We all know how dope dealers lure in customers. Have a taste for free. You get hooked, and then voila, the dealer has a new customer. Well, I’m not saying that Apple works like dope dealers here, but with the deluge of new free software and upgrades Apple offered up yesterday in its big announcement, it certainly is working on keeping its customers hooked.
Apple has offered up the latest version of its OSX operating system, Mavericks, for free. It has also updated its flagship software applications for both OSX and iOS for free. Customers buying new hardware, and in most instances customers who have existing hardware can now get iLife (iPhoto, GarageBand, iMovie) and iWork (Pages, Numbers, Keynote) for free, in addition to other applications that Apple offers. “Free” is certainly an alluring price point, and this news certainly captures your attention in the same way that a sale sign does in any conventional store. So, how is Apple doing this and why?
As to the why part of that question the answers are straight forward.
- Apple wants you in its ecosystem. It wants to hook new customers and it wants to keep current ones happy. It’s called building loyalty. It’s called making the consumer feel good about his/her investment. Take the iWork suite of Apps as an example. Apple has yet to demonstrate any real muscle in competing with Microsoft and Google and their productivity suites (Office and Google Docs.) Pages, Numbers, and Keynote are all top class alternatives to those other offerings, and in some cases (Keynote) better. But Apple is manufacturing a world where it wants you to have some combination of its smartphones, tablets, or computers, tied together with its iCloud service. The best way to bring that along and make you feel like you don’t need to shop anywhere else is to offer up these Apps for free.
- With its new operating system it is in Apple’s best interest to move as many users as possible into adoption. “Free” helps move this along. Slower adoption cycles make life more difficult for developers to innovate. Apple, with both its Mac App Store and its iOS App Store, has a vested interest in seeing new software developed. I’m guessing everyone still knows someone using Windows XP. When Apple takes a step forward, it doesn’t want you to think twice about following along.
- Apple’s integrated approach with hardware and software works for the customer and for Apple. Apple can better control the experience (whether or not you think it is a better experience is up to you) if everyone is playing on the same page.
So, how can Apple do this?
Apple wants to sell you an integrated experience. The hardware side of that pitch is to deliver a premium product and a premium price. Apple has created a market where it can charge premium prices for that hardware and customers don’t balk at paying it. Of course Apple has to deliver that premium hardware, and by and large it succeeds in doing so with quality products and a quality retail experience.
Buy the hardware and you’ve already bought into the system and the idea. Or, phrased another way, you’ve already paid the price of admission, and we’re going to let you feel good by not charging you for the popcorn and soda. With profit margins that most manufacturers would kill to have on that hardware, Apple has room to maneuver. Those high profit margins on hardware matter. From the customer side, you pay for all of this free stuff by being willing to pay those premium prices. Nothing in life is really free.
The equation here creates a semiotic experience that keeps current customers happy and always looking forward. If a consumer buys a new laptop from Apple they are probably thinking of the purchase as being at least a 2 to 3 year investment if not longer. Apple with the release of Mavericks says it is revolutionizing the way we think about pricing for operating systems. That high price point for entry into multi-year investment is a bit easier to swallow if you “believe” you’ll be able to upgrade the OS and your Apps, and keep current for free next time around.
Scroll back up and look at the picture accompanying this post. “Sometimes, the best things in life are free” it proclaims as it talks about free software. Notice though that all of this free software is seductively displayed on hardware. I would also argue that the clever insertion of the word “sometimes” gets Apple of a potential future hook if it ever feels it needs to charge for its software again, but that’s another story for another time.
Apple has seduced us into thinking that the we’re buying into a stable path forward. Stability equals value in many consumers’ minds. Consumers that pay attention know that Apple makes big moves once a year, unlike Google and its ecosystem which seems to make a big move every month or so. But Apple is always adding new things with each new OS release (we see this more frequently on smartphones) and that creates a tempting pull towards making a new hardware purchase. Gadget geeks and the status hungry may buy each new phone, PC, or Tablet, but most normal consumers don’t think that way. Apple is keeping you well fed on the one hand, and always tempting you with more on the other.
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