Tech Report: Apple follows a tried and trusted path
Lost in all the hype – or perhaps the lack of hype – surrounding yesterday’s press conference to introduce the latest additions to the iPhone stable was the tacit admission that Apple – along with all the other smartphone manufacturers – is now struggling with a rapidly-maturing U.S. smartphone market.
As pointed out in an earlier post, a Pew Research Center study recently reported that 56 percent of all U.S. adults now own a smartphone. In some demographics with more disposable income, that ownership mark is at 90 percent, suggesting a level of saturation that is unprecedented in the field of non-essential consumer electronics. Meanwhile, more manufacturers are releasing more models on a variety of different platforms, so that even the once untouchable Apple is starting to feel squeezed in terms of growth and market share.
So what to do? Well, you only have to look at Apple’s strategy in regards to its other core products to find a solution. When Apple first introduced the iPod back in October 2001, the 5GB wheel model was priced at $399. Very soon it added a 10GB model and then a 20GB model and eventually a 60GB model and the prices remained consistently high – between $299 and $499 through the end of 2004.
By the time we got to 2005, Apple figured that everyone who wanted – and could afford – a classic iPod had already bought one, so it was time to chase a different kind of customer. In 2005, Apple introduced the iPod Nano for $199 and then the iPod Shuffle for just $99, scoring an instant hit with all the teens and tweens who had to rely on mom and dad (or Santa Claus) for their first taste of what was still the coolest gadget on the planet.
Fast forward to 2012 and Apple was already experiencing a slowdown in sales of yet another flagship product: the iPad. Part of the problem was cheaper competitors but a bigger issue was slower overall tablet adoption rates. Again, anyone that was sold on the need for a tablet – specifically an iPad – already had one. So, along with introducing regular updates of the original iPad, Apple also released the more affordable Mini.
Running with high-cost., high-margin originals for as long as possible and then introducing cheaper, slightly stripped-down follow-up versions makes perfect sense. The market for the cheaper models is either going to be budget-conscious adults, who are already looking at competitive products, or kids.
It’s no coincidence that Apple’s new iPhone 5C comes in five different candy colored flavors and incorporates a more child-proof plastic finish. The 5C is the Nano of the smartphone world – a fully-fledged copy of the real thing that will get kids into the Apple pipeline and hopefully keep them there for the rest of their lives.
One could argue that Apple was late to the party with the iPad Mini, allowing more affordable kid-friendly tablets like the Kindle Fire to get too big a foothold in a rapidly peaking tablet market. However, the timing of the iPhone 5C looks just right. Despite the best efforts of Samsung, Nokia and others, the iPhone is still the cool phone to have among teens and even younger kids. Making it more affordable without dumbing it down to something else is an option that other smartphone manufacturers can only dream about.
So don’t be fooled when commentators say that Apple is sacrificing quality for the low end of the market, or missing out on an opportunity to go for a bigger screen. Apple is doing what it’s always done – establishing a superior product for the adults and then finding a way for the kids to jump on board.
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