Monday, September 10, 2007

iPhone Price Drop - Go For Market Share

A lot has been said about the recent iPhone price drop. Fairness aside, I think that the price drop is signaling a shift in Apple's overall strategy that's been happening slowly ever since the first iPod was introduced.

Apple is going for market share.

The 90s were plagued by Apple executives creating niche products and being happy with their great profit margins. However the iPod success has given Apple a taste of what its like to be the market leader. Apple sees another opportunity to become a market leader in the phone space, and they know they have to compete on price. Sure they could have held the price of the iPhone high through Christmas, and probably would have ended up making more money, but selling fewer phones. The price drop indicated Apple's desire to sell more phones, not necessarily to make more money. Apple is learning from watching other companies dominate in other markets. Step 1, become the de-facto standard, worry about profits later.

Apple has a long, long way to go to become that standard, but they have a shot at least. Nokia, Motorolla, Microsoft, Blackberry, Palm, etc all have a piece of the pie right now, but it would be hard to argue that any one has become a standard in the way that the iPod has. I don't know if Apple will succeed in this market, but the price drop indicates that they are going to make a serious push to dominate it.

1 comment:

Anonymous said...

Did it ever catch the fact that Apple introduced a new product called the IPOD TOUCH at the same time??! Merely the fact, that putting out the TOUCH at $299 (the most logical and highest amount they could ever expect to get for an iPod at introduction) would have been HOMICIDE for the iPhone, had it stayed at $599??

Hellooooo? Only alternative: NOT to introduce the Touch until AFTER X-Mas... which of course would be the most idiotic thing to do!

Startin' to get it?