billions in earnings from the sale of these products follow their own
circuitous routes back to a network of tax havens, including Ireland.
The result is a gargantuan profit and luxury margins at the scale of a
low-cost producer. Apple is one of the most profitable firms in history,
but it doesn’t need to endure the nuisance of U.S. tax rates.
- Price Premium
High prices signal quality and exclusivity. Survey your own browsing.
Aren’t you drawn to, and compelled by, the more expensive item?
Even on eBay, don’t you search by “highest price” out of curiosity?
Negative economic elasticity holds: If Hermès marketed a scarf for
$19.95, most existing customers would lose interest. Apple, in this
sense, is not Hermès. It can’t sell computers or phones for twenty or a
hundred times the price of a commodity brand. But it does charge a
hefty premium. An iPhone 7 without a subscription subsidy costs
$749, a Blu R1 Plus is $159, and the latest from BlackBerry
(BlackBerry KeyOne) is $549.^35 ,^36 ,^37
In this, and in most everything else (except decent HR policies),
Steve Jobs learned from Hewlett-Packard, the pioneer in quality tech
product pricing. From the first days of Apple Computer, Jobs had
publicly stated his admiration of that company and his desire to create
Apple in its image. One of HP’s attributes that Jobs most admired was
its commitment to making the best (that is, most innovative and
highest-quality) products—particularly calculators—and then charging
the shit out of engineers desperate to buy them. The difference was
that HP was largely a professional equipment supplier—hardly a
luxury product business—while Apple sold directly to consumers, and
thus could take full advantage of all the signals and signifiers of
elegance.
Some Apple customers aren’t thrilled to learn that their purchases
are based on irrational decisions. They think they’re smart and
sophisticated. So, they rationalize that their brain rode shotgun on the
decision. It’s just a better phone, they say. The software has an
intuitive user interface. And look at all of those cool productivity apps.
The laptops work better. The watch encourages me to walk an extra
3,000 steps a day. The higher price is fully justified, they tell
themselves.