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Education Sales & Profits Down?
Why Not Just Raise Prices?
by  Steve Wood
February 27, 2001

 

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Someone from Apple Computer really, really needs to explain the contradiction of Apple's variously stated "commitment to education" and the $100 price increase of the new entry-level iMac introduced at MacWorld Tokyo last Thursday. You see, when Apple introduced its new 400 MHz entry-level iMac, it also dropped the $799 350 MHz iMac, effectively increasing the price of the cheapest new Macintosh available by $100.

Not to fear, the actual price increase of the new entry-level iMac to educators and educational institutions is actually just $50. Apple has discounted the new offering to educators and educational institutions to $849. The previous entry-level iMac carried no special educational price ($799 for one and all). So it's really just a $50 per unit price increase to the education market.

That's pretty peculiar behavior for a company hurting for sales and supposedly "obsessed with reigniting education." At the very time when Steve Jobs has finally acknowledged that Apple has blown its hard-earned lead in the education market, and at the very time when the foremost need of schools wishing to justify purchasing Macs is a more competitively priced entry-level iMac, Apple has chosen to invoke a 6% price increase!

One might have hoped for better treatment from Apple Computer. Steve Jobs announced the hiring of Cheryl Vedoe last October as the new Vice President for Education Marketing and Solutions for Apple Computer, saying, "The education market is a top priority for Apple, and we intend to regain market share beginning in 2001." Ms. Vedoe got off to a credible start with her A Letter to the Education Community online. It was notable for a couple of excellent quotes:

"The discussion of technology in education needs to be about more than the technology; it needs to be about education."
 
"Apple's commitment is to ensure that schools have the right products and solutions to support the entire education community &emdash; students, teachers and faculty, administrators, and parents. Our goal is to help prepare today's students for the real world of tomorrow, to help each child reach his or her full potential."

Cheryl concludes her letter:

Please let us know whether we are on the right track: edfeedback@apple.com

On my way out to the truck last month, I slipped on the ice and wrenched my back. Being a tough old ex-dockworker, I went to work anyway...until noon. I then whimped out, called for a sub, and went home and took some wonderful muscle relaxers and pain killers for two days. (Ah, a cheap, legal high!)

During the second day of my drug influenced haze, I actually wrote a semi-nice snail mail letter to Cheryl. Yep, after my experiences with Apple and Apple Ed, I had to be seriously under the influence to do that. I have previously written how Apple undercut the efforts of the Mac faithful at our school to retain Macintoshes in the elementary. Even so, I thought a letter to the new Apple Ed veep was a worthwhile endeavor, especially considering my diminished capacity to do much of anything other than lie flat, or sit up very straight and take my medicine. Unfortunately, I found that neither the email address above, nor snail mail direct to Cheryl, produced any substantive result. At least my back is better and the ice has melted.

By itself, Cheryl's letter might not have moved me to any action. Within days of reading Cheryl's letter, I received the following encouraging email from a reader in response to my column, A Final Blast for 2000:

Been following your online articles about Apple in Education and thought I would share with you what I have heard here in Michigan.
 
As an administrator in a large district, I personally felt the pain when 3 years ago our IS director convinced everyone that Windows was our platform for learning. Since that time we have purchased over 3000 Windows machines and learning with technology has dried up. Recently the Governor of Michigan implemented a program that will put a laptop in the hands of every teacher and I thought to myself this will be the end of Apple.
 
To my surprise at this point Apple has responded to this program with hard hitting marketing and a price point on a fully equipped iBook that makes even our administration take notice. Within 2 hours of the announcement of hardware winners every one of our administrators had received a call from Apple, a product sheet was in my fax machine, and the local sales representative had called our Supt. to make him aware of Apple's offer. We are now going to allow teachers to choose between a fully equipped iBook (complete with Office 2001) or last years model of Compaq with very little software.
 
While this is just a small dent I have been blown away by this 'New' Apple. I am not sure if this is a result of the new Apple Education Vice President or the marketing department finally woke up. You may want to follow the Michigan program ($110 million for laptops) as I hope this is an indication of things to come from Apple.

Whoa! It is truly exciting news that Apple Education rose to the challenge and provided computers at a price school systems could afford...in one state...in one very specific instance. Could they do it again? Or, maybe more properly, would they do it again?

Sadly, it appears that unless there is a whole state on the line, Apple Education apparently doesn't think your business or mine is worth truly competitive pricing. While the situation in Michigan was a ray of hope to educational Mac users, the reality of a $50 entry-level price increase may pretty well answer any questions one might have about Apple's plans for its educational sales.

Hopes were also raised when Steve Jobs recently addressed the Apple Resellers. His colorful comments and emphatic statements concerning the educational channel seemed to signal a recommitment of Apple to the long neglected education market.

Through all of this, please notice that I have not mentioned Apple's new color schemes for the iMac. However, fellow educator Joe Taylor pretty well summed up what a good deal of the Mac educational community must be feeling right now:

 

OK - I try not to always be a pessimist, but Uncle Steve makes it hard sometimes.

$100 more for 1 more FW port, 50 Mhz, & an Airport antenna. Everything else the same. I'm not exactly overwhelmed by the value. I was a little worried beforehand that I had jumped the gun by buying my Sage DV+ when they knocked $200 off. Now, I thank God that I bought when I did. 

I can just hear school administrators all over America. "Well, we had abandoned the Mac for lower cost PC's with more features (you know how burdened we are with all of this extra cash), but now that I've seen Flower Power, I'm convinced. Let's order a dozen!" 

I dread hearing the PC crowd talking about Barbie's new computer. I'll stand there staring at my feet mumbling something about a reality distortion field. I guess Uncle Steve wants to market to a new crowd (i.e. My 3 year old daughter).

 

Photos Courtesy
Apple Computer, Inc.
It's become clear over the last few years that Apple's traditional strength in total cost of operation per unit is no longer a convincing argument to financially strapped school corporations that now look primarily at the sale price per unit. If and when Apple deigns to make such an explanation to educators left out in the cold by the unwarranted $50 price increase, I truly hope they don't try to justify the price increase by the measly 50 MHz speed kick from 350-400 MHz of the "new" iMac. I also hope they don't try to explain away the price increase with the added firewire ports or Airport. It won't wash.

In today's educational sales market, price point is the key issue to be considered. Apple has to know this and has chosen to provide an entry-level model with minor improvements at a substantially higher cost. This is approximately the same machine that was previously not competing all that well with more feature-laden, quicker, cheaper WinTel boxes. It would appear Apple is choosing not to compete in the entry-level educational market.

While the Apple faithful go berserk at such characterizations as the one above, all of their rants, however true, about TCO, how long Macs last, and ease of operation seem to fall upon the deaf ears of those making purchasing decisions for schools. The Apple faithful and Apple Education can continue to plug their ears with their fingers while shouting "Blah, blah, blah," as long as they wish as Apple's educational sales continue to dwindle.

Steve Jobs, Cheryl Vedoe, and the clamoring Apple faithful appear to have totally misread the educational market. Educators really aren't terribly concerned with a mere 50 MHz improvement or the ability to capture and edit videos in a kindergarten through sixth grade elementary classroom. They want to run AppleWorks and many of the great educational applications available on a Mac. Apple's $50 price increase may just make that impossible. If your school system only purchases PC's, it's real tough to run all of those great Mac apps!

I've previously given my recommendations of what Apple and Apple Ed can do to begin recapturing some of the lost educational market. Raising prices certainly wasn't one of my suggestions. It would appear that any number of other folks not living in the reality distortion field may share that view.

While the decision by Mr. Jobs to keynote the National Educational Computing Conference in Chicago is a move in the right direction, June may be too late to announce any new models that will significantly impact 2001-2002 school year sales. Those decisions are often cut and dried before summer vacation begins. Mr. Jobs needed to unleash some irresistible price points on machines for the education market at either of the two recent MacWorlds (San Francisco and Tokyo). Instead, educators have again been left out and can choose to swallow the current $50 price kick, continue waiting for Apple Education to actually make a reasonable set of offerings to them, or move to a platform teeming with folks who are cutting each others' throats to make a sale!

If you don't love the Mac platform, it's not a very tough choice.

Steve Jobs deserves a lot of credit for helping save Apple Computer, Inc., but during his current tenure as CEO, Apple's educational sales and market share have continued to suffer. Students using Macs through their school years are the very best advertising Apple Computer can have. Raising educational prices in a time of tight educational funding and aggressive pricing from competitors sends the wrong message to the educational market. It's another nail in Apple Ed's coffin.

Some sixteen months ago, I published a tremendously unpopular column for Low-End Mac in which I speculated that a conscious decision to no longer seriously compete for the educational market may have made at Apple Computer. Steve Jobs's famous quote while away from Apple about milking the OS for all it's worth, may now also apply to Apple's current treatment of education. Other than the Michigan initiative, Apple's recent behavior certainly does nothing to contradict such a speculation.

Odd thoughts while shaving between paragraphs:

I've been working on a column about shareware authors gone MIA, but this news really can't afford to wait. For some time I've been describing Samuel Davidoff's Math Flash Bash as a virtual freeware (attempts at contact or payment unsuccessful).

All of that changed with a pleasant email exchange with Sam last November in which he asked that I announce that Flash Bash truly is freeware to the Mac community. Sam currently is being held captive by the WinTel world without a Mac to his name and cannot upload a new release of Flash Bash to Info-Mac, etc. from his current box. But be advised that his dandy little math fact drill program is free to use and still works well with many Macs and even on the latest system software (including OS 9.1 and the Classic box of the OS X public beta).

Actually, Sam is a busy, busy law student who took the time to track me down and ask that I let folks know he'd love for them to use his application free of charge. For now, you can download The Math Flash Bash 2.2 (78K) from this site.

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©2001 Steven L. Wood