I PAD-It’s the price, stupid

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    Posted: 21 April 2010 06:00 PM

    What’s revolutionary about the I Pad. Is it just a big I touch. I believe what the greatest significance of the I Pad is its price. It represents a change in business strategy worthy of Sun Tzu (the Art of War).

    The I Phone represents the greatest marketing story in the history of cell phones. It was based on a strategy of build the best product and charge a premium for it. It is by far the most expensive cell phone made. Exclusive carrier agreements were created to charge a premium not only for the phone, but to make profits on the data charges.

    Apple is known as a company that charges a premium for the best products. It has a preponderant share of the high price computer market. They made the best product and maintained high margins. They let the other companies fight for the mass market. There have been few challengers to the I-phone. The only company that has come close -Google and Android- wasn’t even in the game when I phone was introduced.

    So no one’s gonna be caught flat-footed next time- right? Everyone knew an apple tablet was in the works. The ramp up time isn’t going to be 3 years this time. And when Jobs introduced the I-Pad there really was no great surprise. Sure an I pad has 8 times the real estate for your fingers to do multi-touch but there was no great new technology.  there’s more you can do with it than with an I phone but what’s the big deal?

    The big deal is the price. At $500 Apple is not trying to take the cream on the high margin luxury buyers. They are saying- look at all the computer you can get for $500. Why would you go anywhere else? At the latest CC they made it clear that they are taking advantage of their first mover status to capture market share. With $40 billion in the bank they can afford to sacrifice their margins way down to 36% (I know, it won’t really go that low) to get dominant market share.

    They have 3 advantages
    1. Reputation as the highest quality mobile devices with I-pod, I touch and I phone.
    2. Financial power of the Apple stores, cash and as a buyer to be the least cost producer.
    3. Dominant platform with the most application and users and an operating system that was built for multi-touch and for efficient battery usage

    So all the companies that are fighting the last war trying to create a tablet to compete in quality at a reasonable price suddenly find that Apple is now fighting them not just on quality but on price, and Apple is shooting not just for the premium market but the whole enchilada.

    Think of what a challenge of execution this is. First they introduce the I phone, their first cell phone as the best in class in a mature cell phone market. Then they introduce a the I Pad, a new product in a new market, and seek to have the preponderant share of the market. Two audacious goals that require very different skill sets.

    And leave the competition blind sided, confused and defeated.

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    Posted: 21 April 2010 06:34 PM #1

    I am an electrical engineer so I think the ipad is revolutionary.  The revolution is real world performance per watt.  We now have a personal computer in the wild which weighs in at 1.5 lbs and last most of one day and will allow you to accomplish 90% of what you need to do with a computer and it is relatively inexpensive.  It is a near perfect device and will only get better with moore’s law.

         
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    Posted: 21 April 2010 06:39 PM #2

    I PAD-It?s the price, stupid

    I resemble that remark.  grin

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  • Posted: 21 April 2010 07:48 PM #3

    The name of the products are iPad and iPhone