The price of iPhone 7 in the USA is $649 for 32GB model. In India, it’s priced at 55000 Rs. But that’s just the price of the base model. You can go up to 92000 Rs (969 USD)! And that’s for a device where you would require a connector to use your previously owned headphones. When I first heard about it, I was like, “This phone is premium and is only meant for the higher class consumers.” If I were given chance to spend that much money, I would rather buy a Trek hybrid, possibly a DSLR and would still have money left to go on a weekend photography trip to a hill station. Even better, with the price of an iPhone 7 plus you can go for a 10 days vacation trip to Russia (25000 Rs round ticket for flight)! That would be an experience of a lifetime. And how long would your iPhone 7 plus last? 3 years at max, afterward you will be looking for an iPhone 10 on the exchange. Anyways, these were my thoughts. Thoughts of a middle-class, Indian young man. I believed similar would be the thoughts of other middle-class, young Indians. I was wrong. I know 3 people around who have bought iPhone 7. Now these guys normally would argue with the vegetable seller for the price of tomato, onions. Hell, one of them owes me 2500 Rs and I know he would never return it back. So, what’s happening here? Why these average, middle-class people are overspending on a way over priced product than tomato, onions? Apple’s product (especially the new launches) are overpriced and I will explain it later. But this question is indeed intriguing. The reason is similar to why an average middle-class person spends way over his/her ability and income on marriages. “Social status”. There are many other factors. So first let’s have a look at these reasons that control (drive) your product purchase
- Because you need it: Winter is coming. You buy a new blanket. You needed it, so you bought it.
- Because it looks cool: Winter is coming. You were just waiting for it to come. Now, you bought a new leather jacket. You already had sweaters, old jackets but you wanted this new one to impress, and look cool with your bike.
- Because of advertisements: Winter is coming. You see an advertisement of a new room heater that can also be powered by solar energy. You ordered it. You probably paid some extra money for solar option without even thinking that it probably would be useless in winters due to dense fog. Here, bullet 1 (and possibly 2 also) plays a part.
- Because you wanted it: Winter is coming. Apple releases a new smart jacket called iJacket, all white with an apple logo. That jacket has a headphone jack that can pair with your iPhone 7 or 7 plus and you can connect it to use your old headphones. It’s priced at 800USD. As soon as it got released, you will search all over the internet for its reviews, price availability, sizes, etc. There is an urge, desire, temptation to buy this product. Even if it’s overpriced, out of your budget, probably not as rugged as your old 250USD leather jacket. Still, you will have a strong desire to buy it. And eventually, you bought it. Although after 2 months, it will be long forgotten.
- Because you can buy it: Winter is coming. Imagine you’re super rich and live in Delhi. You just bought a whole new house in Mumbai to stay away from winters. And then moved to Mumbai during winters.
A combination of these factors dictates whether you would buy a product or not. For example, consider your visit to Big-Bazaar (any shopping mall). Suppose you need onions, potatoes. So, you took a trolley. Put some onions, potatoes in the trolley because you needed it. Then, you bought a knife because it was looking cool. A salesman approached you and because of his advertisement and selling skills, you bought a new winter cream too. Now you were just about to leave when you saw a pack of strawberries. You had tasted them once or twice before. You didn’t much remember the taste. The cost of 6 pieces (probably 2 weeks old) is 200 Rs. You can buy 5 kg oranges with that amount. But you bought the strawberries.Now just when you were at the billing counter, you bought a candy too.
Apple has nailed down the 4th bullet. It has built a consumer base that wants almost each and every apple product. Then the wise question should be, “How did they do it?” To answer this question, simply think for a while, “What makes you absolutely desire for a product?” Suppose a bike. There are many good bikes in the same price range. But there would be a few, which you would absolutely like to have. You can even ignore its practical flaws and price. Mostly the desire arises from branding, design and actual feel of the product. And to maintain this desire for the next product of that brand, the product should function smoothly, like the new one, consistently for a long time.
Coming to the case of Apple, in the early smartphone age (even before that), they were the ones to absolutely prioritize design and feel of the product. Event to this day, Macbooks are the most well build, well-designed laptops. This is absolutely important to create and maintain desirability in the consumer’s mind. Secondly, whatever apple products do (quite limited compared to windows, android), they do it smoothly, consistently. Now a smart consumer can easily do the same with a half priced windows machine. But the average consumer isn’t smart. Just make a consumer learn your way to perform a task. He won’t switch platforms in the future. The combination of these strategies has created a consumer base for them. These consumers have learned an apple way of doing things, unfamiliar with a lot of other alternatives/ functionalities, too used to apple design, and most importantly too obsessed with the brand itself. And that’s why apple heavily overprices its newly launched products. And earn a lot. I mean, profit wise they are miles ahead of any other brand in the world (including Coca-Cola, Google, Microsoft).
Then next question would be, “How to get into the consumer base of apple?” This consumer base though much smaller than windows for PCs and android for smartphones is the highest profitable consumer base because they are willing to pay a lot. So, how to do it? Do what apple did, better a lot better. I mean, these consumers are too used to apple. So, you have to be very good to get them onboard with your product. Seems impossible but in fact, it’s already happening with surface products. According to Microsoft, more people are switching from Macs to the surface than ever before. Microsoft: more people are switching from Macs to Surface than ever before
How is Microsoft achieving that? Simply by creating a more beautiful, smooth, more functional, and ultimately a more desirable product.
The one at the back has a more unique design (hinge, separable tablet), has a touch screen, a unique pen, and simply much more desirable to a neutral buyer. To an apple buyer, however, it will take time. But it’s happening, slowly.
So the lesson.
Build a seamlessly, smoothly designed product and make it somehow desirable to the consumers. Once they are onboard, play with prices and earn huge profits. Sounds simple, but will require years of hard work, capital, planning, and even luck (depending upon the product). But then, the prize is big, very big.
(Header image credits: wired)