JustifiedPosted: August 23, 2013
Back when the iPad mini debuted, many people criticized the device’s $329 price tag (for the base model), saying that it was too expensive compared to other tablets of similar size that were on the market. I thought the same thing, until I pulled back a bit and looked at the mini from a longer-term perspective.
See, for most companies, they can get along fairly decently creating products for the right now, adjusting their products, pricing, and features according to market whims. It’s a way of interfacing with the market that has always seemed reactionary to me. Look at what the public is slathering over and give it to them, riding the wave until the notoriously fickle populous decides they want something else. Alternatively, you can just create a smattering of different products with arbitrary and marginal variations, designed to cater to fractionally different subsets of popular culture, and hope that people gravitate towards one product or another, or perhaps just make them enough money to offset the cost of developing, manufacturing, and marketing who knows how many different iterations of a given product.
For Apple, however, the view is longer. The timeline extends 5–10 years out, and is driven internally by the desire to deliver really incredible products into peoples’ hands. That places the locus of control squarely inside the company, instead of vesting that power in the whims of a population that worships reality TV and Hollywood drama. As such, Apple looks at supply chains and forecasts their production costs far further ahead than most companies do, and is thus able to deliver better products over time than their competitors because they’ve had the wherewithal to cultivate and maintain a stable, consistent base (referring simultaneously to supply, production, and consumption). Thus, while the $329 price point may not have made sense for the iPad mini given the original permutation of components, an iPad mini with a Retina screen, which will undoubtedly cost more to manufacture, can still provide Apple with healthy margins since Apple has already been able to account for the decrease in price of Retina displays over time and has been able to invest in battery research to drive the new displays. That, in concert with the other inevitable improvements that Apple has made to the hardware and software of its new iOS devices, will allow Apple to manufacture a better product while still maintaining margins and trying to keep investors happy (a notoriously difficult thing to do). From one angle, it’s very difficult to see the justification for that price point. But, given time, it becomes clear that Apple never priced the iPad mini for the market when it was introduced, it was looking many years down the line.
If that’s what they can do for pricing when looking forward, imagine what they’ll be doing for products.