How Apple Raised MacBook Prices

Click here for images of the new MacBook, MacBook Pro and MacBook Air.

Over the last couple of weeks, I blogged three times about Apple pricing, expressing reservations about the likelihood of massive price cuts. I mention it not to slap my back but to a make an important point about Apple: Conventional wisdom rarely applies. What's true for the commodity PC market rarely applies to Apple. The answers to Apple's future strategy typically can be found in its past actions.

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Now there remain questions about whether Apple should price more aggressively than Windows notebooks. But that topic is separate from what Apple would do and did. Here's a refresher on the past posts and their relevance to today's MacBook and MacBook Pro announcements:

• Apple Demands a High Price to Be Cool, where I looked at how Apple had priced high in a market buying low. No question, netbooks are taking off, and Apple isn't competing. I wrote: "The market trend is cheaper and smaller, but Apple appears on track to continue above-$1,000 laptop pricing."
• It's Official: New MacBooks on Oct. 14, which was written when rumors of an $800 Mac notebook were driving all kinds of wild pricing speculation. Mac notebook average selling prices were, and still are, about twice those of Windows laptops. I wrote: "Can Apple maintain these ASPs with a recession likely to sap holiday sales? I say maybe yes."
• What Apple's New Notebooks Must Be, where I explained how Apple would choose to preserve its premium brand rather than dilute it with aggressively lower pricing. I wrote—and this was Oct. 13, when price cut rumors continued—"Apple's branding means something. The company shouldn't risk its premium notebook brands tomorrow with cutthroat pricing. If there is a sub-$1,000 laptop, Apple should differentiate by something, such as new subbranding, lesser configuration or design appeal."

The first and last of the three stories are most important for putting Apple's pricing strategy in perspective. In the last one, I explained the importance of Apple maintaining its premium brand. There was no way Apple was going to compromise the brand by hugely lowering prices. Cheapness evokes connotations of poor quality. Apple has wisely chosen not to compete in the commodity computer market.

In the first linked story, I used iMac to show how Apple pricing works over a time period. I explained: "Apple typically brings in a new product line at Price X, adds new features in several subsequent iterations and drops at least one model's price before the next big redesign. The redesigns almost always raise the prices higher again, as Apple repeats the process."

So let's look at how Apple raised MacBook prices with today's redesign. Consumers will get more for their money, but not pay any less. The old MacBook pricing: $1,099, $1,299 and $1,499. Pricing for the new models: $1,299 and $1,599. Sure, Apple discounted the older $1,099 MacBook to $999 and added a SuperDrive. Emphasis: older, retired model. The newer MacBooks have higher prices, which is consistent with the company's past pricing practices. The entry-level aluminum MacBook costs $200 more than did the entry-level white MacBook. The second configuration costs $100 more than the older, and now retired, black MacBook.

The rumormongers and wishful thinkers were way, way wrong. Apple didn't lower MacBook prices. It raised them.

MacBook Pro prices didn't go up, but they're not lower, either. MacBook Pro prices are still $1,999 and $2,499. The higher-priced of the two models is the bigger upgrade, with respect to hard drive and system memory, over the newly retired $2,499 MacBook. That's classic Apple: Offer more for the same price, rather than lowering pricing.

That said, some dealers dropped prices for newly retired models, and they pose the greatest competitive risk to new MacBook Pros. Lower pricing makes me wonder just how much older MacBook Pro inventory is still in the channel. For example, PC Connection has the retired 2.4GHz MacBook Pro, with 2GB DDR2 (double data rate 2) memory, 15.4-inch display (1440 by 900 resolution), 200GB hard drive, 256MB Nvidia GeForce 8600M GT graphics and SuperDrive, for $1,599, or $1,449 after manufacturer's rebate.

Now compare that with the new $1,999 MacBook Pro: 2.4GHz Core 2 Duo processor, 2GB DDR3 memory, 15.4-inch display (1440 by 900 resolution), 250GB hard drive, Nvidia GeForce 9400M plus 256MB 9600M GT graphics, and SuperDrive. Sure, the newer model has a new display, trackpad and a few other goodies. But where it counts, performance, the notebooks are comparable and the older one is a lot cheaper.

The point: Perhaps there is an Apple price cut after all, but it's for a limited time and limited to inventory still in the channel. Apple gave away nothing substantial on newer models, contrary to weeks of ridiculously out-of-control speculation about massive price cuts.

[Please send your tips or rumors to watchtips at live.com.]

Related Posts:

• Live from Apple's Notebook Launch, Apple Watch, Oct. 14, 2008
• What Apple's Notebooks Must Be, Apple Watch, Oct. 13, 2008
• It's Official: New Notebooks on Oct. 14, Apple Watch, Oct. 9, 2008
• Is Brick the Next Cube?, Apple Watch, Oct. 5, 2008
• Mac Laptop Retail Share: 35% Measured in Dollars, Apple Watch, Sept. 26, 2008
• Apple Demands a High Price to Be Cool, Apple Watch, Sept. 26, 2008
• Putting Mac Selling Prices in Context, Apple Watch, Aug. 8, 2008
• Vista PCs: These Prices Are Insane!, Microsoft Watch, Aug. 5, 2008
• Should You Pay Twice as Much for a Mac?, Apple Watch, Aug. 5, 2008
• Can Price Cuts Get Apple 10% Share, Apple Watch, July 23, 2008

Posted by Joe Wilcox on October 14, 2008 1:53 PM