Aug 08

Competition Based Pricing

Today, when we talk about pricing of a product like a computer, it's not that easy as a few decades ago. Back in the early days, only a few units were produced, and if a certain company came up with a computer priced at $1,000,000 including parts worth $5,000 and 20 hours of work, as long as there was no competition for it, those in need were forced to buy...or wait for the days when competition based pricing became a daily habit. For example, look at Apple and the Windows PCs these days - do we have competition based pricing, or not?

I know the image above shows Windows PCs to have half the price of their Apple counterparts, but let's do more than just scratching the surface, and get deeper into the story, shall we?

According to Stephen Baker, NPD's vice president of industry analysis, the average selling prices(ASP) at retail in the last 3 years are looking like the ones in the image above, so the natural conclusion would be that "The ASP for Mac desktops is more than $1,000 greater than for Windows PCs, and Mac desktop ASPs were higher in June than they were two years ago," as eWeek's Joe Wilcox wrote in his article, but I think he is missing something...

Comparing the midrange iMac and the Dell Inspiron 518 based on their online pricing, he considered the system configurations below:

"Apple iMac: $1,199; 2.4GHz Intel Core Duo processor, 20-inch widescreen display (integrated), 1GB DDR memory, 128MB ATI Radeon HD 2400 XT graphics, 250GB hard drive, 8x double-layer DVD burner, Bluetooth 2.1, 802.11 g Wi-Fi, Webcam and Mac OS X 10.5.

Dell Inspiron 518: $739 (after $150 instant savings); 2.4GHz Intel Core 2 Quad processor, 19-inch widescreen monitor, 3GB DDR memory, Intel GMA X3100 graphics, 500GB hard drive, 8x DVD burner and Windows Vista Home Premium Service Pack 1."

Since he is asking "why pay twice for a Mac," I think he deserves an answer. The Mac has a better and larger display, a video card that's not as bad as the Intel onboard one, and comes with Mac OS X 10.5, which simply kills Windows Vista Home Premium Service Pack 1, no matter what Microsoft fan boys may say. We're not discussing about design here, because that would lead us into comparing the iMac with the Dell XPS One, which is a product I really like...only that it's more expensive than the iMac!

So...if we're talking about competition based pricing, let's make things fair, shall we? One last question - if you would have to choose between the iMac and the XPs One, which one would you choose?