While it’s good news for customers that Intel is aiming to make superportable laptops that rival the MacBook Air affordable for many, via its ‘ultrabook’ project, it shows a slightly outdated mode of thinking. When asked what would make superportable laptops successful, Intel’s executive vice-president Sean Maloney replied that a low price would do it. Low price = more sales = more profit, the conventional wisdom goes. Or does it?
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The problem with the equation above is that low price = low margin, and you therefore rely on huge sales to make significant profits. And the drive to lower prices can lead to design compromises – plastic rather than aluminium shells, steel rather than magnesium alloy skeletons, cheap components that fail more quickly or are louder or slower. This is the PC industry for the last 30 years.
But it’s a flawed business model – just look at UK box-shifter Mesh, which ceased trading recently. Equally, look at Acer. For years it has been trimming its costs to be ultra-efficient while also climbing the league tables in terms of units sold. All this effort was in many ways the pinnacle of the low-price philosophy of making money from computers. And it failed: Apple is more profitable.
That’s the shift that we’re seeing: so far, we’ve made do with stuff that kind of works, does a job and doesn’t cost too much. Now we want technology that’s cool, that looks like it could be from the future and that we’re not embarrassed to leave out on the coffee table. Make something desirable and it will sell, even if you whack on a decent margin. And from that decent margin you can invest in customer support (how many negative stories have you heard about Apple customer support? How many positive ones?) and into the creation of new, even more desirable kit.
Of course, the Apple success story doesn’t end at merely charging extra for desirability, there’s the fact that it takes a 30 per cent skim of any software sold for that desirable item. However, the point that it’s desirability and not cheapness that really makes money these days doesn’t crumble in light of the App Store levy caveat. Hopefully superportable laptop makers won’t forget this fact, despite Intel’s out-of-date thinking about them; certainly if preview shots from Computex 2011 are anything to go by, Asus hasn’t with its UX21. Could we see desirably light laptops without a prohibitive price? Possibly, but I’m hoping that the latter doesn’t undermine the former.
[break]
The problem with the equation above is that low price = low margin, and you therefore rely on huge sales to make significant profits. And the drive to lower prices can lead to design compromises – plastic rather than aluminium shells, steel rather than magnesium alloy skeletons, cheap components that fail more quickly or are louder or slower. This is the PC industry for the last 30 years.
But it’s a flawed business model – just look at UK box-shifter Mesh, which ceased trading recently. Equally, look at Acer. For years it has been trimming its costs to be ultra-efficient while also climbing the league tables in terms of units sold. All this effort was in many ways the pinnacle of the low-price philosophy of making money from computers. And it failed: Apple is more profitable.
That’s the shift that we’re seeing: so far, we’ve made do with stuff that kind of works, does a job and doesn’t cost too much. Now we want technology that’s cool, that looks like it could be from the future and that we’re not embarrassed to leave out on the coffee table. Make something desirable and it will sell, even if you whack on a decent margin. And from that decent margin you can invest in customer support (how many negative stories have you heard about Apple customer support? How many positive ones?) and into the creation of new, even more desirable kit.
Of course, the Apple success story doesn’t end at merely charging extra for desirability, there’s the fact that it takes a 30 per cent skim of any software sold for that desirable item. However, the point that it’s desirability and not cheapness that really makes money these days doesn’t crumble in light of the App Store levy caveat. Hopefully superportable laptop makers won’t forget this fact, despite Intel’s out-of-date thinking about them; certainly if preview shots from Computex 2011 are anything to go by, Asus hasn’t with its UX21. Could we see desirably light laptops without a prohibitive price? Possibly, but I’m hoping that the latter doesn’t undermine the former.
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