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Lessons to learn from MacBook pricing

Thu, 28 May 2009

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Apple has once again thrown up the price of the MacBook in the UK. This time by a fairly substantial £30 to £749. This follow a price increase earlier in the year from £704 to £719. Actually this follows an even earlier price increase (then decrease) from £699.

Of course, it's the exchange rate, which in England has been falling steadily for the last year. The global economy continues to freefall, and the UK exchange rate has been badly hit.

In October 2008 I covered this in-depth when the exchange rate fell from $2 in the pound to $1.73 in the pound.

In May we noticed that the exchange rate had fallen again and when Apple closed the store I mooted the possibility of yet another price increase.

And now it seems to have happened. Even though the pound rallied a bit and now stands at $1.59 to the £1. It's still low and doing the sums shows that the US and UK prices are comparable.

We're not surprised. Apple doesn't have a vendetta against the UK; it doesn't hate all its UK customers. It isn't out to punish us. It just operates in a global economy and sets all its prices on a local basis.

But still, we can't help but continue to wonder if the price of Apple's computers is right across the board. Obviously we want as many people to buy Apple computers as possible. After all more Mac owners means more visitors to Macworld.

We also fervently believe that Macs offer a better computing experience than PCs. And we'd like as many people as possible to realise that. And there's no doubt that the high cost of entry is a problem for many.

I was at a dinner party the other night and a person said they were after a laptop. Just something for surfing the web and writing the odd word document. Every person suggested a netbook; just £200 they said. It'll do you fine.

It's becoming increasingly hard to justify spending the £550 extra a MacBook costs over a netbook. There's no doubting that it's a better computer; no arguments there. Better keyboard, hard drive, trackpad, screen – better everything.

But cost is an issue. And every time Apple ups the price in the UK it becomes a bigger issue.

But there are two other things I learnt from today's experience. And I thought I'd share them. The first is loss aversion.

I started investigating this a while ago after hearing the term and realising it struck a chord with what I saw amongst Macworld readers. According to Wikipedia:

"loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains."

As much as though this does sound like it should belong on Twitter with the #noshitsherlock tag, it does go some way towards explaining reader comments like this:

"I can understand why they put up the price, but will they reduce the price so readily if the exchange rate was in the UK's favour? I think not."

The fact that our reader says "I think not" is telling. Because that's exactly what Apple did in 2006.

The truth is that people don't notice gains in the same way that they notice losses. That's why you get so many "rip-off Britain" stories in newspapers. They grab your attention much more than a "this is a bargain" story.

Although it has to be said that Apple customers in the UK haven't really had much practice with bargain stories or late.

Still… today's news is the exchange rate. It's always the exchange rate. Always. Apple sets the price in the US and adjust accordingly around the world. It typically makes the adjustment when it updates the products. The price goes up or down depending on the exchange rate.

I know this because we analyse every single product on the Apple store and compare its pricing around the world. We also do it with other products which is why you get articles like this on Macworld.

Which brings me to today's revelation for me, and it isn't to do with Apple at all.

Typically I have used a number of programs to work out the pricing behind Apple. Either the Unit Converter widget or www.xe.com website to get the exchange rate and a calculator to work out the VAT.

You know what I used today?

Wolfram Alpha from start to finish.

I did it almost instinctively in the same way you'd use Google to search. It wasn't until I had all the figures that I realised I was using it instead of a calculator.

Peter Cohen was completely right when he said that Wolfram Alpha acts as computation knowledge engine, not a search engine.

Wolfram Alpha

Wolfram Alpha showing our exchange rate

So I learnt something today. But has Apple? I wonder how the sales of MacBooks are going in the UK. I know if I was buying a computer tomorrow I'd probably still buy a White MacBook (it still represents pretty good value for what's inside) but how many people are going to buy Dell 10 netbooks instead?

Apple might not be able to make a £300 computer that isn't a piece of junk. But surely it could make one for £500. It might have a smaller screen and keyboard, and a less powerful processor, but really do you need an Intel Core 2 Duo 2.13GHz for surfing the web and writing up a Word document?

A £500 laptop (even if slower) would make more sense in the current market than a £750 entry level laptop. I think it's time for Apple to seriously reconsider its pricing structure, and make it easier for switchers to afford a Mac laptop.

Posted by: Mark Hattersley

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Comments received


Craig Grannell said on Thursday, 28 May 2009

£500 looks like the sweet spot. You might then be able to argue an extra £100 over, say, a Dell Studio, for a Mac. That said, I can't see a £599 MacBook appearing any time soon.

Richard Williams said on Thursday, 28 May 2009

So glad I decided to buy a new white Macbook online a few weeks ago for £640 :o)

Nik Gibson said on Friday, 29 May 2009

I agree that Apple needs to look once more at an entry level product as, especially in today's economy do you really need to pay £749 just to use the web, email or write the ocassional document. My entry level product to the Mac was a Mac Mini but that is really poor value now. So what about it Apple?

Hugh Jarse said on Monday, 01 June 2009

Nice article Mark - I agree entirely. The Mac may be worth the extra money, but the wider the gap between the cheapest Mac and a netbook, the harder it is to persuade people to pay the extra.

J Kane said on Monday, 01 June 2009

I have given up advising people to buy Mac's. As soon as you mention the price they start choking and going red. Empty Apple stores & resellers also telling a story.

gregorsamsa said on Monday, 01 June 2009

Good article, Mark, & I quite agree with your concluding comments. Going by the generally negative sentiment invoked by the latest price increase, I expect Mac market share to dip further.

G said on Tuesday, 02 June 2009

What I find is more interesting and disgusting from Apple, is the disparity in pricing between Europe and everywhere else. In the Republic of Ireland, along with the rest of Europe, a MacBook costs €949, which corresponds roughly to $1350 given current exchange rates. Simply by crossing the border into Northern Ireland, any body buying a mac will automatically save a minimum of €150. Worse than that, though, is the Mac Mini, which is priced at €599, when in the U.S. it is priced at $599. Virtually all apple hardware is priced at a near €1 to $1 dollar ratio, yet the exchange rate is currently €1 to $1.42. Apple have no excuse for this ridiculous pricing, and should be put to task over it immediatly.

Helen Giuliana said on Friday, 05 June 2009

G you are so right about the €1 to $1 dollar ratio, this also applies to all software i have bought in recent months, with one exception. Now Adobe are increasing the price of CS4 to harmonize prices, shame on them, other companies don't.

Helen

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