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?