2001: Charles Moore recently wrote a short piece on Applelinks, Macs Still Cost Too Much, discussing how Macs are too expensive when compared to PCs. While hardly one to drag an old argument out of the closet (Macs have better components, Macs last longer, etc.), I will admit that Charles does have a point.

Dollar for dollar, Macs are more expensive. The price gap has narrowed considerably over the last few years, but Macs still remain at the higher end of the PC market.

The problem with this lies in the fact that Apple holds a much smaller part of the market than Dell, Compaq, Gateway, and the rest of the PC crew. They simply move fewer machines. Fewer machines mean less of a chance to earn discounts on bulk orders and less opportunity to lean on a printer company for a sweet bundling deal.

This is not something that will go away anytime soon. Apple will remain a niche player for the foreseeable future. Because it is a niche player, it will never be able to match the prices of its PC counterparts. Asking Apple to compete on price would lead the company to financial ruin.

I suspect that profit margins are already quite thin. Getting into a price war would put a serious dent in future profits.

Fighting the price war would be a damaging one to Apple and would probably win few converts. Matching the price would still not solve other perceived problems that Macs have (at least in the mind of the naïve consumer). For example, a consumer might see that the Mac has the same price as a Dell machine – but then realize that there are fewer games for the Mac. All things being equal (including price), which would the consumer take? Most likely the one with more games.

Because Apple cannot fight an effective battle on price, it should take a page from BMW’s book. This point has been made many times before. People are willing to spend more on a BMW because of the cachet associated with the name. BMW’s are for discerning drivers. They take their driving seriously. The same kind of marketing could easily be applied to Apple.

No one expects BMW to compete on price. They would be wiped out quickly. The market for BMW’s is simply not big enough for them to drop their prices into the same range as, say, a high-end Chevrolet Cavalier. Sure, the Cavalier might have all the bells and whistles that the BMW has (power windows and locks, sunroof, cruise control, etc.), but there is no way it would be confused with a BMW. Indeed, BMW would cheapen itself by trying to compete with a Cavalier.

Apple could (and maybe should) sacrifice their original tenet (The computer for the rest of us) and market their machines as computers for discerning computer users. Above the common PC rabble, they could manufacture an image of exclusivity and quality. Then they could easily command a premium for their machines.

Or they could flush the company down the tubes and compete on price.