The iPad is still $499 and dominates the tablet market in revenue and unit market share. The winds of change are upon us, though, and tablets from Amazon and Google have staked out the low end, while Microsoft’s new Surface takes the high end.
How will Apple price the iPad mini?
$199? $299? $349? $399?
Let me examine the iPad’s competition from the low end to the high end. Amazon and Google have tablets that start at $199.
The Kindle Fire HD starts at $199 for a 16GB model, while a 32GB version is $249.
Nexus 7 starts at $199 for an 8GB model, while the 16GB version is $249. Both Amazon and Google say that their tablet devices are sold at cost.
At the other end of the scale is Microsoft and the Surface tablet. A 32GB Surface is $499 (compared to iPad 3 at 16GB for $499).
Speculation swirls around Apple’s pricing strategy. CEO Tim Cook is on record that Apple will not permit a pricing umbrella to develop, but will keep Apple’s products competitive.
What does that mean? Lower prices? Maybe not. After all, Apple’s Mac, iPod, and iPhone have plenty of competitive products priced much lower.
How about if Apple disrupts the entire tablet marketplace with a $199 iPad mini? That won’t happen. First, there’s no profit at $199, and Apple is fond of profits. Second, Apple does not have a history of selling quality, feature laden products to compete with lower priced competitive products with fewer features.
That means an iPad mini will be priced somewhere between $499 and $249 (the higher of Amazon and Google tablet range).
With the 10-inch iPad 2 already priced at $399, a $349 price tag for a 16GB, 7-inch iPad mini makes more sense. It’s an aggressive price when considering Apple’s built-in value proposition– an ecosystem of apps, accessories, and quality not rivaled by Amazon, Google, or Microsoft.
Historically, Apple adds value to new products rather than drop the price. We have to expect the iPad mini to be competitive in the tablet market, but not the low price leader. Instead, Apple may launch the iPad mini with a host of expected features, and perhaps one more thing.
These include dual cameras, high quality display (but not Retina display), long battery life, Lightning connector, Siri (and microphone), and Wi-Fi. Apple could easily disrupt the tablet market by including 4G LTE in the iPad mini, perhaps at $399 (and include an option for an exclusive data plan).
Who would not like to see a 7-inch iPad priced at $199? Google, Amazon, and Microsoft. At $199, Apple would not be able to keep up with demand and instead cannibalize the 10-inch iPad line.
At $349 for the entry-level iPad mini, Apple maintains profitability, expands the product line, puts pressure on the low end devices, and disrupts the tablet market enough to maintain the dominant position.
The iPad mini’s price tag is critical. If it’s too low, Apple doesn’t make money. If it’s too high, Microsoft, Google, and Amazon may continue to take market share. Priced just right, with more features than the competition, and Apple continues to own the tablet industry.