Impact Pricing Blog

Why Are People Laughing At Apple?

Analyzing the $999 Apple Monitor Stand

I confess. I don’t watch the Apple announcements. However, one of my readers and frequent commenters, Jim Schibler, sent me this video.
When they announce the new stand for $999 in the video you can hear the audience laugh. Since then, many “Choose Wisely” memes have hit the Internet.  People are making fun of Apple. Let’s analyze this.  First, people are allowed to make fun of companies. What happened here is so far out of the norm that it shocked people. Buyers typically have a reference price. If I ask you the price of a BMW, you have a price in mind. If I ask you the price of a computer stand, you have a price in mind… and that price is nowhere near $999. Laughter often comes from surprise, and that price was surprising. Even after the shock, that price seems extremely high for a monitor stand. From Apple’s perspective, is this a mistake? I don’t think so. Let’s do the math (with some rough assumptions). A quick scan on Amazon shows you can buy a decent VESA adapted monitor stand for $25. Let’s assume then that Apple’s cost is $25. Apple could probably sell one with every monitor if they only charged say $50. That’s a contribution margin of $25 per unit. However, for every one they sell at $1,000, they make a contribution margin of $975. If more than 1 out of 39 monitor buyers also buy the Apple monitor stand, Apple makes more profit. There is no doubt that my assumptions are wrong, but the math is right. Apple is fine losing some percentage of the sales because their margin on the sales they make is so high. There are other considerations to pricing products high:
  • Having a high price keeps its brand image high.
  • They aren’t really in the metal bending business so this is just incremental revenue and profit to them.
  • This isn’t an important part of the Apple ecosystem so it doesn’t really matter if someone goes outside their offerings (unlike iPhone, computer, watch, earbuds, ???).
They are definitely being laughed at, but you could laugh at me too if I could make just a portion of what Apple will make selling metal stands.   What do you think?
Tags: pricing skills, pricing strategy

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