Laptop Hunting

by Krishna on July 16, 2009

I was amused to read the story of how somebody from Apple wanted Microsoft to stop the Laptop Hunter ads. Because last week, I was with my friend providing moral support while he was hunting for a laptop at BestBuy. Yes, he bought a Windows laptop, though not for cost – he needed a PC to do some of his development work. There were a few Apple laptops also on display and that started a conversation on our way back.

While at BestBuy, I noticed that the most expensive Windows-based laptop that they had was priced at $1099 – maybe there were more expensive models, but I missed them. I remembered the Laptop Hunter ads and told my friend that someone shopping on price alone would always choose a Windows laptop. For the time being, I am ignoring those who need a particular operating system for a specific functionality. Many people who buy computers are not familiar with the technical details and so may be more influenced by price.

So here was my argument:

Suppose a person walks into an Apple store and BestBuy store. In each place, they see many laptops at different prices. The normal customer wants something mid-range. They don’t want the cheapest computer because it probably sucks. The highest priced computer is a luxury item. So they would like to choose something in the middle. This is the behavior you see with most consumer items. When you buy a TV, you are most likely not to buy the cheapest or most expensive TV, but rather a price point in between that gives you the biggest bang for your buck.

So if you go into an Apple store, you get a MacBook for $999 and your MacBook Pro goes all the way from $1,199 upto $2,499. The mid-point seems to be around the $1,500 range. In contrast, the price range in BestBuy runs from $450 to $1,099 (as far as I remember) and so that is roughly $750. So the comparison between the mid-point prices gives the appearance that an Apple laptop is twice as costly as a Windows one. Worse, the most expensive Windows laptop is $400 less than an Apple.

Obviously, if someone wants a Mac or wants a PC for reasons other than price, they will know better. But what about the lay person who is probably buying a laptop to send email and write documents?

My friend didn’t agree with me and here was his argument:

It is all about branding. I would rather have the cheapest Apple laptop because there is the pride of ownership. You can show off your Mac which you cannot do with a Windows-based laptop. Think of Windows as a line of Toyota cars and Apple as a line of BMWs. You would rather have the cheapest BMW than the best Toyota.

Most high-school and college students beg their parents to get them an Apple because it is way cooler than a PC. The college student would rather get the lowly MacBook because in the end, it is an Apple.

He has a point. But I wonder how much of an effect brand has, when taking the price difference into consideration. I don’t mean that rhetorically – I am asking a question. How many customers does Apple lose because of its price structure and how many does it gain because of its brand? In fact, Apple cannot cut its prices to match Windows because it could affect the branding (If Apple costs the same, what is the difference?).

If the Microsoft executive is telling the truth, it suggests that perhaps the ads are hurting Apple in a measurable way, and  the price premium for Apple is above the brand effect.

{ 2 comments }

Rajesh Shanbhag July 16, 2009 at 10:35 pm

I agree with you, KK. Most people use laptop to browse internet, browse pictures/ videos, use MS Office maybe. What has pride got to do with this – “Hey, I saw your photo on a Mac” !!!! that cost extra $500 maybe. I recently bought a netbook – though it does not have a DVD drive, it is great for browsing, checking emails… it comes with 160g HDD and a price tag of 370$ (Acer Aspire 1165). Three months since, I do not find any fault with it. Neither do I feel “cheap” using this.

Rajesh

Krishna July 17, 2009 at 5:59 pm

Rajesh, Windows laptops and netbooks are dirt-cheap. Unless somebody is doing something special with their system, you just need the cheapest one and that means a problem for Apple.

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