Why Is Apple So Expensive?
Each of us has owned an Apple product or envied our friend’s latest iPhone.
However, it is commonly agreed that Apple products such as the iPhone, iPad, Mac, or iPod are usually the most expensive toys around compared to Windows or Android devices with similar functionality.
Furthermore, the list doesn’t end at gadgets alone.
Apple also majors in mobile applications, storage services, and TVs.
This enables them to stay on top while generating billions of dollars in revenue every year.
Why Is Apple So Expensive?
1. Apple Tax
With the brand loyalty Apple receives, they figured out how to turn existing customers into another market base for extra products.
Owning an Apple product such as an iPhone doesn’t stop there.
Paying more is a custom of those within the Apple ecosystem.
Sometimes the prices are just bizarre.
This is what we are calling the Apple tax. For example, a 256GB Mac will be sold for $1,299.
A Windows laptop with the same price tag will have better specs.
During an announcement in 2019, Apple revealed a $ 5,000 Mac Pro display and its stand which would be sold for $1,000.
Paying these premium amounts is part of the Apple tax agenda.
Another form of Apple tax is observed with how they handle storage.
When you wish to upgrade your storage, you will have to purchase more storage from Apple.
It also goes without saying that some devices are sold with their storage capabilities being one of the major differentiating factors.
The bigger the storage space available, the more expensive the gadget.
This price becomes higher and reaches extreme heights for the Apple computers.
Compared to other companies’ devices with similar functionalities, Apple’s prices seem to go way overboard.
An additional way in which Apple is expensive is seen in their accessories.
Apple sells premium keyboards for $129 and a premium mouse for $79.
Even with such an awesome design, it seems illogically above items with the same functionality from different companies.
Accessories such as cables are also expensive.
The removal of headphone jacks and wired earphones is slowly restricting Apple users to the exclusive use of pure Apple accessories due to compatibility issues.
2. Software
All Apple products use Apple software, and there’s no way you would find one using third-party software.
It is one of the most distinguishable gaps between Apple iPhones and Android phones.
The same difference can be observed between MacBooks and Windows laptops.
Apple has to develop new OS versions from scratch every time they update or upgrade their software.
This is unlike Android phones and Windows devices which get the ready-made OS from Google and Microsoft, respectively.
The software from Google and Microsoft comes pre-tested and perfected with only a few solvable bugs.
A company needs to pay for the license to use Google services such as the Google Play Store on their devices.
Apple has to design the software and test it for itself.
Considering that, the components of some of their devices are not common means that the software has to be customized even to the bare essentials.
While selling their devices, Android and Windows device makers and Apple have to factor the cost of the software into the final market price for these devices.
The software also needs to be maintained and frequent updates made whenever a need arises.
Android OS is open source, and Google does not need to manage it.
Still, Apple has to charge the users directly to manage the iOS software, enlarging the final product price tag.
3. Product Quality And Price
When Apple’s CEO Tim Cook was asked why Apple products are so expensive, he reiterated that the company always chooses quality over price.
Apple does not want to favor price at the expense of quality.
This translates to one of the many reasons their customers value Apple so much.
Apple values its “magical” products above everything else, which means whichever product you purchase from Apple will definitely be worth the price due to its quality.
Cook also claimed that the innovation at Apple and new product releases are actually motivated by the consistent desire to make new gadgets at affordable prices.
He said that Apple doesn’t just constantly question themselves to check how they can cheapen products such as iPods, MacBooks, and iPhones.
They also ask how they can achieve a great product that will reach the consumer at an affordable tag.
Many tech experts have also questioned Apple’s decision to sell the Mac for under $1,000.
However, the CEO explains that they found out that to get the Mac at a lower price, they would have to create a substandard product, which is not what Apple’s brand stands for.
However, they came up with an iPad, a testimony of how Apple’s innovation observes problems and presents solutions.
The iPad has now taken the place of the cheaper laptop as an expensive tablet.
Apple claims to be endlessly committed to delivering great quality products above pricing and functionality.
Those who have used an iPhone can probably explain how different it feels when using a different phone like the Android types.
This quality management is a principle called Total Quality Management (TQM) developed by William Deming.
This principle involves reducing the errors made during the process of manufacturing.
Apple uses the same principle to keep its employees and teams motivated.
Apple uses four tools, cause and effect diagrams, histograms, Pareto charts, and control charts, to control TQM.
The advantage of TQM is that it helps bring all stakeholders together.
The company uses four basic TQM tools: Control chart, Pareto chart, cause and effect diagram, and histogram.
TQM enables the company to bring all the stakeholders together and control the final output of all ecosystems within Apple.
TQM follows set internal standards and guidelines.
TQM reduces waste in the supply chain and also balances responsiveness and efficiency.
Managing TQM is actually very expensive.
To also ensure great quality, Apple only hires the top people, as observed in the requirements of some of its careers on its jobs page.
To ensure the best quality of products, Apple hires and trains the best of the best.
This also ensures that the best employees are at Apple, which gives the company an edge over its competitors.
Since employees are some of the best resources for the company, ensuring that the ROI on employees is high involves grabbing the best product engineers, graphic design engineers, quality control specialists, product design engineers, marketing specialists, and management personnel from the market.
Compensating these professionals is also a bit expensive.
It is, at the end of the day, reflected on the consumer during product purchases.
4. Amazing Apple Stores
Apple has iconic stores where they exclusively sell their devices.
These stores are available not just in the US, not just in Europe, but worldwide.
Talk about owning more than an average of five stores in every country of the world.
By every country, think of Australia, think of South Africa, think of Egypt, think of China and India.
Apple spends heavily on these stores to maintain the brand perception.
Some stores are found in some premium cities.
A good example is the floating Apple store in Singapore, which was termed one of Apple’s most ambitious retail projects to date.
Another one is the Apple store in Oudong, Shanghai, China, featured in the architect magazine.
The list of the stores is endless since Apple has more than 500 iconic stores distributed all over the world.
The cost of the design to construction and frequent maintenance of such premium stores is factored into the consumers of Apple products.
You, as the user, pay for these magnificent buildings.
5. Psychological
We’ve all met a group of people who buy Apple items just because it makes them feel special, important, and premium.
These are some of the physiological satisfactions sought by most Apple users.
You will find them hungry to buy a new Apple product even if the one they have is not a year older and still performs its functions adequately.
Apple has learned to capitalize on such customers and uses formulas like pre-ordering and creating wild buzz for its products to trap such segments of clients.
This category will buy anything from Apple, provided it has that iconic logo.
The price tag is normally not a concern for them.
Apple exploits this by attaching high prices to some of its premium devices.
6. Use Of High-End Components And Quality Of Finishing Of Apple Products
A story is told of how Steve Jobs threw the first iPod into an aquarium to prove that the size could be reduced.
A team of engineers working on the first iPod came to present a prototype to Steve Jobs, who rejected it at first sight, stating that it was too big.
The engineers said that it was impossible to create a smaller device, at which point, Steve dropped it into an aquarium.
Once the device produced air bubbles, Steve claimed that they could make it smaller.
Reaching such a level of quality demands a lot of time, research, and innovation.
These three factors are all made possible through money.
We all love the amazing relentless finishing on Apple products.
Even without the logo, it’s easy to recognize Apple’s signature bezel finishes on some of its products, such as the Mac, iWatch, and iPhone.
Furthermore, the components used on Apple devices are some of the most reliable and premium in the market.
Apple rarely has issues with bugs. It is also rare to need to repair an Apple product.
The products also do last longer than most.
We probably know of Macs that have lasted for more than 10 years.
7. Overhead Costs
Overhead costs are the costs associated with the daily running of the business.
Whenever you purchase an Apple product, you don’t just pay for the components and packaging of the product.
There are other even greater costs hidden within the gadget.
A. Marketing And Advertising
Marketing is an important aspect of all businesses.
Even though Apple has established itself in the market and has a reputable brand, they still have to market new products and software updates.
They heavily market new products.
The costs involved may be drawn from print media, social spaces, search engines, and news stations.
Apple places ads everywhere, even on roadside billboards.
Influencer marketing also plays an important role in keeping the flow of customers moving towards the Apple ecosystem.
The brand can also be valued or associated with the influencers Apple picks, which means they have to use the best and most valued influencers.
B. Cost Of Labor
Apple pays a lot of staff and workers from executive teams to development teams.
Although products such as the iPhone are designed in California, most components are manufactured and assembled in different areas of the world.
Apple component manufacturers are found in Germany, China, Japan, Switzerland, and the U.S.A.
Apple assembly companies are found in areas with cheap labor.
Apple only assembles through two companies, Foxconn and Pegatron, based in Taiwan.
The two assemblers have different factories in China, Czech Republic, Malaysia, Thailand, Singapore, and the Philippines.
The cost of labor is thus factored into the expensive Apple gadgets.
C. Customs Duty
Every product made outside of the US incurs a certain tax upon entry into the country.
Considering Apple products are assembled out of the country, the customs duty charged at entry into the country is high and factored in during final pricing.
There are also various legal taxes paid by Apple and its stores for operating, which are also factored in on all Apple devices when they are being sold.
D. Legal Affairs
In 2019 alone, Apple filed 2,490 patents.
To date, Apple has many patents that need protection which can easily turn into legal battles from time to time.
With the size of Apple, the company may get a lot of lawsuits from disgruntled users and opportunists.
This means that they have to maintain a strong legal team which is costly.
Since lawyers are billed hourly, some cases which drag on for years are really expensive.
Examples of legal battles include Apple and Fortnite developer, Apple and Virnetx, and one against its former employees at 52 Apple stores.
E. Events
According to Protocol, Apple spends $50 million hosting WWDC, the Worldwide Developer Conference, annually.
Apple also organizes events to launch new products.
Catering for expenses during such events is expensive, which leads to most products being very expensive.
8. Research And Development
In the 2020 fiscal year, Apple spent a whopping 18.75 billion dollars in research and development alone.
This is due to the numerous research projects carried out in the different small research labs worldwide.
This is a cost that is paid for by the consumers of Apple products.
The amount is justifiable by the huge quality of products and innovation that Apple constantly delivers in its products.
9. Branding And Marketing
Apple Inc. is a well-known brand.
Whenever we talk about key gadget makers globally, Apple has to pop up somewhere in the conversation.
Apple has placed itself as a key brand in the world today and consumes millions of dollars to maintain its brand.
Even the products consume a lot of manufacturing costs to ensure the brand remains associated with quality products.
Some people also pursue Apple as a premium lifestyle brand.
We cannot have missed meeting a friend or colleague who bought an Apple iPhone just because it has the logo.
They didn’t even put much thought into the functionality or price of the phone.
Actually, Apple categorizes its customers into three categories.
They target the urban clientele, especially since they can buy their products.
Apple has distributed its products based on three broad consumer segments:
1. The major targets are iTunes and iPod music listeners.
2. Apple also targets teens and professionals who use the Mac, iPads, and such gadgets.
3. The third segment is those who use other less popular Apple products and services such as the iWatch and Apple TV.
Controlling brand perception is important and plays a big role in determining which company gets to be called the best brand in the world.
Apple takes this seriously, as seen in the design of the products, how great the quality of their adverts are, how well the stores are designed to match the brand, and the customer support, which is famous for being the best.
They say love is blind, but one can think of Apple’s brand loyalty as even blinder!
10. Apple’s Competitive Advantage
There are many competitors of Apple such as Huawei, Samsung, Microsoft, and Xiaomi.
However, Apple still maintains a grip on top-selling products, such as the iWatch and MacBook, which are considered the best in their respective gadget categories.
Apple also has the advantage of having a lot of revenue, considering they have been in operation for a while.
Apple also pours a lot of this revenue into R&D, which ensures constant innovation and the introduction of new products.
Maintaining this competitive advantage can be costly and is usually factored into the final cost of most products.
11. Apple’s Profit Margins
Apple enjoys very huge profit margins on some of its products.
The company has a set profit margin target for each financial year that has to be reached.
For example, just on the 3rd generation iPad, Apple made a profit margin of close to 50% after selling the $366 (non-manufacturing costs not included) iPad for $ 699.
Maintaining such profit margins requires Apple to consistently innovate and sell products at very high prices.
However, people still buy the items, a fact known too well by Apple.
Apple gains a greater advantage over its competitors when it comes to profit margins since it can pull off greater profit margins without anyone raising any concerns.
You could view Apple as a luxury brand.
Put it into the same category as Gucci or Chanel.
You’d buy a bag from Gucci for thousands of dollars, but it doesn’t mean the bag has any added special functionality.
It’s the same with Apple.
In fact, cheaper products have proven to possess greater functionality, but Apple still wins.
The loyalty to the brand allows Apple to extract a premium from its users.
People are willing to pay for bugless devices and simplicity.
Many of Apple’s competitors actually just add functionality, which complicates the user experience in the place of numerous features.
How To Save On Apple Products
1. Buy a previous generation of product. When Apple launches a newer product, it reduces the price of the previous one. You just have to wait patiently for the price drops. iPhone 5 debuted at $849 and is now being sold for $150.
2. Use the educator discount: If you are an educator, you are eligible for wireless headphones, freebies, and discounted purchases. However, proof like ID is required.
3. Use the military and veteran discount: A 10% discount is given to current and veteran US Military, National Guard, and Reserve members. Immediate family members can also use these discounts to shop for Apple products.
4. Trade-in your old device: On Apple’s trade-in page, you can trade in your old device for cash.
5. Shop at authorized resellers: Authorized resellers such as BestBuy, Walmart, and Amazon may occasionally offer certain discounts on some products.
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