I bought the new Mac Mini. Seriously.

[Jason Dunn]

Hug your loved ones today, because there may be no tomorrow: I've ordered a new Mac Mini. Somewhere a Microsoft employee is weeping.

[Janak Parekh]

It is a slick unit, albeit a bit overpriced. What was the final trigger, Jason? ;-)

[Jason Dunn]

What's that? An OS X die-hard saying that a Mac is overpriced? Hehe. Don't let Vinny see you write that! ;) I had more or less decided to get one about a month ago, but was waiting for the new version...it's not because I particularly WANT to get one, but I'm trying to get into some new type of product consulting that requires me to be cross-platform.

[Janak Parekh]

Well, compared to previous *minis*, it's certainly a bit overpriced for what it brings to the table. The base unit has increased by $200 since the original one came out, albeit with better specs.

The comparison to other platforms is harder. You're paying for the Mac experience, whether or not you like it. In general, I would say that, based on hardware alone, the laptop prices are somewhat competitive, but the Mac desktops are certainly more expensive. To say they are overpriced compared to their Windows counterparts is trickier: who's to say what is the right price or not? Are BMWs overpriced? :-)

[Jason Dunn]

Yeah, I know what you mean - the specs are better, sure, but I bet the price of a 320 GB hard drive is the same, or less, than it was back when the previous Mac Mini was launched.

I really do think Apple is missing their opportunity to grow their market share by having this new Mac Mini be even more expensive than the last one. If they want to get people on board, they need to be willing to sacrifice their typical 100+% profit margins on one product.

[Janak Parekh]

The key insight you're missing, though, is that Apple rarely is interested in marketshare. They want their profitable niche. If it's around 10%, they're happy with that. (I say "rarely", as opposed to "never", because that's not entirely true -- witness the $99 point for iPhones. But, for other products, it generally is.)

The way I like to think of it is as a luxury car or watch brand, and the Store experience in a lot of cases reflects this. Whether or not you feel that it is worth such status is a separate question, of course. ;-)

[Jason Dunn]

I'm not missing anything Janak. :) Apple is completely two-faced about their market share; in the PC world, they look at their 5% world-wide market share as being a niche luxury item vibe. In the mobile space (MP3 players + phones) they're the dominant player (MP3) or a leading player (phones) and somehow that's OK with them.

Apple is a business ... See morelike any other, and if Apple could do something to somehow quadruple their market share overnight, you know that they would. How they - or Apple fans - interpret their market share is all a matter of spin and amount of Kool Aid drunk.

[Janak Parekh]

Jason, I completely disagree. If Apple cut their PC prices a few hundred dollars, they'd increase marketshare, but they are clearly not interested in doing it.

The goal of a business is to maximize *profit*. Given that they have been utterly successful in this regard, I don't think either you or I can say "they could have done better if they do X" with any confidence.

(And please, enough with the third-person Kool-Aid references. I know you don't mean this, but it comes off as "anyone who disagrees with you in this regard is drinking the Kool-Aid.")

[Jason Dunn]

I guess we'll have to disagree. The fact that Apple spent over half a billion dollars ($511 million in 2009) on advertising, and let's say half of that were the Mac vs. PC ads (betcha' it's more than that), tells me that Apple *does* care about market share. They *do* care about getting more people using their computers. If not, why do you think ... See morethey spent so much money on ads ripping into Windows Vista? Just for fun?

I agree that a business is about maximizing profit, but I don't understand how you can say that quadrupling their market share wouldn't also bring with it even more profit. They're a massively profitable company, yes, but would they turn away from more profit? No way.

What they won't do to get more profit or more market share is drag their computer pricing down into what they perceive as the gutter of PC pricing - $499-ish and lower for desktops, and especially not for laptops. It was probably a source of many arguments internally for them to have a $999 Macbook. They want to maintain the perception that Apple is an elite brand representing quality and status. The primary way they do that is by being more expensive than everybody else because a price tag brings with it perceptions of quality. Just ask Lexus, BMW, etc.

This is why Apple *loves* the phone game I think - they can have their expensive, high-quality phone hardware be mega cheap with a carrier subsidy...they get to maintain their aura of quality (just look at the price of the iPhone 4 without a contract) yet still be affordable. If they could figure out a way to do that with their computers, I think they'd be all over it.

My original point was that by *raising* the price of the new Mac Mini, instead of keeping it the same or lowering it a bit, Apple was taking what was supposed to be a "gateway" computer - a computer that gets people into the Mac ecosystem - and pushing it into a higher cost bracket. To me, your gateway option, your "budget" option, is what draws people in, then the next computer they buy from you is your $1500+ computer.

Apple is a massively successful company in MP3 players, phones, and amongst a segment of the population that buys expensive computers - and I was simply expressing my opinion on the fact that if they ever want to reach out to more people with OS X, by raising the price of the Mac Mini they're headed in the wrong direction.

Apologies for the Kool-Aid reference - it wasn't aimed at you. I won't mention it again...in this conversation. ;)

[Janak Parekh]

Yes, we will have to mostly disagree. Apple wants SOME marketshare (enough to have a sustainable critical base of users), and absolutely needs marketing to support that -- but if they wanted to conquer the market, there's multiple steps they could do that they never will: slash prices, allow for clones, etc. Many of these moves, however, will decrease profit.

Again, Jason, I don't think you or I have the numbers to make the assertion you do. With greater marketshare via reduced prices comes a greater percentage of revenue going to fulfillment and support. By keeping the profit margins very high, the fixed cost of support-per-unit remains a small percentage, and they maintain huge margins.

Let me emphasize: Apple's profits per square footage in retail is leaps and bounds higher than ANY OTHER STORE ON THE PLANET, multiple times over Tiffany's or Saks Fifth Avenue. They are steadily INCREASING profits in a down economy. And yet analysts keep on insisting they're wrong. I really, really don't get it! (I won't touch the market cap argument, because I could see that argued multiple ways.)

Finally: is pricing also about branding as a luxury item? Of course it is -- that we can agree on. Recent Mac products are engineered so precisely it's insane. The iPad is an absolute engineering marvel; there are absolutely no seams or screws anywhere. I'm mystified that people can manufacture units so perfectly. Moreover, given the great support I've had at Apple Stores, I do walk out of there feeling I was treated differently than when I've called HP or Dell. (I've walked in there multiple times [with an appointment] -- with a dead Mac laptop power supply, an iPhone with dead pixels, a dead BT headset. Every single time, the guy behind a desk took a minute and went and handed me a brand new one, no questions asked. That is support, and it was hard not to smile as to how effortless and nice it was.)

[Jason Dunn]

You raise some good points Janak. Ultimately, Apple is doing extremely well as a company right now, so it's silly for anyone (myself included) to point a finger at them and say "Oh, you're doing that wrong!". I still believe, however, that based on the amount of money Apple spends on bashing Windows, that they do want more Mac customers...and slapping a $100 price jump on their entry-level OS X product is a poor way of doing that.

I've heard mostly good stories about Apple service/support, and I definitely grasp how amazing it is as a customer to be able to walk into a store with a dysfunctional product and walk out again with a fixed/new product. That's old-school customer service that has all but vanished in today's high tech world. I think that's probably the greatest achievement Apple has made with their retail stores: the ability to instantly make customers happy.

For what it's worth, I bought a three-year AppleCare plan on my Mac Mini for that very reason - the good things I'd heard about AppleCare and the Apple stores.

[Janak Parekh]

You raise some good points Janak. Ultimately, Apple is doing extremely well as a company right now, so it's silly for anyone (myself included) to point a finger at them and say "Oh, you're doing that wrong!". I still believe, however, that based on the amount of money Apple spends on bashing Windows, that they do want more Mac customers...and slapping a $100 price jump on their entry-level OS X product is a poor way of doing that. Well... Apple has a complicated relationship with Windows. Vista was low-hanging fruit (undeservedly so; I think Vista was underrated as much as Windows 7 is overrated -- they're ultimately extremely similar) to advertise against. At the same time, they want Microsoft interest in the platform via Office, and OS X supports Exchange, etc.

I think they used the ad campaign to try and justify moderately higher prices to customers who weren't particularly interested by the luxury aspects of Apple. "Don't want viruses and spyware? Macs make your life simpler," is an attractive advert (and, actual security aside, is relatively true, given the smaller footprint of OS X making it less attractive to malware creators).

In any case, you'll notice they finally ended that ad campaign. Time will tell what they replace it with, but their focus is clearly iOS right now, which, sadly, Microsoft has no answer to (well, they do have the technological answer and have had it for over a decade -- Windows CE -- but seem utterly incapable of packaging it right in the last few years). The profit margins on the iPad must also be huge, just like their Macs.

For what it's worth, I bought a three-year AppleCare plan on my Mac Mini for that very reason - the good things I'd heard about AppleCare and the Apple stores. Well, let's be honest. The other reason you need it is because you can't replace parts trivially on the Mac, which makes AppleCare semi-mandatory unless you are willing to throw the unit out when it breaks. ;) Apple desktops, Mac Pro aside, are basically desk-sized packages of laptop technology, and should be treated as such when you think of things like warranty. That said, I didn't buy AppleCare on my iMac -- if it dies, I'd love a newer, faster one. :P

--janak