Apple has enjoyed the lion's share of the tablet market, for years now; in January to March 2011, alone, over 4.5 million iPads were sold worldwide. Yung Trang, President of TechBargains.com, shares the truth behind who's buying. A recent survey showed that 48% of consumers said they were going to buy Apple's new iPad and of those 74% concede that no tablet compares to an iPad. With a higher-than-average cost to procure one of these iAnythings, however, it may be worth asking "why do people continue to pay more overall for Apple gear?" We look at some of the factors behind why people continue to fork over big bucks for the big brand.
Brand "Belonging"
One reason that so many people ignore the price tag of a new Apple device, and buy with unquestioning urgency, is that the brand name "Apple" means something to many people. There is also a feeling of security that the company has been able to instill in its loyal customers. Justin T. Esgar, CEO of Virtua Computers, an Apple consulting firm in Manhattan, shares that years of PC issues have made his clients feel better about buying Apple products. While the common computer-related issues were years ago, "they switched to Mac and stuck with it." He also shares that the familiarity of Apple has kept them around for the new product launches, and helped bring loyal customers on board with the new innovative tablets and phones Apple offers.

A Sound Investment
Another sound reason for paying extra for the Apple brand is that the products seem to hold their value very well. The market has proven that, because people are willing to shell out big bucks for the latest brand new Apple offering, the gently-used version will also command a pretty penny. Yung Trang comments that people can get around $350 for their used iPad 2 on eBay. "For an electronic to retain value of over 70% is absolutely unbelievable." The same may not always be said for competitive tablet brands, something that die-hard Apple fans have in mind when they upgrade to the latest and want to cash in on last year's model.

Perceived Value
Finally, there is still a common thought among Apple owners (iPad enthusiasts, especially), that they are getting a great buy for the money. Daniel M. Ladik, PhD, and Associate Professor of Marketing at the Stillman School of Business, explains it this way, "Until competition can come close to the value equation - i.e., you get what you pay for - that iPad offers, Apple can command that premium price." He goes on to admit that what Apple pays to get the product made and how much margin per unit Apple earns is not relevant to consumers, just analysts. Consumers continue to give their approval of the pricing model with their wallets, something that proves the price is not hindering Apple in any way.

The Bottom Line
Apple recently dropped the price of their iPad 2 model by $100 in preparation for their newest model. The TechBargains study, however, suggests that not everyone is on board with the "value" that Apple offers.

"The main reason 16% of shoppers surveyed said they would not buy the new tablet and 36% remain undecided is because of the high price tag. Even most of those who said they won't buy the iPad who have an annual household income of $150,000 or more, say the iPad is too expensive."

It appears then, that for many, price will never likely be an issue. Those who refuse to pay the big prices to be part of the Apple story likely wouldn't have been the market Apple was looking for, anyway.

Related Articles
  1. Economics

    Understanding Switching Costs

    Consumers incur switching costs when they receive a monetary or other type of penalty for changing a supplier, brand or product.
  2. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  3. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  4. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  5. Stock Analysis

    Is the Apple Watch a Real Threat to Fitbit?

    Examine the potential for marketplace competition between Fitbit and the Apple Watch in the rapidly growing consumer wearables industry.
  6. Investing News

    How 'Honesty' Could Pay off for Jessica Alba

    Is it possible that Jessica Alba is one of the savviest businesswomen on the planet?
  7. Stock Analysis

    3 Stocks to Protect Your Portfolio from Inflation

    Discover three stocks to protect portfolios against inflation. The best companies to protect against inflation are those with pricing power.
  8. Chart Advisor

    Invest In Consumer Staples With This ETF

    The consumer staples sector is showing signs of strength in a weak market. We'll take a look at a couple ways to make a trade.
  9. Stock Analysis

    J.C. Penney: Identity Crisis or Buy Opportunity?

    With so many recent leadership changes, J.C. Penney might be suffering from an identity crisis. Here's why and what you need to know.
  10. Stock Analysis

    How Nike (NKE) Continues to 'Do It'

    Other than style, do sneakers from any maker really differ that much? That's debatable. But this is certain: Nike sets the standard for selling an image.
RELATED TERMS
  1. Duty Free

    Goods that international travelers can purchase without paying ...
  2. Fast-Moving Consumer Goods (FMCG)

    These are consumer goods products that sell quickly at relatively ...
  3. Virtual Good

    A good or product traded in the non-physical realm, typically ...
  4. Buyer's Option

    In commercial contracts, an agreement between a vendor and a ...
  5. Underinsured Motorist Coverage ...

    One of the two triggers that can be specified by an insured party ...
  6. Lemon Laws

    Regulations that attempt to protect consumers in the event that ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What role does the OEM (original equipment manufacturer) play in the finished product?

    Original equipment manufacturers (OEMs) do not typically play much of direct role in determining the finished product. However, ... Read Full Answer >>
  4. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  5. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  6. What has the retail sector evolved to its current structure?

    Retail is the catch-all phrase for the sale of final goods to consumers; a retail transaction is considered an "end" and ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!