The Upside of a $500 Dollar Mac

Muhahaha! Muhahahah! It’s alive! After years of producing and continually bettering the iLife suite of applications, the iPod, the iSight, Safari, and OSX, the profitable Apple user has finally come alive. Well not quite yet. Jobs and Co. have one key component to put into this Digital Hub Frankenstein�

“An iMac for $500? I’d buy that.” Of course you would. The rumor to sell the popular but, recently fledging iMac is the missing part in this profitable, lifelong sales stream. Is it a G4 or a G5 iMac? Who knows? Rumor says a 1.25Ghz G4 with no monitor. A “headless mac”. We have talked extensively about how Apple Computers have a perceived expensiveness to them. Whether that is true will be forever debated as it is virtually impossible to compare apples to oranges (or PCs for that matter). And yes, pun was intended. Specifications don’t matter because non-Apple users don’t know the difference. I’m not saying Apple should pull the wool over the eyes. IT’s not worth it for Apple to strip the iMac down to a basic system nor is it advisable to the brand building. What I am saying is explaining the performance difference of a 800Mhz G4 to a 1.25Ghz G4 is like trying to put in Mac terms the difference between a Pentium 2 and a Pentium 3. I, for one, do not know the difference. I just assume the Pentium 3 is better. But with even the low end G4 iMac being able to handle iLife and all the other benefits of a Apple digital lifestyle, that is not an issue either.

$500 prices the iMac below the eMac: my personal crusade. (See my previous article, When Good Things Go Unnoticed: The eMac) But an iMac has name recognition. And although it won’t have a monitor it is still unique and innovative to graybox addicts. A headless iMac allows PC users to dual purpose their monitor. In addition, the iMac has more options to expand your system via peripherals. Another way Apple can capitalize on the sales of accessories of theirs and that of their partners.

Saab recently announced in their radio advertising, “People who test drive a Saab, usually buy one.” I find this incredibly interesting. First off, I bet most car companies can say that. Once you test drive a car, you have most likely already pre-qualified the car company’s dependability, price, and styling. Besides, how do you measure the word, “most”? But what is also interesting is the clear attempt to just get people to try it out. Initiating trial can be tough for big ticket items. Most big ticket items involve sales people that make a living on commissions, thus making any advice given suspect. $500 for a computer no longer qualifies as a big ticket item. This is definitely one of the barriers to widespread domination in the computer market. I wonder how many kids, through Apple’s educational initiatives, have tried Apple computers and have become familiar with them only to get denied at home because their parents did not have the luxury of trying it out for themselves and thus failing to recognize the value of such an expensive machine.

Now $500 is not a big ticket item for a computer but it certainly is for an iPod. Which brings me to my next point. A $500 iMac will sell more iPods. And the continuing sales of iPods will sell more iMacs. Let’s get real here. If the iPod wasn’t so damn visually breathtaking and it’s user interface was not so flawless, the iPod might have not fared any better than the Newton. Us Apple enthusiasts would still lust after it, but it certainly would not have reached mainstream appeal. $500 is a lot of money to justify for a portable music player. I think even in it’s heyday, the most I spent on a Discman was $200. More iMac sales means more software and accessories being developed. Which in turn means upsell and crossell across Apple’s entire product line.

In targeting marketing, buyers of products or brands for that matter, can be broken into 5 categories:
Innovators: 5%
Early adopters: 15%
Fast majority: 30%
Late majority: 30%
Trailers: 20%

As you can see, the innovators and early adopters make up up to 20%. The real potential however is in the majority segments. It can be argued that for iPods, Apple has reached the fast majority stage. With a brand awareness of close to total, Apple can expect solid growth for many years to come. But in the computing segment, Apple is most likely just breaking out of the innovator and into the early adopter stage. This is in the consumer home market, not the professional market. And this is consistent with the supposed 5-8% marketshare Apple boasts. In simple terms, the $500 iMac could propel the computing segment well into the fast majority and drag everything Apple with it.

So let’s go Mr. Jobs. Why don’t you announce this $500 iMac next week at MacWorld ok? It will finish your digital hub masterpiece that everyone knew was possible.