Mac’s: 66% Market Share – Facts Not Spin

It would be hilarious if it weren’t so sad. NPD’s report that Apple Mac’s market share of $1,000+ personal computer is 66% is not really subject to interpretation – except apparently for the last dying gasp of PC fans.

Here’s how this works.

Of the people who had and were willing to spend $1,000 on a personal computer, 66% looked, shopped and choose a Mac. It’s as simply as that.

You can dig further down but extrapolate that generally, the more well-heed your customers are, the better off you are (as a seller) – whether you’re selling cars, refrigerators or computers. For the company selling products, it generally means you have higher margins or better yet, have created a brand of higher value.

In other words, the market share of Windows OS personal computers in the $1,000+ group has slipped from 98% to 34% in 7 years. That is not a good trend.

Why is that? Part of the reason is that Microsoft has poisoned its own name. They traded short term profits (1992 to 2002) for long term branding. By neglecting Windows and placing their NAME large & square in FRONT of every virus report, every global trojan and the poor customer choice of blaming the hardware manufacturer who then blamed Microsoft for the user woes – what are they left with?

A brand that is perceived as a commodity that’s just built in – it’s the OS assigned to you at work much like the OS on the fax machine or the copier. It’s just there. Now, in the beginning of the desktop technology age (1985 to 1995), Microsoft’s brand held esteem as the leading edge of technology and why not buy the brand I’m using at work, right? Why not get my opportunity to own the leading edge also? But Microsoft frittered that away through arrogance, later neglect and now apparently cluelessness – what does the name Microsoft now mean to the average personal computing consumer?

It is the OS you get when you buy a $499 computer. It’s useable, it’s passable but that’s all it’s worth. How can we tell? What percentage of PC users paid for the full Vista upgrade? Versus what percentage of Mac users paid for the full retail upgrade?

And of course, now this stat. Which basically can be summed up as such: If I have or am willing to spend more than $1,000 on a personal computer, I’m 66% more likely to buy a Mac. That’s what the numbers say in black & white. Not many ways to spin it.

Whether you think Macs are over-priced does not matter in this equation because there are literally thousands of PC’s choices that are readily available – it’s not as though there is limited competition in the $1,000+ PC category – the bottom line is those can afford or are willing to spend more than $1,000 on a computer will 2 to 1 buy a Mac now after considering a PC.

That’s not to say there’s anything wrong with selling to the masses at the low end – there is certainly money to be made, the audience is large – the margins are much lower but it’s a living.

But PC fans & MS still think it’s 1995 – it’s not for Microsoft’s real reality. Face the facts, they are simply the low priced OS of “choice” for those who don’t wish to spend $1,000 on a personal computer. Microsoft should stop having pretensions otherwise, that is the problem. Somehow, because Bill Gates is worth $50 BILLION dollars, that means his company brand should carry high esteem and brand worth but it’s exactly like Wal-Mart. There are dozens of Wal-Mart billionaires also and like WM, the store – they are profitable but everytime WM tries to go upscale or even slightly upmarket, they get pushed back to their new natural order (with WM, it’s the George apparel line).

It is exactly the same with Microsoft now. They occupy the low tier of brand value for consumers now – hence why MSN, the ISP could not defeat AOL (after MS spent $4 BILLION dollars!), why WIN mobile phones sell so poorly after 8 years in the marketplace, nor could they “revolutionalize” the watch industry … not the home networking industry and why after 18 months, they have “shipped/sold” as many Zunes that Apple sells in 1 WEEK.

When given a CHOICE, consumers do not choose Microsoft unless price is the sole factor.

This is also why MSN Search is such a colossal failure – even when FREE and a switch is 2-seconds away, MSN or LIVE Search is still such a failure and LOSING market share after plowing $6 bilion in R&D & marketing.

Consumers didn’t randomly arrive at their mistrust and assignment of MS products and technology to the low tier/price as the sole factor in decision making – this is a hard fought battle of amazing neglect on Microsoft’s part. From blithely ignoring and blaming users for viruses and trojans, their solution after 6 YEARS and hundreds of millions of infections? – send us $100 for virus patches … to the case of the Xbox 360, instead of building consumer goodwill by actively acknowledging build & over-heating issues, again, their solution is to try and ignore the problem – again, poisoning their own well for a short term gain … triumphing 10-million console sales but not accounting for the 10-30% returned and non functional units … and after a year, they have lost 30% of the market to the Wii and slipping behind sales of the PS3 – the pattern repeats itself. They still have a fan base but beyond that?

This is a company that has literally and figuratively failed in EVERY consumer venture since 1995. The company has been propped up by enterprise sales so unlike most companies that can spend some $50 BILLION over the past ten years on divisions that has accounted for ZERO profit, they just keep plugging along as if showing up and saying we’re #1 is enough for everyone to fold up and go home. It doesn’t work that way in the consumer market. Microsoft should do two things – a) either just concentrate on the enterprise market or b) acknowledge that they are a lowly consumer brand and accept that fact and just sell on pricing. They have spent too long on poisoning their own name for anything loftier and even if you want to go upscale and upmarket – their recent attempts are just as feeble and ill-conceived such as the Zune or Vista – both positioned as if they’re cool and better than anyone else. They simply aren’t because it’s from Microsoft – a brand that consumers mistrust and associated with poor working technology. It can be fixed but first they have to get off their arrogant horse and realize they are riding an ass and not a horse – no one is fooled.

Buying Yahoo and/or causing further complications (such as requiring users to have a LIVE name to access anything) is only going to further sink their cause.

They are rapidly losing the highest margin customers to Apple. Those with more than $1,000 to spend on a computer are buying Macs 2 to 1.

We know in all computer sales, while PC sales have slowed to a few % points growth, Apple is galloping at 35% – of course, Apple is starting from a smaller base but growth is growth and apparently with each sale, Apple is obviously adding in revenue at $1k per machine while MS only adds $50 per machine in OEM Vista sales.

So, Microsoft is losing market share in the below $1,000 personal computer category – even to Linux in the below $500 category – and what is their response to forces pushing them in from all sides?

To buy Yahoo?

What happens if Google builds an internet desktop that doesn’t require Windows – knowing Google, it will be bundled for FREE with a $300 personal computer … leaving Microsoft with no high end margin sales (or very much diminished if Apple continues to add 35% growth every year) and Google gives away a free OS?

Windows 7 available in 3 years selling for $169 will resolve this?

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9 Comments

Filed under Advertising, Apple, Apple Mac, Computing, Design, Financial, Gadgets, Internet, Marketing, Media, Retail

9 responses to “Mac’s: 66% Market Share – Facts Not Spin

  1. Michael

    Retail.

    While I applaud your post, it’s really important to note this is strictly a retail measure. So, count more consumers than business (who buy direct, not retail, typically). And discount Dell almost entirely (their retail presence is limited at best). It’s a great stat, it sounds really good. But what this is really saying is the other vendors are crap at retail, Apple is good. HP sells value boxes as Staples. Dell largely doesn’t do retail. The cow is dead, mostly. So, who is Apple left to compete with high end in the Retail market?

  2. Apple drinks Microsoft’s milkshake!

  3. Blad_Rnr

    What a great article. You are dead on. We can talk about all the specifics (Michael), but the trend is there. MSFT has lost all respect by their users, at least in the consumer market. And IT people are finally giving Apple a look before they spend their money. The point is MSFT just doesn’t care about the user anymore.

  4. BrianD

    I love my Mac and wouldn’t trade it for a PC. I have been a Mac user since the early 1990’s and find they are the easiest, least complicated machines to run. If it wasn’t for PC based software (mainly proprietary ones) I would run a Mac at work. Now that most of my business is moving to web based applications, I can make that switch in the next year or two.

  5. Realtosh

    This figure about marketshare in the over $1,000 computers does relate only to retail.

    Some say that Apple is good at retail. No joke. They’re getting 66% of computers over $1,000. Yes, this figure is conclusive proof of their strength in retailing.

    But Apple is also good at direct sales which are not reflected here. Example of direct sales would be apple.com and dell.com, who are 2 of the best direct sellers out there. It would be interesting to get the break-down of direct sale marketshare as well. I’m sure Apple is doing well in that category as well; probably not as amazing as they are apparently doing in retail, but Apple should be doing extremely well online.

    Apple is also doing extremely well in the education (K-12) and higher education markets. Also getting that begin to approach their share of retail in some areas.

    The only area where Apple is not doing so well by choice is in business sales. Apple has concentrated on selling to individual end users: consumers and small businesses. Having the better product; it makes sense to target users who have input into the buying decision.

    In most businesses, computer buying decisions are made by IT, or upper-level management. So, in business most users have little or no input into the buying decisions of the computer they will use.

    Business, then becomes the last frontier for Macs. Apple has already shown that they are willing to target the business client by adding Exchange to the iPhone.

    Expect a full frontal attack on the business market within 2 years. First, they have to get the iPhone and the portable Internet device market off the ground and dominating each respective segment.

    By then, Apple should have enough technology developed so make the transition for businesses easier.

    Microsoft has lost the battle, and they haven’t even realized. They’re too busy worrying about buying Yahoo, that they’re not realizing that their bread and butter core OS market is in an extremely weak position. Most Microsoft sales result from inertia. People don’t like to make changes. In most industries, the number 1 player usually stays in place for that very reason. Kleenex is synonymous with tissues, etc. Since the debut of the IBM PC, PC has come to mean computers infected with Windows. It will not be easy to unseat Windows. Microsoft will not give up without a fight. But, the moves are already made. When the time is right, Apple will make their move for the crown, and checkmate Microsoft.

    Microsoft will still have a fall back as a developer of business and productivity software, and even maintain some success in the server market for a time. But with Google taking the bottom of the market with a FREE OS and Apple taking the top and middle of the market, Microsoft will it difficult to hold on to their leading position.

    Google will make their money in Internet services, which is why Microsoft is so desperate to pick up Yahoo. They need something to get their Internet Services out of the doldrums.

    Good Luck. I’d put mu money on Apple. (and Google if you can buy them right.)

  6. KenC

    You said, “If I have or am willing to spend more than $1,000 on a personal computer, I’m 66% more likely to buy a Mac.”

    Actually, that’s not right. If, Apple sold 66%, then Windows/Linux sold 34% , right? So, you are about twice as likely to buy a Mac if you are planning to spend $1000 or more in a store.

    Twice as likely is actually more dramatic than 66% more likely.

  7. Many good points, but Microsoft wants computers to be dirt cheap. Software and hardware are complement products, like razors and razorblades. The cheaper the computer, the more they could charge for their software. MS has made its billions riding the computer prices into the ground. Apple had to come along and spoil their fun by trying to take away market share.

    I don’t need to hear any sad songs about how MS has ruined their brand. They can sell 140 million copies of Vista, which no one is saying they want. Somebody has to be stretching the truth here.

    MS is big and they will continue to make billions for years to come. Apple or Linux has to have some impossible growth to ever catch up. Don’t count MS out just because they suck and have terrible products. They have deep pockets and they will survive. It is the stupid PC vendor who is stuck clinging to MS that is the victim here.

    (MET: MS’ problem is that they think they are both the technology industry leader AND the best brand – Microsoft certainly did fine financially in getting a PC to every desktop from 1988 to 1995 and beyond but they presumed they could just stop adding to that legacy and just coast on the name since 1996 … and they certainly will for a long time for many reasons but a couple of them are not being the technology leader nor the best brand. They either have to accept that or really fix their problems … instead of announcing the recent policy of ‘PC companies can sell XP on the machine but MS counts it as a Vista license and pays them for Vista OEM …’ The question then is – who are they really fooling if not themselves?)

  8. People are finally figuring out that the emperor has no clothes.

  9. The beginning of the end for them could be how the built Vista to use Word to parse images in Outlook rather than in IE (which all versions prior incl XP did). That one stupid move is going to continue to cost them BIG until they fix it…which they probably won’t.

    Just talk to any marketer about blocked and messed up images in Outlook due to Vista and you will get an earful. It is truly a debacle and helps explain the very, very low adoption rates in business. Maybe the key Product Manager for Word has the goods on Ballmer? How else to explain such a boneheaded move?

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