Last Updated Jul 22, 2008 6:19 PM EDT
There's nothing wrong with charging a higher price for a premium product. But that only works when the force driving the price is user demand. For decades, Apple has kept its prices artificially high, particularly on the personal computer front, by owning both the hardware and software platforms and being the only game in town for people who wanted a Macintosh.
Even though the company is conventionally successful, what happened was the disaster that would have befallen IBM had it been able to buy Microsoft all those years ago. It looks great on the balance sheet to have all those fat margins, but there's a trade-off. You gain revenue by the unit, but lose the war of adoption. There was a time when Apple could literally have taken off the way Microsoft did. It had a more appealing product, and businesses actually used to use Apple products.
But because of hardware proliferation and competition, prices fell on the PC side and, eventually, the corporate market became a Wintel world. That helped drive home users down a similar path, because these were the machines they were used to using at work.
Now Apple finds itself in an interesting position (and one that I suspect was deliberate). The ubiquitous nature of the iPod and the growing expansion of the iPhone have again created the association between the company and consumer perception of equipment you might actually buy and like.
Ideally, Apple would revisit the idea of licensing clones, as it did for too brief a time in the 90s, and realize that there is a lot more money and margin to be made by selling all those operating systems. However, assuming for a moment that such a decision has no chance of passing through Apple's "we want to control everything about us" culture, dropping prices to a real competitive level could go a long way. Volume would jump, invoking economies of manufacturing scale, and over the long run the company would gain more market share and money.
There are all those people in the world who hate Microsoft and aren't comfortable with the DIY style of Linux. Might as well offer them something affordable and help bring about a variation on a phrase once used in the context of IBM: Nobody ever got in trouble by buying Apple.
Sydney Apple store sign image via Flickr user Sailor Coruscant, CC 2.0