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Understanding Statistics

This isn’t specifically a Mac or Apple post, but rather a focus on the statistics and results of this particular survey. The survey identifies that about two-thirds of PC users (64%) would pay less than $600 for a Mac Tablet, and the remaining one-third would pay $600 or more. Interestingly, of the remaining 36%, 20% would pay more than $800, while only 16% would price it between $600 and $800.

In contrast, current Mac users have a different view: 27% would pay between 600 and 800, 41% would pay more than $800, and only 32% would pay less than $600.

Let’s look at these numbers a little deeper though. A Mac user is twice as willing as a PC user to pay $800 or more, and almost twice as willing to pay $600-800. They are half as willing to pay less than $600. In other words, Mac users consider the price worth it, and are twice as likely to buy a Mac Tablet as a PC user, regardless of the price. In other words, Mac users value something other than price when they make a purchase. PC users, on the other hand, value price above all else.

Basic economics says that a person will never pay more for a product than the value that product provides, except in the case of a pure monopoly on a necessity item. Thus, when a person is willing to pay a certain price for a product, they consider its value to be relative… they will pay more for a product they feel is worth more, but will not pay more than they think it’s worth. Make sense?

In this survey, 64% of PC users will not pay more than $600. Economically speaking, it’s because they don’t consider the value of what they are purchasing to be greater than $600. But their primary frame of reference is the cost of PCs, and in particular, $300 to $600 netbooks. In contrast, 68% of Mac users will pay more than $600 for a Mac Tablet. Again, economically, Mac users value a potential Mac Tablet as greater than $600. Now also consider that both parties are people who are willing to buy a Mac, and therefore already place some degree of value on it. These are not people who were asked what they think the product will be priced at, these are existing computer users who were asked to identify what price they would be willing to pay. PC users place a lower value on a Mac than Mac users do.

Thereby begging the rhetorical question of the day: Who is better to judge the actual value of a product–the person who already uses it, or the person who doesn’t use it?

In effect, PC users are saying, “I want a Mac Tablet, but Mac’s are pricey, so I want them for the same price as netbook PCs, because I value them as one and the same.” Mac users are saying “We already use a Mac, and we already know its value, which we consider to be greater than the value of a PC, so we’re willing to pay a higher price for that greater value.”

And this is where statistics get funny. The article from TUAW suggests that Apple needs to keep the price of a Mac Tablet at about $600 or less to attract PC users. Yet, Mac users are willing to pay more. But from Apple’s perspective, the statistics say something different:

Don’t take losses by selling the product cheap just to win some short term converts: current Mac customers don’t care. And current customers are more valuable than potential future customers.

Remember the old adage, slow and steady wins the race. Focus the time on educating the PC user to become a dedicated Mac convert. It’s not like Apple to win a convert by offering a cheap product. They win a convert by gradually appealing to something other than people’s pocketbooks.

Because Mac users get it.

Mac users understand the value and are willing to pay more for it. And once the product is out there and tested in a controlled capacity, then work on making it better, and dropping the price. You win more converts each time, and existing Mac users buy a new one anyway.

And lastly, don’t forget that we’re talking about a product that doesn’t even exist yet, and already people are willing to pay a premium for it. That’s precisely what Apple needs: Mac users and PC users alike acting like Pavlov’s dog over a potential product. It’s not a bad thing. But it is a learned, and conditioned response, and Apple knows how to lead that well. It will be interesting to see how this knowledge will drive the development of this product over the next two months.

About the Author

SteveI am a husband, a father, a son, a brother, a friend, and a professional. Many men have a tendency to define themselves by what they do, and I don’t think I’m much different. I am a husband, because I do what a husband does; a father, because I do what a father does; a son, brother, and friend because I do what needs to be done for those roles.View all posts by Steve →

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