Apple’s Perception Of Value

Apple’s Perception Of Value:

Horace Dediu:

What matters most is how to gauge the perception of value.

This is where one can take cues from the existing market. Gold is costlier than steel but the pricing difference is greater still. Multiplying $1000 (cost) by 10 (to get a price) yields far more profit than multiplying $1 by 20. This perception of Gold as being worth it is far beyond its utility–a perception which has taken centuries to build. What Apple is doing with Watch pricing is simply leveraging existing perceptions of value for materials and using them to capture profits for an otherwise purely functional product.

But that process of using perception to gain pricing advantage for function is how Prestige branding has always worked. The notion that materials, craftsmanship and attention to detail can be priced at huge multiples of cost is possible only with the right brand. brand, itself built over decades, even generations, gives assurance of quality, perhaps exclusivity and comforts the purchaser in the moment of decision. It also provides assurance after the purchase and preserves the feeling of value well into the future. So-called Luxury brands are those which can impart these qualities on their products and extract the pricing advantage.

It’s a good argument as to why only Apple in the technology space could possibly pull off a gold watch. (Which doesn’t mean they will, only that with any other company, it would likely be an impossible proposition.) Apple’s years of building quality products at higher price-points, long viewed as a weakness, is now the strength which allows Apple to try the Edition version of Apple Watch.