There’s a phrase I use a lot when I reply to people who expect Apple to make low-cost products that will appeal to the general public: “Apple will never be the low-price leader.” Although people often complain about the prices of Apple products, in general they confuse the reluctance to reach the lowest price points with poor value.

Yes, you can pay a little more for an Apple product than a competitor’s product, but you also get more. However, there is no denying that Apple products are expensive. As it has become one of the most profitable and valuable companies in the world, its ability to maximize revenue growth has served it well.

But as Apple sees revenue growth slowing across most of its product categories, I have to wonder how much Apple might be willing to raise the prices of its products to squeeze even more money out of its customers. The recent strength of the dollar has given Apple an opportunity to experiment with what happens when the price of Apple products rises.

Currency laboratory

You might think that a strong dollar would be good for a US company like Apple. But while a strong dollar is good for American tourists – look, the whole UK is having a sale! is actually bad for companies like Apple that sell consumer products in other countries. As long as prices in other countries remain the same, this means that Apple is making less money in dollars from each sale.

Apple

At this point, Apple has only two real choices: keep prices flat and eat up some of its profits, or raise prices and risk turning customers off in those countries due to even higher prices for Apple hardware.

Here in the US, Apple prices have remained surprisingly stable. But elsewhere in the world they are on the rise. “When we launch new products…we look at [foreign-exchange] situations, and in some cases…customers in international markets experienced some price increases when we launched new products that buyers in the US have not seen,” Apple CFO Luca Maestri said last week during Apple’s Q4 2022 financial report. of the year. “And that’s unfortunately the situation we’re in right now because of the strong dollar.”

Thus, people outside the US, already accustomed to the high cost of Apple products, now find them even more expensive. This is Apple’s lab for raising prices. To keep its profits, the company raises prices in different countries and then watches the market reaction.

The results are bad news if you value your bank account.

Inelastic, not fantastic

According to Maestri, it looks like Apple has discovered a striking inelasticity in demand for Apple products.

“One of the things we really appreciated… was the fact that despite a very strong dollar and difficult [foreign-exchange] environment, we are seeing very strong results in many international markets, especially in some very large emerging markets,” said Maestri. “It’s important for us to look at how these markets work in local currency because it really gives us a good idea of ​​how customers react to our products, how they interact with our ecosystem, and overall brand strength. And I have to say that in this respect we are very, very pleased with the progress we are making in many markets around the world.

Let me rephrase this, just to be clear: in many international markets (Maestri specifically mentioned India, Indonesia, Mexico, and Vietnam), Apple raised prices, and the company still seems to be delighted with the reaction. Things are still being sold, and more than before.

Of course, maybe in emerging markets, Apple’s price increase is greeted with a shrug, because it attracts the richest people in these countries, and their number is limited. But perhaps it also reveals something about the Apple brand and people’s willingness to pay more for Apple products. Sure, Apple products are expensive now, but if they were even more expensive, would we buy them? The first results say yes.

Jason Cross/IDG

You will pay for

Tim Cook’s Apple is a remarkably ruthless money-making machine. As a result, I fully expect Apple to continue raising prices, but to focus more on the upper end of the market. Apple is raising prices on the MacBook Pro, iPad Pro, and iPhone Pro, and I suspect it will continue to do so.

That said, while Apple will never be a low-price leader, I think Apple is very aware that there are entry-level price points it needs to reach and it must deliver value at those prices. That’s why the MacBook Air M1, ninth generation iPad, and iPhone 13 are still on sale, even though newer models have replaced them. Modern Apple knows how to increase its revenue by offering cutting-edge designs at high prices. as well as last year’s model at a bargain price.

But it’s hard to look at Apple’s continued success in markets where it continues to charge more and more and not imagine the company will change its approach. In the future, expect more expensive high-end products – recent rumors of new 14- and 16-inch iPad models are a good indication of this – along with choices that provide value at the expense of a little power or elegance.