Why did Apple wait a year before upgrading the iPad line? For a company that prides itself on machine-like precision, this seems like a massive gaffe, no?
No. Apple is disciplined. The leap from the original non-Retina iPad mini to the new iPad mini is substantial. Ditto for the new iPad Air, which is smaller, lighter, faster than the previous model. Will Apple make enough money on the new iPads to overcome lost revenue and profits from the delay?
Money Left On The Table
It’s easy to look at Apple’s iPad sales performance over the past year and think that the company left plenty of money on the table by not upgrading the iPad line sooner.
As it is, the new iPad Air will catch most of the important holiday shopping season, while the iPad mini with Retina display will probably be very short supply until 2014 and that will impact quarterly sales and earnings.
So what? It’s obvious Apple doesn’t care much about such timing. What’s more important is getting the product right and expanding the distribution lines.
Both are even more important than product pricing. Apple is conceding the low end tablet market to any and all comers, effectively saying to competitors, ‘Lose money if you want to, we don’t care because the iPad line and ecosystem is better than your plastic junk.’
Therein lies Apple’s iPad secret. Both iPad Air and iPad mini are the products that discerning buyers want, and are willing to pay more than plastic knockoffs from China, or the limited models from Google, Samsung, and Amazon.
A New Way To Sell
Here’s a way I see Apple selling tens of millions more iPads, both Air and mini, in 2014. One word: Financing. T-Mobile, the U.S.’s fourth string cellular network, plans to give away data to iPad Air and iPad mini customers with models that work on T-Mobile’s data network.
As if free isn’t good enough (and T-Mobile’s paltry 200MB per month definitely is not good enough), T-Mobile will let you buy and use a new iPad Air for $26.25 over 24 months with zero money down (the iPad mini with Retina display, when available, will be $22.08 per month). Cellphone carriers in the U.S. are like lemmings; when one does something new, the others will follow.
The key to success is entry-level pricing, a financing gimmick to get you hooked on usage. An iPad Air with cellular capability is priced at $629 from Apple, so the monthly rate from T-Mobile at $26.25 is essentially cost. Models with more storage will have an up front price. T-Mobile hopes to make profits from data and bandwidth usage.
Even better, T-Mobile’s plan allows for iPad Air and mini users unlimited data worldwide (wherever T-Mobile roams, of course, and within your monthly plan limits).
What separates Apple’s iPad line– both Air and mini– from the market leading tablets with Android OS? Price is one, of course. The iPads, in nearly every case, are more expensive than comparable Android-based models. The second is usability.
The largest group of iPad competitors is defined as Other by market researchers. Those are the cheaper plastic knockoffs which are little more than a media player with a big screen. It’s obvious that Apple doesn’t want to enter that market, content with plenty of profits by dominating the high end of the tablet industry.
What surprises me about Apple’s business tactics is that the company has not used the $150-billion war chest to help fund purchases of Macs, iPhones, and iPads by lowering the entry costs users typically pay. T-Mobile’s plan is a step in the right direction, but Apple could easily sell millions more products by offering affordable financing.
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