MARKETING ACTUARY: THREE MARKETING LESSONS FROM THE iPAD

October 12, 2010

THREE MARKETING LESSONS FROM THE iPAD

On Sunday, I went out of my way to visit an Apple store for the first time. The place was buzzing with activity and energy. I've never bought an Apple product but wanted to see an iPad for myself. That's the power of marketing — attracting a disinterested client.

The iPad teaches three valuable marketing lessons

Show, don't tell
Lock the price
Sell the old model

Show, Don't Tell

People can't easily tell what they want before they see it. Can you? That's why focus groups and market research have limited value for new inventions like overnight delivery, bank machines and smartphones. Watching is a much better measure of intent than listening.

The Original Tablet

Tablet computers have been around since 1992 when IBM launched the ThinkPad 700T. There have been many models from various companies ever since. Microsoft Windows has supported tablet PCs since 2002. Yet sales were limited.

Enter Apple

Within 80 days, Apple sold three million tablets — more than all models from all other companies combined. There was a market after all.

What happened? Apple showed people what the iPad can do. Through their stores, their own experts answer questions and let visitors try for themselves.

Within a few minutes, an Apple rep showed me the capabilities and had me sold. The only question was which model. And you thought actuaries couldn't be impulsive. My family was with me and discouraged the purchase. So I walked out empty-handed.

What do you show and let potential clients touch? This is tougher if you sell a service, which means that what clients touch has even greater impact.

Lock The Price

Prior to launch, there were questions whether Apple would manage to get the price of the iPad below $1,000 US. They managed to charge $499 for the base model with prices ranging to $829.

Model	16 GB	32 GB	64 GB
WiFi	$499	$599	$699
WiFi + 3G	$629	$729	$829

With that much choice, price isn't much of an issue. Also, prices seem to be the same at the few places like Best Buy that are authorized to sell the iPad.

To some buyers, price is probably incidental. They have to have it. There's similar fervour when a new Blackberry or iPhone gets launched.

Are you selling on price or do you offer a range? The range may consist of offerings from different companies (e.g., at Best Buy) or a range with offerings from one company (e.g., at Apple stores).

Sell The Old Model

You don't need to sell the best … if you're perceived as first to market and have a reasonable price. Perfection can come later.

These deficiencies haven't deterred early adopters

no multitasking (coming with iOS 4.2 in November)
no USB connection
no HDMI output (but a VGA connector is available)
no 4G option
no widescreen (4:3 ratio 1024x768 resolution)
no camera

Despite the shortcomings and ridiculed name, Apple sold three million iPads in 80 days. At the $499 entry price, that's $1.5 billion in revenue. First year sales are higher than for the original iPhone or DVD players.

If you won't buy until minimum standards have been met, Apple has given you reasons to wait for the iPad 2 (and perhaps to keep you away from competitors). For current buyers, Apple is creating anticipation to encourage upgrades to the iPad 2 and additional purchases for other family members.

Are you creating anticipation for future sales? Are you selling what you have now or pausing until the new models come out?

What's Next?

Competitors are on the way. Apple can probably maintain momentum and market share by reducing prices prior to introducing the iPad 2.

MARKETING ACTUARY