At first it was just a hint; one divulged a couple of years ago when Apple Watch hit the market. Since then, Watch prices have dropped. We saw it again last year with the highly acclaimed and modestly priced AirPods. Modestly priced? Check the competition. Apple has stepped up its game. Here’s another example.
The $299 iPad Air 3
No. That’s not the newest iPad’s name. It’s just iPad now. And it replaced the very aging iPad Air 2 with a faster CPU in a bit thicker and heavier package (but not that you’d know). $299 is the education market price tag. For you and me and anyone else interested in the mid-range iPad, it’s a mere $329 for the entry level model.
Frankly, the $299 education price for the new iPad might be too little too late to save Apple’s bacon in the education market which seems head over heels in love with Chromebooks these days, but at that price point, at least Apple is in the game. The average Chromebook is priced at $299.
What is Apple doing with all these lower priced products? Isn’t Apple the premium brand? Yes. Apple is the premium brand. But that brand has hit a few speed bumps on the way to making Apple the most valuable company on planet earth, sitting on top of the largest cash pile on planet earth (well, not actually sitting; the money is stored in banks all over the world).
iPhone sales have hit record levels a couple of times in the past year, but just barely record levels; instead it’s looking more like a plateau. The same can be said of the Mac, again at record sales levels, but just barely, and that, too, looks more like a plateau. Apple’s executives are smart enough to recognize the handwriting on the wall, and the company is making adjustments accordingly.
Here’s the problem. Apple is the iPhone company. iPhones are premium products and its safe to say most revenue and profits come from iPhone 7 and 7 Plus, iPhone 6s and 6s Plus, with a smattering from iPhone SE (which, relative to other iPhones, is a bargain). Macs are premium, too, and there’s just no such thing as a cheap Mac. Watch, on the other hand, is competitively priced at the entry-level position. AirPods seem premium but when compared to wireless earbuds elsewhere, are something of a bargain.
And that new iPad? It’s positively cheap, by comparison to the first iPad in 2010, and by comparison to the iPad Pro. While cheap might look good to customers, and might help spur sales the iPad Pro line did not, it also means Apple doesn’t make as much money on the one product line that is going downhill fast. iPads.
So, is this new love affair with lower prices a smart move? Or, is it a move of desperation?
I think the jury is still deliberating. We’ll know for sure whether Apple is taking a different course with pricing as the year progresses. If we see a new line of MacBooks priced under $1,000, and the much anticipated iPhone 8 with OLED display and wireless charging debut at under $1,000, then we might just be looking at a new Apple strategy for the future.
One word of caution, though. Apple has been sitting on a few hundred billion dollars in cash, and gave away another 100-billion in stock buybacks and dividends, and still hasn’t produced anything new since Steve Jobs died in 2011. Watch and AirPods are accessories to iPhone and not true new product lines. Less expensive products might spur sales in an otherwise drab and flat market (and I’m sure competitors don’t want to see Apple get dirty with pricing) but if Apple couldn’t do much with Mac, iPhone, and iPad while it was making money hand over fist, how likely are we to get the next great thing when Apple doesn’t make as much money as it did?