Apple has 91% of market for $1,000+ PCs, says NPD

Move over Microsoft. Apple can claim big, big market share numbers, too. According to NPD, in June, nine out of 10 dollars spent on computers costing $1,000 or more went to Apple. Mac revenue market share in the "premium" price segment was 91 percent, up from 88 percent in May.

By the way, Apple's command of the premium market is way up from first quarter 2008, when, according to NPD, Mac revenue share was 66 percent. Gee, and it seemed so high when I broke that story.

Microsoft executives had better study Apple's success -- and well -- as they prepare to bring Windows 7 to market. The new operating system released to manufacturing today and launches on Oct. 22. But some people will get Windows 7 sooner. Microsoft might want to reconsider its marketing, too. Apple's premium sales success means that from one perspective, Microsoft's "Laptop Hunters" commercials are a failure.

Market Share 101

Microsoft and OEMs measure success in unit market share, which for combined Windows PC shipments is over 90 percent, according to Gartner and IDC. In the United States, Mac market share was a paltry 8.7 percent in second quarter, according to Gartner. The bulk of PCs sell for less than $1,000.

According to NPD, in June, average selling prices for all PCs sold at US retail was $701, or $690 for desktops and $703 for notebooks. But the ASPs get more interesting when comparing Macs to Windows PCs. For all Windows PCs, ASP was $515 in June. For Macs: $1,400. Desktop Windows PC ASP: $489. Mac desktops: $1,398. Windows notebook ASP was $520, or $569 when removing all those nasty, margin-sucking netbooks. Mac laptops: $1,400.

Mac ASPs have been higher for a long time, because Apple chooses not to compete at lower prices. The real entry price for Apple computers is $999 for the white MacBook and $1,199 for either the low-end iMac or MacBook Pro. By comparison, Windows netbooks sell for as little as $199, unsubsidized, and even some fuller-sized laptops don't cost much more. For example, HP laptops start at $349.99 after rebate.

Apple's starting prices put nearly all Macs in the premium category -- but A (higher pricing) doesn't necessarily lead to B (greater sales). All major Windows OEMs sell PCs in the premium category, too. Apple's charging more isn't necessarily recipe for people paying more for Macs, or their capturing big revenue share.

Among the things working for Apple:

  • Mac OS X, iLife and hardware design differentiate Macs from PCs
  • Most households have Windows PCs -- so a Mac is something fresh, new
  • Most Windows PCs come with Vista, which has gotten lots of bad press
  • Apple retail stores offer a singular purchasing experience
  • Apple excels at lifestyle marketing; there is a Mac lifestyle
  • Sales halo effect from satisfied iPod and iPhone customers help Mac sales
  • Design priority: Apple emphasizes different features, such as super long battery life for MacBook Pro, than most Windows OEMs

Despite these advantages, US Mac retail sales slowed for about six months.

The Macolypse Hits Apple

From about November 2008 to April 2009, Mac year-over-year US retail sales declined, even as Windows PCs dramatically gained. There was kind of a numbers reversal, following the late-September stock market crash. For example, in October 2008, following release of new aluminum, unibody laptops, US retail Mac revenue grew 25.5 percent, while Windows PC sales fell 4.2 percent, according to NPD. By January 2009, Mac retail revenue was down 10.4 percent from a year earlier and Windows PC revenue was flat.

The unit changes were dramatic, too: in January, Windows PCs were up 16.7 percent, and Macs were down by 5.4 percent. In February: Windows PC units sales rose 22 percent year over year and Macs fell 16.7 percent.

Several factors accounted for this dramatic turnabout:

  • The post-September economic collapse chilled consumer spending -- higher-priced PCs among the harder-hit categories.
  • In September, Microsoft started its "I'm a PC" marketing campaign, which, according to the company and analysts, boosted Windows perceptions and PC sales over several months.
  • Apple took a four month break from airing "Get a Mac" commercials.

By April, Mac sales started to turn around, as the economy improved and new "Get a Mac" ads started airing.

Laptop Hunters Miss the Game

In March, Microsoft's ad campaign entered another phase, with "Laptop Hunters" commercials, which sought to demonstrate the value of Windows portables compared to Macs. Many Apple and Microsoft pundits or analysts have said the Laptop Hunters commercials are about price -- meaning PCs costing less than Macs. That's simply not true. The commercials are about value, and at premium prices.

Six Laptop Hunters commercials have aired in the United States. For four of the commercials, the shoppers had budgets between $1,500 and $2,000. Budgets for the other two: $750 and $1,000. If the commercials were about contrasting Windows laptop lower pricing to costlier Macs, Microsoft wouldn't feature shoppers with so much money to spend. Consider that at retail, where all the people in the commercials shopped, Windows laptop ASP was $703 in June, according to NPD.

Microsoft marketers sought to compare and contrast Windows laptops in the same premium price ranges as Mac portables. That's the market segment where Microsoft and its OEM partners need to gain share against Apple and where PC hardware margins are richer. The commercials were supposed to show Windows' laptops greater value against Macs in similar price range.

By that measure, the Laptop Hunters campaign is a failure. Clearly, more US retail buyers see more value in Macs in the premium price range, which is evidenced by Apple's ridiculously high revenue share and gains reaching it. I'm a fan of Laptop Hunters and consider it be one of Microsoft's very best advertising campaigns. Laptop Hunters campaign has boosted Microsoft's brand and, by analysts numbers, helped boost Windows sales in a soft market. But the campaign apparently didn't boost Windows laptop value perceptions against Macs.

Apple Calms the Stormy Economic Seas

Apple must be doing something right to go from, in the US retail premium PC market, 66 percent revenue share in first quarter 2008 to 91 percent at the end of second quarter 2009. The company has masterfully navigated the stormy economic waters that battered so many other companies. While competitors slashed prices to protect market share and to pull sales, Apple sought to preserve the perceived value of the Mac brand.

Rather than lower entry-level pricing and move big time into the sub-$1,000 PC market, as some analysts recommended, Apple chose to do something else, in early June:

  • Lower 15-inch and 17-inch MacBook Pros by $300
  • Replace 13-inch MacBooks with Pro models for $100 less
  • Effectively lower the Pro entry price to $1,199 from $1,999

Based on data from NPD and other analysts, including Piper Jaffray's Gene Munster, Apple's price cuts at the high end significantly boosted Mac sales, which at US retail were up 16 percent year over year in June. Rather than aim low, Apple chose to make the high lower, in a segment where Macs already commanded overwhelming market share.

Yesterday, the company revealed that it had shipped 2.6 million Macs during second calendar quarter, beating analysts estimates.

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