What if Apple Continues iPad 1 Sales After April?

| Editorial

One might assume that when the iPad 2 ships in, perhaps, early April, the original iPad 1 would be discontinued. One might be wrong.

Apple has a goal of making life difficult for the competition by geting ahead of the game in innovation, selling millions of products before they even wake up, driving costs down, then coming out with a next generation version that leaves the competition’s first efforts looking expensive and outdated.

That’s exactly what’s happening with the iPad. The tablet competitors that are any good are still not shipping in quantity and and Apple is on the eve of introducing its second generation iPad. Given that Apple shipped over 14 million iPads in 2010, it’s very likely that the cost of parts is now down considerably from the US$259.60 estimated in April of 2010. Let’s say for the sake of argument that the current cost to build a 16 GB model is $220.

iPad

It would be very smart of Apple to continue the original base model iPad and sell it for, say, $379. Here’s why.

Competitive Lag

As Steve Jobs said during the Q4 Earnings Report last year, tablet competitors will be hard pressed to produce a product with the iPad’s large screen, A4 performance, and price. They’ll have to settle for 7 inch screens — which is what many are, in fact, doing.

Just as the competition starts to sell imitation iPads, with immature app stores, and struggles to meet the iPad’s specs and price point, Apple could lower the entry model iPad’s price considerably, making the purchase decision for an iPad a no-brainer. The competition would be throwing chairs when they see their own sales numbers.

No Cannibalization

Wouldn’t that cannibalize sales from the iPad 2? I don’t think so, assuming the technical specs of the iPad 2 are desirable: 2048 x 1536 resolution, multiple cameras, and so on. Also, the effect on Gross Margins would be short term and small, weighted against all Apple’s other products.

Apple has never been afraid of cannibalization. They know that their customers are tech savvy enough to pick the right product and the right price for their needs. Some will buy an iPad 1 at an attractive low price for themselves or a son, daughter, spouse or parent. Meanwhile, others will want the latest and greatest at the original base model price of US$499. Lesser companies would cancel the iPad 1 for fear that sales of the second generation iPad would suffer. Apple need have no such fears.

Precedent

There is precedent for this. You can still buy the iPhone 3GS at a subsidized price of just US$49. That gives retailers a low price leader, but it hasn’t hurt iPhone 4 sales.

Customer Peer Pressure

Another factor that comes into play is buyer attitude thanks to Apple marketing that generates a certain kind of peer pressure. It goes like this: If you buy, just for example, a Samsung Galaxy Tab, you may lack the technical judgment required of modern customers. You look like the kind of person who backs himself into technical back alleys and dead ends. As Bill Thompson in the UK says, customers these days, want to show that they’re tech savvy and can make good purchase decisions for the long term. The Apple tablet ecosphere is a good place to be.

Summary

All in all, I think Apple would do well to continue a discounted iPad 1 well into 2011. It would give the company a way to completely deplete its inventory, cause competitive products to be stillborn, and maintain market share. If the iPad 1 popularity remains great enough, Apple might even have to enter new production orders.

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Comments

DocRoss

All in all, I think Apple would do well to continue a discounted iPad 1 well into 2010.

Or even 2011.

solarsculptor

Apple should sell the Ipad ver1 forever. Businesses are adopting it, using it as a cash register, front control panel on CNC machines, medical devices, and lot’s of things consumers don’t even understand. It’s a vast invisible market that suddenly Apple has tapped into. It’s a market that also wants stability, it wants to know that a device that it has incorporated into it’s product will be available for many years.
It’s not fashion driven (some CNC controls still run DOS!) but based on long investment and compatibility.
Camera’s are unwanted, although a display can never be too good. The key is durability(which IPAD has) dependability, and future availability. So I hope that they make a “plain” version available for years. Apple will always be able to sell it, and many of these new customers will not feel burned by Apple.

brett_x

The competition would be throwing chairs when they see their own sales numbers

Nice one, John.

But what will the others do? Demote a CEO upward?

David

I would like to see them drop the iPad 1 so I can get top dollar for mine, making it easier to upgrade.

Fast, Expandable, Affordable: pick any two, Apple

trrll

Another advantage is that people sometimes have a number in mind for how much they are willing to spend. So a low price for iPad 1 will get people into the Apple Store, where they will inevitably see the features of the new model. Psychologically, it’s easier to decide to pay just a little bit more for an improved version of something that you’ve already decided to buy than it is to swallow a high price all at once.

Ion_Quest

iPad 1 $500
iPad 2 $600 ?

chicochaz

Another advantage is that people sometimes have a number in mind for how much they are willing to spend. So a low price for iPad 1 will get people into the Apple Store, where they will inevitably see the features of the new model. Psychologically, it?s easier to decide to pay just a little bit more for an improved version of something that you?ve already decided to buy than it is to swallow a high price all at once.

This relates to the old retail ploy of “loss leaders,” products at a great price that get you in the store. I think the iPad I and iPad II would work very well in this manner. The iPad I for $100 or more less than the new version at $499 would be a powerful “loss leader!”

iisystems

If they follow what they did for the 3GS, they will be selling an “iPad I” with only 8GB memory for $399.

wab95

Brilliant assessment. A forked attack. Love it.

aneexiaoa@gmail.com

tgdfsgsdg

Ipadenclosures.com

The iPad 1 is great for business as a kiosk and can only get better as a kiosk with camera.  At http://www.ipadenclosures.com you can make an iPad work as a kiosk by securing it.  With a camera on iPad 2 you will be able to have a secure kiosk that can read QR codes and such,

Apple should sell the Ipad ver1 forever. Businesses are adopting it, using it as a cash register, front control panel on CNC machines, medical devices, and lot?s of things consumers don?t even understand. It?s a vast invisible market that suddenly Apple has tapped into. It?s a market that also wants stability, it wants to know that a device that it has incorporated into it?s product will be available for many years.

Ross Edwards

It?s a vast invisible market that suddenly Apple has tapped into.

This is not always good, of course.  Usually these markets respond to liquidation-level hardware because it can be retrofitted to extreme specialization and cost nearly nothing.  Two examples that come to mind are the Vectrex consoles being retasked as medical scanners and the Atari Jaguar console being retasked as a dental instrument controller.  If the iPad were maximally attractive to these markets, that would suggest that the iPad was worth little or nothing on the standard consumer market, and that’s a message Apple will not want to send.

Not that I think Apple should leave money on the table or anything, just… well, few companies set a goal to be the top-selling product at the 99-cent store.  Apple’s brand depends on staying well clear of that market mindspace.  How’s that?

rlo

The iPad has definitely made a strong presence in the marketplace and now the business environment which Apple will enjoy for years to come if they continue to fight for their position. Apple has to continue to innovate and fight for that number 1 spot because competitors, although few, have a chance to topple Apple as the market is still new for this product.
One misstep that comes to mind is the iPhone, it made a huge splash and continues to do well but lets not forget Android. Everyone dismissed it at first but now it is showing that consumers were willing to try it as it as alternative as it plugged up some of the shortcomings of the 3GS. The antennae issue on the iphone4 didnt help either. I think Apple will stay strong if it doesnt ignore upcoming competing tablets.

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