Microsoft is no longer shy about openly attacking Apple: it says PCs are cheaper and has the stats to prove it.
Over the last 18 to 24 months, Microsoft has suffered on the advertising battlefield at the hands of Apple, which has run a highly successful marketing campaign, which mercilessly portrayed PCs (and by association, PC users) as uncool and behind the times.
Meanwhile, Apple Australia has been progressively raising the prices of Macs in Australia.
Microsoft has been strongly criticised for appearing to lie back and take the body blows without complaining, but now the software giant has taken the gloves off.
For a long time Microsoft has been seemingly shy about openly attacking the competition. The tragically unsuccessful Bill Gates/Jerry Seinfeld ads and the far more successful “I’m a PC” campaign were designed to boost the brand but stopped short of naming who they were trying to promote themselves against.
This is definitely not the case with Microsoft’s latest and strongest counterattack. In a series of global campaigns, Microsoft has gone on the offensive against Apple, painting it as the over-priced, under-value alternative to the vast range of affordable and powerful Windows-based products.
The timing of the campaign is no coincidence, of course. It is propelled by the inevitable reduction in consumer spending brought on by the global financial crisis and supported by the widespread popular interest and acclaim for Windows 7 and the boom in low-cost netbooks, Microsoft has put itself in a strong position to claw back ground lost to Apple, and is already seeing results.
We talked to Tony Wilkinson, Business Operations Director Consumer and Online for Microsoft Australia, who explained why Microsoft feels it is on a winning strategy in highlighting the cost difference between Macs and PCs.
APC: What have you found out about the Australian computer buying patterns?
TW: [Microsoft's research showed] in the Australian market, the most important features for consumers when purchasing a new computer, was pricing as the third most important factor.
The most important was processing speed and the second-most was storage. Approximately two-thirds of people surveyed said that price was very important, and overall 97% said that it was either important or very important.
When we looked at what people were prepared to spend, we saw that on average they were budgeting around $1350 and actually ended up spending a little bit less than that.
People who had not purchased a new computer for some years were coming back into the market assuming they would have to spend about $2000 for a new laptop, then discovering that it would actually be quite a bit less than that and so the budgets dropped accordingly.
We also found that at the entry-level price point, there’s quite a premium for a Mac versus a PC. The cheapest Mac is a bit over $1600 whereas it’s quite possible to get a comparable PC for around $1000, and that 60% markup means that the entry-level Mac costs more than the average consumer budget.
People are always going to weigh the various factors surrounding a computer purchase differently, and with the wide range of PCs available on the market, there’s something to suit every personality type and personal preference.
Over the last few years Apple has tried to define and box the persona of the PC as a dowdy-looking guy lacking in all coolness, but market reality doesn’t match what they’ve been trying to portray. Not only do consumers have a much wider choice with PC, but then can do it at a better price – typically a Windows-based PC in any performance category will be available at an equivalent or better price than a Mac.
The price differential is the most marked at the entry-level price point and reduces as you move into more powerful performance categories, but at each level there are cheaper PCs offering better storage and better features, but more significant is that the price differential in many cases is enough to cover the cost of a netbook. If I’m a parent looking at buying a laptop for my kids, I could buy a high-end laptop AND a netbook for the price of an equivalent Mac, which is a strong value proposition.
Our research is showing that in the Australian market for new computer purchases, 19 out of 20 people are choosing a Windows-based PC rather than a Mac. Whether the important factor for each consumer is look and feel, performance or price, the vast majority of people are realising that they’re better off with a PC.
APC: When you purchase a Mac, you’re buying a hardware and software bundle supplied by the same vendor. This stands out as a constrast to the alternative – Microsoft makes Windows but doesn’t make notebooks. What is it about the Windows pricing model that allows PCs to be cheaper than Apples?
TW: There’s a big marketplace and a big ecosystem of partners, which results in aggressive competition which in turn results in better prices for consumers. It also creates innovation, with so many different people coming to the market with different approaches, you see new capabilities and features implemented in PCs very quickly.
APC: Given that there’s a rapidly growing market in netbooks and a large market in desktops, why the particular focus on notebooks?
TW: Retail statistics show that the trend towards laptops is very strong and continually expanding – desktops are really minor players these days in terms of new computer purchases. We could have included netbooks in these comparisons, but we thought it might not be fair in terms of performance comparison. Having said that, netbooks are definitely an alternative and these days people are able to buy a Windows-based machine for just over $500.
When you look at what we’re doing with Windows 7, Microsoft is embracing netbooks as a just another form factor rather than a separate branch of the market with special needs. A full install of Windows 7 will run on a netbook with no problem. It’s another example of where Windows-based machines are particularly strong compared to Apple.
APC: A position put forward by a certain section of the consumer market – advanced users, enthusiasts and hobbyists – is that you can buy a PC, save money by not purchasing an OEM license of Windows and install Linux instead.
TW: That’s certainly an option and it does represent a monetary saving, but research indicates that people are not choosing to go down that path. Windows is delivering a good value proposition which is considered to be worth the investment. The most relevant example is what has happened in the netbook market – when they first came out the vast majority of machines were running Linux. The OEMs thought that would be the best choice as it’s such a price-sensitive market, but they found that customers weren’t enjoying the experience and the return rates were very high. Now the situation is reversed and the vast majority of netbooks are running Windows. Yes, there is a premium to running Windows but we’re seeing that most people are seeing the value.
APC: Given that this marketing campaign is an explicit counterattack to Apple’s marketing, what has consumer feedback been like?
TW: We’ve been running our ad campaigns for a while now, particularly in the US, and there has definitely been a positive reaction in favour of the Windows platform. We’ve also seen improvements in our market share position in the US. We’re certainly seeing that the persona which Apple has put forward for the PC is not representative of the 19 out of 20 consumers who are choosing the buy a PC.
APC: Wilkinson also provided the following slides detailing Microsoft's research into consumer spending patterns in Australia.