Skewed Decision Making

13 September 2015

This post is not about the protracted existence of 16 GB phones. Myself and others have voiced the problems with this many times. It doesn’t need repeating again. The point of this post is something more general I’ve noticed that potentially affects all of Apple’s products going forward. That being said, let’s start with an anecdote about 16 GB phones.

My mum has finally decided she is due for a new phone. Her current 16 GB iPhone 4s is always full, even with iCloud Photo Library optimising photos, the OS is constantly complaining that its out of space. She wants an iPhone 6s Plus, easy decision. She has the money to buy any of the variants but what does she pick? The base 16 GB model.

She knows her current phone is always out of space, she has the money to buy a higher end model, but she doesn’t. I ask her why: ’64 GB is way more than I need’. The product SKUs are forcing her to make bad decisions. It isn’t just about the base model. If Apple offered more choice, for instance a midway 32 GB model between 16 and 64, she would buy that and be happier.

In the iPhone case, it’s a problem of granularity. Another example is the new iPad Pro. If you want cellular, you have to get the 128 GB model. You have to pay for storage you don’t need just to get the feature that you do want, mobile data. With an example budget of $900, I believe prospective customers wanting a new cellular iPad now face an unwinnable compromise: take a cellular 9.7 inch iPad or take a 32 GB WiFi iPad Pro. Both cases the customer loses. They either get a desirable iPad (forgoing cellular) or resort to buying an iPad model they don’t really want but are essentially forced into picking because Apple doesn’t offer uniform SKUs of the different features.

In the lineup of the Retina MacBook Pro, there are several SKUs with varying hardware specs but only one configuration, the most expensive with the highest margins no doubt, includes a dedicated GPU. A build-to-order option for that GPU is ‘conveniently’ not available.

There are logistics problems obviously by adding more SKUs, like in the iPhone example. A better solution for that case is probably to just remove 16 GB model entirely. What really triggered this post was the newly announced iPad Pro offerings.

Every previous iPad has offered cellular at every size. The lack of cellular on the 32 GB was immediately conspicuous. It just seems like Apple is trying to artificially inflate (upsell) the average selling price of the product by requiring people to pay a lot more for cellular service. The iPad Pro also lacks a 64 GB SKU, a natural fit between the $799 and $949. It’s hard for me to not see this as a quick trick to bump the ASP higher than if they sold a 64 GB model for $899.

Perhaps there are ulterior reasons for this that I simply can’t see. I guess what I’m getting at is I don’t want Apple to purposefully exclude combinations of product features for profit maximisation. It feels icky and exclusionary. In raw shot term profits, this kind of strategic pricing will improve the bottom line but it has to be detrimental to buyer happiness (customer satisfaction).

There are obviously limits to what Apple can and should offer as customisation. I’m not asking for anything crazy — just the normal expected set of options. Crucially, I don’t want product SKUs that should be available not be because of business objectives. Make the products, then price accordingly. Even if you can discount my other examples, the newly announced iPad Pro lineup clearly signifies a decision dominated by business motives. Personally, I don’t want to see this become a trend.