Why has Apple opted for the luxury end of the market?
Apple’s event on March 9 was mainly about the Apple Watch, and what emerged over the course of the day was that this is a company increasingly focused on the luxury end of the market, a segment defined by the search to do something different with technology, something that creates a unique experience for the user, albeit based on the same values that have always characterized this particular segment.
In Apple’s case, this process has been underway for years now, but rarely has it been so clearly laid out: different colored computers, gold watches costing up to 17,000 dollars, form taking precedence over function, constant updating of models, eye-candy advertising, and in general the feeling that we are dealing here with fashion products; indeed there was something of the catwalk about the whole affair. There is clearly a difference between usability or giving the user the best experience possible and instead focusing directly on the luxury end of the market, one that offers the chance to attract clients who might not previously have been interested in tech products. At the same time, Apple runs the risk of closing the door to those with more pragmatic reasons for buying. It isn’t so much that Apple has reoriented its innovation solely toward luxury goods: the company will continue to invest in technological developments that are about much more than just design, as can be seen from the spectacular evolution of the insides of its computers, but in many ways it’s clear that the company is looking to differentiate its products in this way.
So why go for the luxury end of the market anyway? This is something I wrote about not long ago:
Apple’s strategy, which has turned it into the most valuable company in the world, has a maturity problem. The company is undoubtedly brilliant when it comes to choosing products to reinvent, and is capable of turning each launch into a global event, inspiring a quasi-religious devotion among its followers. Equally pertinantly, it sells more than anybody else and with a higher margin than its competitors. The formula has proved a roaring success.
But as technology markets developer ever more quickly, the company has less and less time to harvest its astronomical profits, as its competitors hurry to launch their own products. The answer is clear: the more the company is able to increase the margins on what it charges for its products, the better able it is to take advantage of its ever diminishing window of opportunity. The best margins are, needless to say, in the luxury end of the market, and are subject to client decision dynamics that protect the company from the pragmatism that buyers in the tech consumer goods market tend to exercise.
Does it make sense to make a watch that costs more than 16,000 dollars, and that’s neither simple nor intuitive to use, one that I have to recharge every single night, and that I am certainly not going to bequeath to my children because its life is conceived in terms of a couple of years at its best? Only if Apple is pitching its watch at the very wealthy: it’s not that luxury goods purchasers are dumb, simply that they buy things for different reasons to the rest of us mere mortals.
In fact some of Apple’s traditional customers have already said they will not be buying the watch; news that will not cause too many sleepless nights for the company: after all, there are hordes of Russian and Chinese millionaires out there prepared to pay 17,000 dollars for a watch that they probably won’t even bother downloading a single app for. For myself, as a long-standing buyer of Apple products, I have always felt I didn’t mind paying more for a Mac because they lasted longer. But now if you turn up at the Genius Bar with a computer that is more than a couple of years old, they smile ruefully at your aged machine, calling it vintage!
Sure, the new MacBook is pretty, but Apple has kept quiet about a number of issues: the camera is no good, they’ve dropped MagSafe, which has saved a number of my computers from crashing to the floor on many occasions; they have reduced the external connectivity options, and, mysteriously, the little Apple logo on the lid no longer lights up when you turn computer on. In exchange, you can choose from several cute colors, one of which is gold, and which if the popularity of iPhone and iPad options are anything to go by, will prove a hit with many buyers.
It seems clear where Apple is heading, and its reasons for doing so are equally apparent: it wants to squeeze as much money as it can from increasingly elusive markets. This is further evidenced by the company’s latest hirings, as well as the redesign of its shops. We have here a company whose products used to be defined by their usability, but that are now increasingly characterized by their lavishness, losing many details along the way that its new buyers wouldn’t understand in all probability. This is electronic consumer goods as status symbol, as esthetics, a product with ever-higher margins that appeals to a new type of tech customer. The trend has been clear for some time, and anybody who doubted where Apple was going can have few illusions after yesterday.
(En español, aquí)
