With the economy in freefall, and consumers becoming increasingly wary of spending unnecessarily, companies are having to get used to making less money. However, some companies are better placed than others to keep their bottom lines buoyant.
One company that has so far managed to buck the red ink trend is Apple. Apple is a company that’s very good at coming up with little tricks that keep their customers spending.
But the question is now serious: Is the Cupertino giant pushing customer loyalty too far and increasingly taking advantage of Apple fans?
Apple is really good at getting users to keep opening their wallets. The iPod and iPhone in particular are effectively small vacuum pumps that fit nicely into the user’s pocket and continually siphon cash to Apple’s HQ.
It started with the iTunes Store but it now extends to the App Store, and pretty soon the iPhone OS 3.0 will give developers the ability to encourage users to spend more money on additional content for apps.
The vacuum pump is slowly but steadily turned up.
But it goes further … much further. Let’s start with $99 a year for MobileMe cloud service. Sure, it’s an interesting service, but I really do wonder whether someone who has shelled out for a Mac or an iPhone hasn’t already paid enough.
After all, if you own multiple Apple devices that require data synched between them, you’re already a pretty hardcore Apple fan. But rather than cutting you a break and giving you something for free, Apple uses it as an opportunity to squeeze more cash from its fan base.
Then there are all the accessories. Nothing wrong with that, but when Apple decides to tweak a device so that existing docks and accessories don’t work, you do have to wonder: was there was a genuine technical reason behind the change, or was it motivated by a desire to sell new products (or license technology to third parties)?
It all keeps the nickels and dimes flowing in.
With the latest iPod shuffle, Apple has even made the headphones proprietary, thanks to the addition of a remote control and mic. This means that if you break or lose your new shuffle earphones, you can look forward to spending $29 on a new pair (which, considering that your shuffle plus earphones cost $79 in the first place, the price of an Apple-endorsed replacement set seems steep). Another win for Apple.
Then there’s the way that Apple has decided that iPod touch owners should pay $9.99 for software updates. Apple claims that this charge is all down to accounting practices, but a ten dollar charge seems excessive.
Not only that, but Apple doesn’t bump up the price of the iPod touch line by the same amount for devices that come pre-loaded with the new OS. To add insult to injury, the iPhone OS 3.0 update that’s due out this summer will, for the fee, activate Bluetooth capability on the second-generation touch devices.
I find this particularly distasteful given that iPod touch owners have already paid for the Bluetooth hardware and have to pay again to get it to work. Apple did exactly the same thing with the 802.11n Wi-Fi capability on some MacBook and MacBook Pro notebooks a while ago (although users weren’t charged a whole ten bucks to activate the hidden feature).
Then there are the ridiculous prices that Apple charges for some PC upgrades. The most blatant example of Apple ripping off buyers is when it comes to RAM upgrades for the Mac Pro.
To upgrade this system from the base 6GB of RAM to the maximum of 32GB costs a whopping $6,100. If you decide to buy the RAM from Crucial and fit it yourself, that upgrade will cost you almost $2,000 less (which, to put things into perspective, is not far short of the cost of the base Mac Pro system).
Let’s also not forget about the way Apple is shifting to a model where batteries can’t be easily replaced by the end user. This ‘feature’ is beneficial to Apple.
Why? Because it builds a time bomb into every product sold. After a certain number of recharges that battery which is locked away will wear out and users can either buy a new product or replace the battery.
Well, you gotta keep ‘em coming back for more!
Apple’s entered this recession is good form. That’s partly because it’s been careful with cash and is sitting on a massive pile. But it’s also fortunate because it’s blessed with a huge base of customers who are happy, willing and able to spend money not only on Apple products, but also on additional services, upgrades and a load of accessories.
Even over the past few quarters, while many companies have been suffering, Apple has posted record profits and revenues. Will this continue?
Well, I guess we’ll have to wait and see, but I can’t see any signs that Apple customers are running out of money. Moreover, with nearly $25 billion in the bank, no debt and profit margins greater than 30% for most products, I don’t think anyone at Apple is too worried.