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Apple’s iPad and the importance of price

by peterme

In the early 90’s, Tandy released one of the earliest PDA’s, the Zoomer. It cost $699, and was a flop. One of the architects of the product, Jeff Hawkins, left Tandy to strike out on his own with Palm Computing. He wrote down the four criteria that his PDA must meet:

  • Fit in shirt pocket
  • Sync seamlessly with PC
  • Fast and easy to use
  • Costs no more than $299

While the quality and characteristics of the product’s behavior were crucial, it’s revealing that among the top considerations was price. Simply building a great product isn’t sufficient, if people aren’t willing to fork over the cash. Also, setting a price limit is a great way to fight feature and function creep.

Before iPad was announced yesterday, some industry watchers were guessing for a price tag just short of $1000.

Steve blew them away when he announced $499.


Image taken from Engadget’s coverage.

He also made investors very happy at that moment.

And what I firmly believe is that “$499″ was a mantra for the device. (If you calculate what $299 is worth in today’s dollars using the Consumer Price Index, you get $410.) Steve knew that he had to be able to release something that was less than $500. Once you factored the components that have become table stakes–wi-fi connectivity; accelerometer; full capacitive touch; support for high-quality video; crazy long battery life–there was no room left for a camera or for GPS. And that was the sacrifice they were willing to make in order to hit that number.

One Response to “Apple’s iPad and the importance of price”

  1. Scott Weisbrod Says:

    The price point also gave them focus. It helped them “refine scope” to get to a solution that delivers on the core ask this device is meant to answer: a portable, high-end media experience.

    What do you think about Steve’s notion of creating a new market? I’m not convinced and I’d bet that behind closed doors they’re probably saying the same thing. That being said, I’d bet that was the plan all along: assuming that the R&D costs were relatively minuscule (didn’t have to develop touchscreen tech, didn’t have to create the App store), Apple can afford a two-year iPad experiment to see if a market emerges.

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