Apple's Nuclear Option Against Microsoft
Monday, March 30, 2009 at 8:11AM 
On Friday, we covered Microsoft's new commercial strategy, and corresponding banner ads. A quick recap is that the spots aim to show the Mac as more expensive than comparable PCs. Of course there's no cost of ownership or duration of the machine considered. These are simple ads aimed at placing doubt in the minds of those about to buy Macs, and frankly, for a lot of people they may prove convincing.
So what is Apple to do? Well, it would be wise to wait a bit, and see if these ads have any appreciable effects. Of course waiting too long, if they are effective could spell doom. What would be the strongest course of action if the ads work? There's a difference between Microsoft and Apple, and it's significant: Microsoft doesn't make computers. Why does that matter? Imagine if you woke up tomorrow to $799 MacBooks, or MacBook Pros starting at $1299. All Apple has to do in a worst-case scenario is lower prices and weather the storm. They have plenty of money in the bank to do so. The same can't be said of all the PC manufacturers. And those manufacturers would probably not be thrilled with Microsoft if they needed to lower prices to compete. I don't think the Lenovos and Compaqs of the world have the same kind of cash sitting around as Apple, and in a slow growth period in the industry, a price war could be devastating to some PC manufacturers.
So while it's unlikely to happen, and unlikely to need to happen, Apple has the ability to wipe out any gains from these ads in short order.
Apple, Microsoft, advertising, banner ads, commercials Permalink
Reader Comments (11)
A more realistic "nuclear option" is a $499 Apple mini-MacBook based on iPod components that costs only $300 to make. Six months later, they can drop the price to $399 as cost drops to $250. Netbook manufacturers today have margins in the single digit percentages. Intel's not happy about selling low-margin Atom chips, but seems resigned to the fact through it's deal with TSMC. Microsoft is practically giving away Windows XP just to squash the rise of Linux on netbooks, but they clearly want more. Apple is in a unique position to control costs from top-to-bottom.
The worst thing Apple could do is come out with a product that nobody wants. The iPhone and iPod touch actually fill the most common use-cases of netbooks: email, FaceBook, YouTube, and light web surfing. The netbooks of today may very well end up looking like the MP3 players of the pre-iPod era.
I gotta think the netbook is in the cards. Maybe in June...
I think Apple will compete in the netbook catagory with a somewhat larger iPod touch. They definitely aren't going to come out with some cheapo laptop.
The other thing people forget is that while netbooks may be selling well, nobody is making money off them. Margins are already razor thin and this is a fairly new catagory.
An iPod touch tablet would be completely unique and allow Apple to leverage their iTunes, App store, developer community and peripheral market head start. A "me-too" netbook would be starting from scratch and would probably be to underpowered/overpriced.
Apple has to return with a Commercial showing a nieve woman buying a computer thats says Windows ready but when she goes to install the updated software it says, "Sorry your computer is out of date!"
Work the story about all those people buying computers that were Vista ready and when it finally shipped, they couldn't run the crappy software!!!!
ha ha ha....... too funny
Actually, lowering their prices would backfire on Apple! It's a well known fact that when you have a premium brand, price is part of the brand image. Lowering the price cheapens the perceived value.
Everyone wants to argue that Apple's computers are overpriced because their guts are similar to, or the same as, brand X PC clones. Well, folks, that's missing the point entirely!
The point is that Macs come with OS X, and hardware which is fully, or rather, FULLY, integrated with the operating system and a series of basic applications.
You're paying for a deep, rich, thick, elegant GUI on top of genuine UNIX. You're paying for the iLife Suite of applications. You're paying for customer support that is rated highest in the industry by most consumers.
In short, you're paying extra for the value added by Apple to the hardware. It's the WHOLE PACKAGE that you simply cannot get from any Windoze experience or experiment.
You want cheap? Okay, give up OS X! Give up the iApps! Give up the Genius Bar answers to your techie questions! Give up ease of use. Say hello to viruses, trojans, spyware, malware, and bloatware. Require the use of IT support to run your computer at work. Require the presence of the geeky boy down the block to explain how the @#$% your machine is supposed to work.
Is that sounding cheap? I didn't think so. It's why I run as much as I can on my Mac, and run XP under Parallels Desktop when I just have to use a PeeCee.
That "nuclear" option seems like a conventional 250lb. bomb. A true nuclear option would be for Apple to offer Mac OS for commodity PC hardware, thus allowing "Lauren" to buy whatever cheap laptop she wants and install OS X on it. This owuld completely obviate, not just undermine, MSFT's entire current campaign.
BurkFoto is correct. I initially thought these new MS ads were good but then I thought about it and actually.... they are not. The protagonist can't afford a Mac, so they buy a PC. Can't afford what you really want? Go for cheap!
Apple is explicitly positioned as a premium brand, with a premium price tag. The new ad kinda re-enforces that. If you want to sell your product, you have to empathize why I should buy it... this ad seems to say "settle for Windows of you can't afford a Mac". Wrong message IMO.
Also - no Apple is not going to lower their prices in response. Lowering prices would erode brand perception as a premium product. And that's what it's mostly about: Perception.
I think Apple needs an add showing someone on a pc tech support line and being told that yeah, that's a hardware issue. Than the hardware tech support telling them its a windows issue. Then back and forth. Time is money. There are hidden costs to a cheap computers.
It's very simple: Apple can just come out with a counter-campaign where the tagline is: "YOU GET WHAT YOU PAY FOR".
They can show a montage of people confronting confounding dialog box after dialog box on their monitor, helplessly clicking on the mouse, frantically dialling tech support, only to be put on hold by an automated message, etc., etc....
I don't understand why so many fanboys are against paying less for Apple products. If these ads along with the poor economy allow me to get a Macbook for $200 less, I think that's great.