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Why Apple should keep its prices high during the recession

Apple is a premium brand. And although a recession is hitting the world, Don Reisinger thinks it shouldn't stop the company from maintaining its price levels.

An analyst named Ezra Gottheil from Technology Business Research said late last week that Apple needs to consider bringing the prices of its computers down to fall in line behind other PC vendors that are lowering their own PC prices to compensate for less consumer spending.

"It is too much to ask consumers to pay more than twice as much for a PC in these times," Gottheil said in a statement.

The analyst went on to explain that she believes the market is moving away from high-priced computers, thanks to the rise in popularity of Netbooks, and with a recession haunting consumers and businesses alike, Gottheil believes Apple's current strategy of upgrading device specs without modifying price could prove damning in this economic environment.

For years, Apple has contended that it's providing more value for more money and it has always been loath to drop the price of its machines to compete on price with competitors. And so far, Apple hasn't made any statement regarding its desire to change that strategy.

But that's a good thing. Apple shouldn't lower the price of its Macs to compete on price with Hewlett-Packard and Dell. It's a premium vendor with a premium product that thrives off its higher price point. Why should it fiddle with a strategy that has worked for years just because the competition is trying to find a way to increase its own PC sales as Apple gains market share with each passing month?

The sweet spot for Mac pricing is $999. And thanks to the MacBook, Apple hits that psychological threshold and makes consumers believe that although its low-end MacBook is more expensive than the $500 junkers HP and Dell are selling, they provide more value. And just in case you want to measure Apples-to-Apples, I think you'll quickly find that an HP or Dell notebook with a configuration that's comparable to Apple's MacBook isn't that much cheaper. Heck, Dell's Inspiron 13 laptop's top-end configuration starts at $820 ($1,139 before instant savings). Does that really sound like a deal to you?

Apple has the luxury of being, well, a luxury brand. Most consumers don't look at Apple and put the company on the same level as a Dell or HP. For consumers who want to save money on a computer or don't want to worry about learning Mac OS X, Apple isn't a consideration anyway. But for those people who have some money to spend, they want the most value for their money. And although some would disagree with their sentiment, I think many believe they get more value from a Mac than any other company's products.

People who buy Macs aren't looking to save money; they're looking to buy a premium brand because of the perceived value of the product. Apple understands that; we understand that; why don't analysts? Sure, the market is moving towards cheaper alternatives and some people want smaller laptops, but hasn't anyone noticed that over the past few years, Apple's market share has grown considerably in the face of "cheaper" computers?

OK, OK, I know what you're thinking: "But, Don, there wasn't a recession hitting the world when Apple gained market share as a premium brand." True. But we need to realize that a recession doesn't have any impact on perceived value. In other words, a premium brand during a booming period is still a premium brand during a recession. Granted, less people are theoretically able to buy premium products during a recession, but we can't lose sight of the fact that when we compare comparably equipped products, a Mac is, on average, far less expensive than some want to believe. So maybe a person can't afford that MacBook Pro he or she has wanted, but you know what? That $999 MacBook is still affordable and, hey, it's better than buying another cheap Dell laptop, right?

Historically, premium brands perform well because they're just that--premium. There's no reason for Apple to drop the price of its Macs to satisfy one analyst who worries the company's prices are too high. Mac sales are up, Apple's margins are healthy, and people covet Macs more than any other computer on the market. Consumers are drawn to Macs because they provide more perceived value than any other product on the market. And it's that perception that has made Apple's "premium" strategy an unbridled success.

Recession or not, Steve Jobs would be crazy to change anything in that plan.

Check out Don's Digital Home podcast, Twitter feed, and FriendFeed.