If the person has $100 million and you offer them a $500 aluminum version and a $5000 gold version, what difference is the price to them? It's about the difference between $.50 and $5 to normal people, not even something to think about. The question for Apple is, why sell something to someone for $500 when they'll just as easily pay $5000 for a fancy version?
It's not a very large market, but the rich are getting richer and the middle class is shrinking. Apple's target market is the middle class what do you do when it's shrinking? You can go upmarket with differentiation, or downmarket with price. Apple knows it's strength.
This reminds me of a book called "Average is Over." It says the rich will continue to get richer because successful businesses have a larger reach than ever before (mainly from the internet), and this crowds at all the second players, creating a winner-take-all payout. Consider the landscape for internet businesses: A small portion of sites make up almost all of the traffic, and get almost all of the money, leaving very little for anyone else. It's the scalability that creates ultra wealth, and things are becoming ever more scalable, crowding out the middle class. The world is quickly moving towards a place where there are two kinds of people: successful entrepreneurs, and highly educated temp workers who get paid little because so many people are educated, with no middle ground for a middle class.
Consider musicians. There are small number of superstars who make the majority of the money. This is because their product can scale. In Mozart's time, his music couldn't scale (no records, radio, etc.). Even though he'd get the best concert halls, he couldn't be everywhere at once, so the lesser known musicians could still make a good living. Now we have superstars and starving artists, and it's doesn't have anything to do with people not wanting to pay, or any moralist view, it's just that when a person wants to listen to Beyonce, they can; there's no need to compromise for a second rate Beyonce, like there would be to see a second rate Mozart.
Apple being a technology company knows the role technology has on the world. On one hand, it democratizes information, but on the other, the best of the best can be everywhere. So if you're not the very best, you're not very valuable.
There are plenty of statistics that show how much of the world's wealth is comprised of a very small group of people. Why do you guys think it's silly for Apple to consider that market? A market of people who'd buy things without even batting eye, in multiple quantities, a few for their friends, one of each color, etc. This is why we see so many more companies making supercars than ever before. Imagine the money Apple is leaving on the table every time it sells an iPhone to a rich person who would have easily paid several times that amount. I wouldn't be surprised to see Apple offer it's other products in more expensive materials eventually.
A company that sells to the middle class will have to make the decision to compete on price to sell to everyone, or differentiate to sell to the rich. We all know the middle class is shrinking. This shift could easily be the downfall for the worlds largest companies if they're not prepared for it. Apple looks like it wants to be. I think Apple could be a company that sells to both segments by offering great functionality that everyone can use, but also something that the rich are willing to pay more for. Think Jon Gruber's use of Andy Warhol's Coke example: Technology allows rich people and poor people to have the same product. It's no about Apple abandoning the democratization technology gives us, it's just selling Coke in different cans.
It's not a very large market, but the rich are getting richer and the middle class is shrinking. Apple's target market is the middle class what do you do when it's shrinking? You can go upmarket with differentiation, or downmarket with price. Apple knows it's strength.
This reminds me of a book called "Average is Over." It says the rich will continue to get richer because successful businesses have a larger reach than ever before (mainly from the internet), and this crowds at all the second players, creating a winner-take-all payout. Consider the landscape for internet businesses: A small portion of sites make up almost all of the traffic, and get almost all of the money, leaving very little for anyone else. It's the scalability that creates ultra wealth, and things are becoming ever more scalable, crowding out the middle class. The world is quickly moving towards a place where there are two kinds of people: successful entrepreneurs, and highly educated temp workers who get paid little because so many people are educated, with no middle ground for a middle class.
Consider musicians. There are small number of superstars who make the majority of the money. This is because their product can scale. In Mozart's time, his music couldn't scale (no records, radio, etc.). Even though he'd get the best concert halls, he couldn't be everywhere at once, so the lesser known musicians could still make a good living. Now we have superstars and starving artists, and it's doesn't have anything to do with people not wanting to pay, or any moralist view, it's just that when a person wants to listen to Beyonce, they can; there's no need to compromise for a second rate Beyonce, like there would be to see a second rate Mozart.
Apple being a technology company knows the role technology has on the world. On one hand, it democratizes information, but on the other, the best of the best can be everywhere. So if you're not the very best, you're not very valuable.
There are plenty of statistics that show how much of the world's wealth is comprised of a very small group of people. Why do you guys think it's silly for Apple to consider that market? A market of people who'd buy things without even batting eye, in multiple quantities, a few for their friends, one of each color, etc. This is why we see so many more companies making supercars than ever before. Imagine the money Apple is leaving on the table every time it sells an iPhone to a rich person who would have easily paid several times that amount. I wouldn't be surprised to see Apple offer it's other products in more expensive materials eventually.
A company that sells to the middle class will have to make the decision to compete on price to sell to everyone, or differentiate to sell to the rich. We all know the middle class is shrinking. This shift could easily be the downfall for the worlds largest companies if they're not prepared for it. Apple looks like it wants to be. I think Apple could be a company that sells to both segments by offering great functionality that everyone can use, but also something that the rich are willing to pay more for. Think Jon Gruber's use of Andy Warhol's Coke example: Technology allows rich people and poor people to have the same product. It's no about Apple abandoning the democratization technology gives us, it's just selling Coke in different cans.
