Monday, 15 October 2012

Does Price Matter?

Rumours have it that Apple is about to ship their latest tablet offering... The iPad mini. Even though previously Steve Jobs apparently hated the idea, Apple has seen a bulk of the market going to cheaper and smaller tablet offerings in the 7" space like the Nexus 7, Kindle Fire, Blackberry Playbook and many other $200-range affordable tablets.

For people who are loyally married to the iOS Apple ecosystem, they have had only 2 choices as far as screen size goes... iPhone/iPod touich 4" size and the iPad 10" size. So a 7" iPad is precisely in the middle of the devices. The question remains... will Apple sell millions of these things and why would people buy it?

Price leaks have already occured and it looks like the iPad mini will have to fall somewhere between the $299 iPod touch and $499 iPad. That means $399. But will this device pack in the same retina display, camera resolution and starting base memory size as the other devices? The other tablets in this size are all in the $200 range, about half the cost! If true, then Apple will make a profit and people may still buy the 7" tablet to save a few bucks yet still pay a hefty premium to secure their place in Apple's walled-garden ecosystem.

There is also speculation that the iPad mini may be made cheaper, at the expense of specs like memory and camera resolution. However, it is unlikely to be priced below $300, lest Apple start taking hits to its profit margins. Remember Google and Amazon have stated that they have been selling their tablets at cost because they plan on recouping money later on in-tablet purchases from their respective app and content stores.

And so here lies the big question. Will Apple switch around from their previous premium pricing history which made them huge profits, or will they sell the iPad mini at cost to bring more people into it's ecosystem and make money from the increase in iTunes purchases?

I see no reason why Apple would lower the price. They are dominating and will still sell millions of iPad minis despite their higher cost. However, millions of people are willing to pay a premium to be in Apple's ecosystem.

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