
Dear Apple, stop overcharging for extra iPad memory - iProject
http://reviews.cnet.com/8301-31747_7-57542985-243/dear-apple-stop-overcharging-for-extra-ipad-memory/
======
confluence
It's called price discrimination
(<http://en.wikipedia.org/wiki/Price_discrimination>).

Windows does it with their entire operating system/office line - student
licenses are the cheapest because it's all they can afford (otherwise they
just pirate - since value to them is so low), home the next (same reason),
then the office, then corporations (they can afford a lot - and they derive a
lot of value).

You charge what people can afford in terms of value to maximise your profit
and increase your chances of continuing to supply said value (or not) into the
future. Apple sells most of their tablets very competitively, but they know
that there are plenty of people out there who get plenty more value, and are
perfectly happy to pay up. So to extract these profits they create stacked
price/entry levels to actively help those who can afford overpriced memory and
perceive large amounts of derived value to happily pay up for it.

Value perceived/extracted and not the price of creation are what's important
to consumers in non-commodity markets and the suppliers who supply them.

~~~
gavanwoolery
Yep, and Apple has traditionally capitalized on this big time. For example, on
a Mac Pro: <http://store.apple.com/us/configure/MD772LL/A>?

You pay about $150 per 4 GB of RAM, or $37.5 per GB. Current ram prices are
about $4.5 per GB!

(See:

[http://www.newegg.com/Product/ProductList.aspx?Submit=ENE...](http://www.newegg.com/Product/ProductList.aspx?Submit=ENE&N=100007611+600078206&QksAutoSuggestion=&ShowDeactivatedMark=False&Configurator=&IsNodeId=1&Subcategory=147&description=&hisInDesc=&Ntk=&CFG=&SpeTabStoreType=&AdvancedSearch=1)

for example.)

~~~
bonaldi
At least with the Pro you can go to Crucial. If an SD card slot was available
on the iPads the OP's complaint would go away, I'm guessing

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nicholassmith
I always enjoy this whole "iSuppli estimates the cost at $X whereas Apple
charges $X*3(ish)", like Apple should feel bad about saying "You want more
space? Fine, pay $100".

You don't want to pay the extra? Don't. Get a 16Gb device, I have for both my
iOS devices and I'm reasonably happy with it due to Dropbox/Box.net having a
decent clients that allow me to expand my space concerns outwards.

The argument that they should charge less when people are willing to pay is
ridiculous, they should charge what the market will pay, which in this case is
$100 to move up the storage scale.

EDIT: Possibly this should be a separate comment. In the fashion world there's
two well known UK clothing companies who occupy slightly overlapping markets,
but with incredibly different price points. The material costs are roughly the
same, stores in similar locations, staff wages the same and so on. Both have
their products made in the same factory, by the same people. One charges about
2-3x for their products than the other, the other charges a 40-50% markup
immediately. That's just how luxury goods economics end up working.

~~~
maxerickson
It's at least possible that they would make more money with lower prices (but
it depends on where the volume is and where it would be).

~~~
nicholassmith
It's very possible they would, but the brand has been built around premium,
luxury products rather than smaller margins and it's doing well for them (see
the cash pile that Smaug guards).

~~~
maxerickson
My point was more that they may be charging less than the market will pay. If
lower margins on the better models result in a sufficient increase in upgrade
participation, they capture more of the economic surplus.

It's likely that the $100 bumps are just fine, but I don't see that $50 bumps
would do much to dilute their brand (especially given the total lack of
visible differentiation between the models).

------
bitdiffusion
Yes - because whenever you buy hardware, optional upgrades are always
available to purchase at cost-price /sarcasm

Although I guess it's not quite as bad with something like a notebook where at
least you have the choice of buying your own upgrades and installing them
yourself...

~~~
kaolinite
He acknowledged this:

"I can understand paying a nice premium over what you'd typically pay for
flash memory, but it gets a little ridiculous when you're paying five times
what you'd normally pay."

However Apple adds an awful lot onto the price for upgrades. When I bought my
iMac a while ago, the only difference between the two 21.5" models was one had
a 500MB HDD whereas the other had 1TB. The difference in price was somewhere
in the region of £250. It will have cost Apple maybe £20-30 more for that
extra price yet they charged around 1/4 of the original price for the upgrade.

In the end, I just got the 500MB iMac. It was a great machine and worth every
penny, it's just a shame that they sting the customer on upgrades. When I
bought a Lenovo laptop a year or so later, they too were pretty expensive to
upgrade (battery, CPU, HDD), but nowhere near the premium that Apple adds.

~~~
weiran
It would've also had a discrete GPU which would add much more to the total
cost than a bigger HDD.

~~~
kaolinite
Not that I'm aware of. I looked through the specs for quite some time and was
unable to see a difference. I know there are differences between Macbooks of
the same screen size, but couldn't spot any other hardware changes.

------
AngryParsley
Truly a tragedy. When I get my 64GB iPad Mini, I'll be sure to install iViolin
Nano and play Ashoken Farewell followed by the theme to Schindler's List.

It amuses me that the author was aware of his kvetching, but went ahead with
the article anyway.

------
cletus
I expect this isn't gouging so much as Apple just liking consumer-friendly
price points and upgrades. By "consumer-friendly" I mean numbers like
$499/599/699 (Wifi iPad) are "nice" numbers and $100 is a difference that
gives choice without giving too much choice.

Apple isn't really in the habit of cutting prices (this has exceptions and I'm
ignoring various FX price adjustments). They're more about giving you more for
the same money. So at some point you'll probably see the same prices but for
32/64/128GB. I'm a little surprised this hasn't happened already. I expect
we'll see it next year. 2014 at the absolute latest. Perhaps this would be too
much of a constraint on flash chip supply though (IIRC Apple is already the
largest consumer of flash memory so doubling their demand would be
significant).

I, for one, will happily buy a 128GB iPad.

That all being said, I think there are now three serious missteps in the post-
Jobs Apple:

1\. The Maps debacle;

2\. Elongating the iPhone 5 to create yet another resolution (the relative
uniformity of the iOS line with only 2/4 (if you could retina) resolutions was
a huge advantage for developers). I really don't see the point; and

3\. The Mini. Sure they'll sell millions of them but by that same argument
Windows Vista was a success. IMHO 16:10/9 makes far more sense on the 7-8"
form factor rather than the "fat" 4:3. Also, 7-8" tablets are moving to be
720p+ and this is below that at 1024x768. The price is also (IMHO) too high.

Google OTOH (disclaimer: I work for Google) I think has a lineup that is
starting to make a lot more sense between the Nexus 4/7/10 at some pretty nice
price points.

I guess that's a good comparison for this article because the Nexus 7 upgrade
from 16 to 32GB is only $50.

EDIT: Two points:

1\. I'm not calling the iPad Mini a Vista-level failure. Seriously, please
read what I actually wrote (the whole electric car was also a big example of
people not reading what I wrote but I digress...). I simply said that selling
a lot of something doesn't preclude it from being a misstep; and

2\. The whole idea of "excessive profit" with a luxury good is fundamentally
flawed. If you don't like it, don't buy it. Ultimately it costs what it costs
because the market bears it.

EDIT2: I understand very well why the mini is 1024x768. Perhaps I didn't
explain my point very well. My point is that's not a very good resolution for
a 7-8" tablet (IMHO of course). IMHO the 16:10 ratio works much better (YMMV)
but they have their hands tied.

~~~
curiousdannii
If they're really on about consumer-friendly numbers and reduced choices, then
why not offer the biggest memory increase they can give with reasonable profit
margins? They could offer to upgrade from 16GB to 64GB for $100, still making
a decent profit while reducing the number of device options.

No, this is simply exploiting people for excessive profit.

~~~
rayiner
What is "excessive profit" in the context of a luxury item? We're not talking
about price gouging for disaster relief supplies here.

~~~
curiousdannii
Who gets to decide what is a luxury item?

(I guess theoretically the tax office, ex: luxury car taxes...)

~~~
illuminate
Whomever wishes to? If you already operate a desktop, a laptop, a smartphone,
a tablet device could without too much trouble be considered a luxury and not
a lifeline to modern society.

------
jpxxx
"First, an admission: I preordered an iPad Mini. But I wasn't happy about the
price I was paying."

The author kindly gives you permission to bail on the very first sentence.
Lesser pundits would bury that much deeper.

------
theorique
"Dear Apple, stop overcharging for extra iPad memory, or else I'll buy your
product anyway ... _and then COMPLAIN about it!_ "

------
zachinglis
He hits the nail on the head in the first paragraph. He bought anyway. Apple
will continue to use unfair pricing because people are willing to buy it, even
if they complain about it.

I'm frustrated by the fact the MacBook extra RAM/SSD is so expensive compared
to manufacturing costs. But it's my only option, so I am going to have to pay
it now aren't I?

~~~
masklinn
> I'm frustrated by the fact the MacBook extra RAM/SSD is so expensive
> compared to manufacturing costs.

That's quite variable actually, at least for the non-air non-retina ones the
trend was generally that the prices (for RAM, not SSD) where fair-ish right at
release (markup of 10 to 50%, roughly in line with other manufacturer-provided
upgrades), but Apple doesn't float its prices so a year later with RAM prices
having fallen by half or more (depending on the quantity) the prices were
inane.

------
trotsky
I wonder if he understands that a long drawn out complaint about pricing where
the author understands all of the component details, yet bought the product
anyway and shows all signs of being willing to do so again... completely
validates their pricing strategy.

------
sudhirj
This is pure self-selecting pricing: it's neither new nor restricted to Apple.

The premise is simple: your market is divided into a very large spectrum of
spending ability. So the most efficient way to charge each customer the best
possible price is to simply let them select it themselves. For obvious
reasons, you cannot sell the same product at each price, so some improvement
is necessary at each upgrade. Quite often the upgrade is a token one, but
sometimes people do need the extra features offered.

I see this all the time at restaurants, car dealerships, insurance companies
and pretty much any other time someone is trying to sell me something.

------
Someone
You can bend this any way you want. Here's one take: Apple is subsidizing the
cost of the cheaper iPads and compensating by making the top of the line more
expensive.

If you find that a ridiculous argument, consider that, every time they haven't
been able to make them fast enough to meet demand, their prices were too low
for the market.

I do not think either of these viewpoints is right. This is simply a matter of
"price to what it is worth, not to what it costs"

------
MrFoof
Can anyone point to a volume hardware OEM that doesn't charge considerably for
storage capacity or RAM?

Off the cuff, let's go buy a laptop from Dell, Lenovo, HP, etc.

Lenovo's T430u is $730 with 4GB of memory and a 320GB hard disk. An additional
4GB of memory is $160, even though the consumer wholesale price of such DIMMs
is $20. The cost to upgrade to a single 8GB DIMM is $450, even though the
consumer wholesale price of such DIMMs is $40-50.

The cost to go from a 320GB 7200rpm hard disk to a 1TB 5400rpm hard disk is
$170, even though the consumer wholesale price of such a disk is $110.

\-----

Every OEM does this for memory and storage, because to the end user, there is
an _obvious, measurable benefit_. Twice the storage means they can store twice
as many things. Twice the memory means they can do twice as many things at
once. This is why Apple doesn't mention clock speeds for their custom ARM
SoCs, but instead how many times faster it is -- 1.0GHz to 1.4GHz doesn't
resonate with people as well as "twice as fast", especially when if you looked
at just clock speed you might think it was only 40% faster.

------
zacharyvoase
<economics>

I'm echoing the feelings of a lot of others in this comment thread. Moaning
about price of something but buying it anyway is a pointless exercise. By
buying the product you're sending a clear signal that they can continue to
charge the same price.

Part of me also wants the title to include the word 'please'—since this is a
request, not a demand.

And, indeed, there are many products sold by companies where the per-item
margin is huge compared to the materials cost. Perfume, designer clothing,
fancy cars…and software. But we buy perfume anyway because we have lots of
money but no perfume, and would rather have some perfume and a little less
(but still lots of) money.

I'm reminded of an economics joke I once heard. An economist and his friend
are walking past a concert hall. The friend turns to the economist and says
"you know, I always wanted to learn how to play an instrument," to which the
economist responds "clearly not."

~~~
fauigerzigerk
If a tech journalist buys the thing for professional reasons, the signal he
sends is not the same as a consumer buying it. I do agree with your
luxury/fashion goods comparison though. That's exactly the business that Apple
is in.

~~~
johncoltrane
He doesn't send any special signal: his money goes with the rest of the money
from other buyers.

------
timedoctor
Their pricing strategy is simple - make the maximum profit possible. Apple is
a premium product and the upgrades are there to get more money out of the
customer. The relationship with the value received is tenuous.

~~~
Argorak
That has nothing to do with premium/non-premium. Thats called "good business".
Even with a low-cost product you try to maximize profit, but in a different
niche.

------
JanneVee
Apple can charge almost whatever they want for the memory as long as the
competition is lagging behind on the software. It will probably be better in a
couple of years. I'm buying a Nexus 7 instead for multiple reasons and the
memory pricing is one of them. Main reason is that I already have an iPad 2
and want a smaller tablet but not the same one I already have.

------
acomjean
I think the problem is the base memory is too low compared to the system spec.
Apple is selling an arguably "high end" product and 16 gb is really pushing
what is needed. They've upped speed and screen resolution but the memory
levels has remained the same.

Unfortunately not upgradable or expandable after purchase.

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1SaltwaterC
"You've found market price when buyers complain, but still pay."

IIRC, PG said that. We're on HN. Rings any bells?

------
drcube
It wouldn't be Apple if they didn't overcharge.

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benblack86
If it helps, think of it as a tax on the rich.

------
johncoltrane
Dear Apple, stop making profits.

