the Nook HD+. Rather, it was to build something which fit easily into the existing lineup, right between the iPod Touch and the iPad, and which would delight its customers as much as those two products do. The iPod Touch starts at $300; the iPad starts at $400. And the iPad mini, at $330, is right in between, where it belongs.

Apple, famously, has the same pricing philosophy as Louis Vuitton: it sells premium products at premium prices, and it never discounts. That philosophy has made it an aspirational brand worldwide: you don’t see vendors in China selling fake Google Nexus 7s. Sometimes, as with the iPhone and iPad, the world beats a path to the company’s door in any case. Other times, as in the case of wireless routers or external displays, Apple’s products are so much more expensive than the competition that only the rich Apple faithful tend to buy them. But that uncompromising devotion to the fundamental philosophy is what has made Apple such a powerful global brand.

The result is that most of the millions of people who buy an iPad mini will never seriously consider any of the alternatives. They know what works for them, and they trust Apple to deliver. That’s the power of the Apple brand. Amazon also has that power — as a retailer, just not, yet, as a hardware manufacturer. Most Amazon customers don’t bother checking prices elsewhere any more: they’ve happily locked themselves in to the relationship.

There are three questions, then, which real people will ask about the iPad mini. Do I want it, can I afford it, and which model should I get. The answers to those questions will determine how many iPad minis Apple manages to sell. But the question which most of the press concentrates on — how does the iPad mini compare to its non-Apple competitors — is one which gets asked much less often than the Apple-as-company people tend to think.

22 comments

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There is a third group too – those who have a vested interest in the failure of Apple the brand and Apple the company – and they are quite noisy. Just as during the court case between Apple and Samsung when there was a lot of negative publicity suddenly in the blogosphere, the recent launch of the iPhone 5 saw a huge amount of hyped up reports about the ‘purple cast’ the camera had – when in fact ALL cameras, from smart phones up to Nikons’ and Hasselblads and more all do this.

Posted by FifthDecade | Report as abusive

The iPad Mini also allows Apple another crack at the Apple faithful who have to have everything, the ones who line up a day in advance for every new product. Now Apple can sell those guys an iPad mini to go with their regular iPad and iPhone.

Posted by JREinATL | Report as abusive

I think more people are willing to try non Apple products than used to.

Amongst both my work colleagues and friends a few years ago everyone who had a smart phone was going with IPhones with just a couple of exceptions. They had all been Apple users since the IPod , had tried macs etc…

Now hoever the IPhone users are in the minority. A lot of people have swapped from IPhones to androids, while those getting their first smartphone are also getting Androids.

Posted by ABT | Report as abusive

Apple’s market share in PCs, according to a quick google search, is now up to 12%; I don’t know to what extent that is corporate buyers who might never be in the market for tablets of this sort, but it seems like a soft upper bound on people who think “Apple” and don’t do any shopping around.

Of course, it may well be that the price they would have to sell this at to attract a lot of the other people is low enough that gross profit would be lower than simply selling a higher-margin product to fewer people, and it would certainly, as you note, hurt the brand in the eyes of people who are very important to Apple. That said, while I’m sure there are some of each — some people who do comparison shopping, and some who look at Apple or nothing — I disagree with your implication that the latter is larger than the former.

Incidentally, “consumers are hyper-rational” instead of “some consumers are occasionally rational” — which, of course, is what is actually required for the WSJ graphic to actually be of use and interest — is just gratuitously annoying and tendentious.

Posted by dWj | Report as abusive

This is a great article. The author really gets it.

Apple’s products are just as addictive as heroin, but in a good way. Once you’re hooked, you’re not going to consider other brands. Customer satisfaction is through the roof.

There is also the matter of the Apple ecosystem of apps and services. The ecosystem makes it easier for the non-geek to use Apple products. iCloud provides automatic syncing between devices, apps work on multiple devices, iTunes provides a far greater selection of apps and media than competing products, and Time Capsule backups are automatic.

Posted by davesmall | Report as abusive

This is a great article. The author really gets it.

Apple’s products are just as addictive as heroin, but in a good way. Once you’re hooked, you’re not going to consider other brands. Customer satisfaction is through the roof.

There is also the matter of the Apple ecosystem of apps and services. The ecosystem makes it easier for the non-geek to use Apple products. iCloud provides automatic syncing between devices, apps work on multiple devices, iTunes provides a far greater selection of apps and media than competing products, and Time Capsule backups are automatic.

Posted by davesmall | Report as abusive

@ABT: Things are cycling so fast these days… Like you, many of my friends and colleagues went with Apple products then tried alternatives, especially in the smartphone area. A large number of those are now ‘returning to the Apple fold’ having become disenchanted with competitive offerings for various reasons.

Posted by deasys | Report as abusive

If you mention “the NYTs Brian Chen,” you should at least note that this is the person who the police in the iPhone 4 Gizmodo theft-gate referred to a “juvenile,” with the DA involved saying on the record that

“It was obvious they were angry with the company about not being invited to some press conference or some big Apple event. We expected to see a certain amount of professionalism-this is like 15-year-old children talking.”

This is the person who describes profit-free devices from Google as being “Apple’s fiercest competitor” and that Amazons “we can’t talk sales figures” Kindle is “selling really well.”

He’s not really credible. He’s a cheerleader for products that aren’t selling and aren’t even designed to turn a profit. They are desperate measures from companies that can’t sell the kinds of products Apple is. So they’re selling plastic junk that isn’t going to get support in a few months.

It’s breathtaking how even significant publications like the NYT are hiring “angry children” to write derisively about Apple’s products. It’s as transparently biased as Fox News.

Posted by DanielEran | Report as abusive

“Which is why the bellyaching about the iPad mini’s pricing is very weird to me.”

The bellyaching is not so much weird (analysts and tech journalists always seem to go through the same sort of hand-wringing with each Apple product release) as as premature and completely devoid of historical perspective. These industry “experts” certainly understand Apple’s release cycle but they still don’t seem to get how Apples does things. It’s like they develop amnesia with each new Apple announcement.

You are correct, Apple doesn’t play around in the bottom end… that is until they want to. Right now it probably doesn’t not matter that the iPad Mini is 130 dollars more expensive than the Fire or Nexus 7. But it will likely matter at some point.

The original iPod Mini was not much less expensive than a full size iPod (and was just as criticized as the ipad mini for being too expensive). But it sold in much higher numbers than the iPod proving all the naysayers tragically wrong. And then came the Nano and Shuffle to plug the holes in the lower price points.

So Apple does sometimes play in the lower levels (and with the iPhone they do it by selling older models for free and 100 bucks through carriers). The real question is when will Apple fill them with the iPad line and how will they do it?

Posted by minimalist | Report as abusive

The author wrote, “Other times, as in the case of wireless routers or external displays, Apple’s products are so much more expensive than the competition that only the rich Apple faithful tend to buy them.”

That may be so, but the Apple Airport Extreme wireless router is one of the top rated routers at Amazon and PCMag.com readers vote Apple AirPort routers the most reliable and best overall in this 2011. Even Yahoo’s Marissa Mayer offered a glowing endorsement of Apple’s AirPort wireless router products on her Google+ social network page at the beginning of the year when she was still with Google.

Sometimes there are good reasons why some products are more expensive than would-be rivals.

Posted by deasys | Report as abusive

Last week, I would have agreed with the premise of this article. After the iPad mini launch, I’m not so sure.

If Apple didn’t care about its competition, it wouldn’t have even launched the iPad mini. iPad sales show no sign of weakness. There’s no reason to muddy the waters with other products. Except, of course, if Apple cared about their competition.

Posted by gregmaletic | Report as abusive

“Which is why the bellyaching about the iPad mini’s pricing is very weird to me.”

The bellyaching is not so much weird (analysts and tech journalists always seem to go through the same sort of hand-wringing with each Apple product release) as as premature and completely devoid of historical perspective. These industry “experts” certainly understand Apple’s release cycle but they still don’t seem to get how Apples does things. It’s like they develop amnesia with each new Apple announcement.

You are correct, Apple doesn’t play around in the bottom end… that is until they want to. Right now it probably doesn’t not matter that the iPad Mini is 130 dollars more expensive than the Fire or Nexus 7. But it will likely matter at some point.

The original iPod Mini was not much less expensive than a full size iPod (and was just as criticized as the ipad mini for being too expensive). But it sold in much higher numbers than the iPod proving all the naysayers tragically wrong. And then came the Nano and Shuffle to plug the holes in the lower price points.

So Apple does sometimes play in the lower levels (and with the iPhone they do it by selling older models for free and 100 bucks through carriers). The real question is when will Apple fill them with the iPad line and how will they do it?

Posted by minimalist | Report as abusive

Quite by accident, computer hardware and software manufacturers — with their dreadful record of provisioning robust, easy-to-use solutions for consumers — have *beaten* hyper-rationality into consumers. This hyper-rationality insists comparing hardware specification pricing among manufacturers wastes time. This hyper-rationality insists on well-integrated hardware and software. This hyper-rationality insists “My time and money are valuable. What works easily and well without wasting my time or my money?”
Apple answers that last question.

Posted by Andre_Friedmann | Report as abusive

Very nice article.

Just like the market has shown the need for two iPad sizes, I wouldn’t at all be surprised to see a second, bigger iPhone in a year or two.

With so much incredible diversity in this world, no company can ever hope to fill every possible situation. But Apple, and any other company, can certainly try to offer as many options as make financial sense within their unique footprint.

Are there countless articles this week talking about how many cheaper options there are than the new 13-inch MacBook Pro? I doubt it.

People tend to buy what most fills their current situation (to various levels of rationality). And that “situation” certainly includes the superficiality of wearing tech tools/gadgets like fashion.

Posted by BrendanPatrick | Report as abusive

“The point here is that Apple has already done the work of persuading people to buy the iPad mini — it’s done it through many years of creating products which are a pleasure to use.”

Regardless of whether or not Apple products are a ‘pleasure’ to use, a company can only write their own destiny for so long. Apple is currently coasting off of their two smash hit products– the iPod and the iPhone. Both products were revolutionary at the time of their release, but the people will only remain impressed for so long. Just as Microsoft thought the Windows train would keep chugging forever, Apple too will discover that it’s innovate or die.

Posted by imtyler | Report as abusive

The recent revelation of a huge vulnerability in routers with WPS support was instructive about the Airport Extreme, which had spotted this possibility, and engineered effectively around it. Premium? Yes, but partially because it’s easy to set up (imagine!) and partially because Apple has done its homework.

The extreme hatred of Apple is kind of strange, and it has always ended with one thing: hating the “sheeple” who buy the brand. Accusations of “monopolist” are not uncommon, and it’s often immediately followed by the ‘they’re only 12% of the (US) market.’ Indeed, the particular business model used by Apple seems to make two things very likely: Apple will make products appreciated by everyone except those who must know the speeds ‘n’ feeds; and two, the monopolist model on the board here is the company that gives out its generic software for free, so that it can profit on the back end. This was Microsoft’s model.

Posted by Swift2010 | Report as abusive

“you don’t see vendors in China selling fake Google Nexus 7s”

That would be redundant. Android devices are already a counterfeit iOS devices.

Posted by Divebus | Report as abusive

Excellent story…could have been even more forcefully written. The tech media and most financial analysts are still stuck in a “once ailing Apple Computer” mindset where Windows is still relevant and where apple products are “expensive.” Unfortunately even Apple’s senior management and especially Cook are ill equipped to deal with their success–why the hell does Cook deign to apologize for the new maps when it is clearly vastly superior to the previous iOS maps? And another unanswered question: I thought Apple had board approval for a share repurchase program, so how trashed does the stock have to get before they step in? A sub 10 ex-cash P/E and 15% drop in price in 2 weeks and still these guys running the company are standing around with $130 Billion in cash with their thumbs up their butts. Sad and pathetic. Can we get somebody more qualified to run the day to day operations of this company?

Posted by spaceageliving | Report as abusive

” A lot of people have swapped from IPhones to androids ”

Whoever posted this is completely ignorant about the product market. So Ignorant that that person does not know Apple holds a 90% retention rate and Android holds a 50% retention rate.

News for the ignorant masses..Your friends/co-worker, blah, blah, blah is called anecdotal evidence and its the worst data anyone can use to formulate opinion!!

Know real facts then post online!!

Posted by HighIQ180 | Report as abusive

My Airport Extreme(s) have been the easiest routers to implement, and even when the first failed (power supply) after the warranty expired, Apple replaced it because I had the Apple protection plan on both my MBP and iMac. After the first router failed I was not happy, went and bought the latest CISCO/Linksys EA4500 which had to be reset a couple of times over 3-4 months, and didn’t support my USB printer even though it claimed to support ANY USB device. I didn’t want to have to keep the iMac running just to print from the MBP, so went to Apple to see if it was just the power cord for the router that failed. Unfortunately it wasn’t but I think if you go in “nicely” without ranting about the problem they work with you. Wasted $$ on the CISCO!

As far as compatibility, the Airport Extreme worked easily with the old PC until its power supply failed. A coworker’s daughter had problems connecting her MBP with another brands router, but his work laptop was Dell/Windows. He switched to the Apple AE and all devices connecting fine. Smh at those who suffer through compatibility issues and rant about pricing.

-Happy Apple Customer

Posted by wthcares | Report as abusive

In regards to the pricing of an Apple product, regardless of Apple’s concern or lack of for competition; doesn’t an Apple purchase include a lot more than just the device?

With others it’s hardware usually offers a decent spec sheet but the physical design is just enough to get by and the materials are mundane plastic. Apple spends more on engineering the physical design and includes nicer quality materials. Other vendors offer the same one year term of warranty as Apple, but what do you get with that? With Apple they have renowned support and service. Staffing and training costs per Apple customer must be much higher with Apple. Apple stands behind their products like no other, often times exchanging a device in store on the spot. Others don’t offer this level of service even if you could get face to face with their support staff. More likely you’re navigating a phone tree with an over seas call center. The ability to visit an Apple store and interact with a device with the help of we’ll trained staff; prior to purchase and receive very thorough support after purchase also must come at some cost. Apple did their homework and created the best OS, iOS is the most flushed out system that most reviewers still give the nod to, as the one that just works. With an iOS device purchase comes OS Updates several times a year and for many years to come. Offering quickly delivered and often times impressive improvements to your device over its lifetime.

Including services like iCloud and the best Appstore; all of these extras come at a cost that is reflected in the higher price. If you buy a mini tablet from others for $199 you’re agreeing to forgo all the above; just as the vendor of that narrowly marked up $199 mini tablet offers that product with limitations that aren’t shown on the hardware spec sheet.

Posted by ekoyarivitz | Report as abusive

The world doesnt divvy up quite so cleanly. I am typing this on my iPad, but I’m just as likely to be doing this on my Samsung smart phone or my hp laptop. When I bought the ipad, there really were no other choices, but now that there are, I will take into account the fact that my iPad crashes the most of the the three and the frequent annoyance created by the flash fails. I don’t mind paying a premium price, but don’t care to put up with a lower level of performance just to be trendy. To the poster who said apple fans are addicts, I was one of the original “crackberry” addicts (got mine in ’01). That was a pretty loyal following too and I think RIM thought they’d always be there. There’s something instructive in there for Apple – you need to continue to earn the loyalty of your customers. The diehards alone won’t sustain you, people are a little more discerning than you (or Apple/RIM?) believe.

Posted by LenC | Report as abusive