Howe: Most Apple Observers Don't Understand Apple's Marketing

by , 3:40 PM EST, January 30th, 2008

Most people writing about Apple don't really understand how Apple markets and sells its products, according to Carl Howe at Blackfriars Communications on Wednesday. The recent suggestions that Apple should lower the price of the iPhone based on economic worries in the U.S. is one example.

The first article at TheStreet.com suggested that Apple should slash the price of the iPhone to guarantee its goal of 10M iPhones sold in 2008. The second suggested that Apple is losing money on the price-reduced Apple TV and is making it up with subsidized movie rentals.

"Based upon these articles, an uninformed reader might conclude that Apple has a new strategy of selling loss-leading devices and relying on revenue from services to keep its profits aloft," Mr. Howe wrote. "That uninformed reader would also be horribly wrong."

It was hard to pin down specific blame for these assertions. Demand for the iPhone is good. No one believes that Apple should follow Motorola's path to financial disaster with its cell phone business. Moreover, the real cost for parts in the Apple TV may no longer be accurate or just poorly understood, and that may have led to bad assumptions about Apple's business model.

The suggestion by Mr. Howe was that if observers of Apple really understood how the company does business, they wouldn't draw the conclusion that Apple engages in loss leader products.

"The bottom line: Good businesses focus on making money overall. Great businesses make money on every single product and service. Apple didn't get to where it is today by settling for 'good,'" Mr. Howe concluded.