Like clockwork, every September, the week after Labor Day, Apple does their largest keynote and new product introductions of the year. I just finished watching the event (available on demand at Apple.com or Apple TV), and two things jumped out for me.
First, the event was tight and shorter than usual. Tim did not start with the expected summary of Apple’s current performance and the entire Keynote was well under two hours. Only Apple Arcade, TV+, iPad, Watch, and iPhone were covered. I guess this means we can completely lock-in an October event, where we’ll see the new operating systems, Mac, iPad Pros, and who know what else.
Second, I’d say the biggest surprise was Apple appears to be getting more price competitive. Apple traditionally employs a Price Skimming strategy where a product starts off at a very high price (above market norms – see HomePod) to signal premium status and also to make up expensive R&D costs. Remember, economies of scale are not common with new product introductions. Gradually over time, Price Skimmers drop price to more of the market equilibrium although Apple rarely does that. Instead, Apple’s MO is to maintain the high price but offer better features (screen, chip, storage, etc.).
Yet, Apple appears to be headed in a Market Penetration pricing strategy where new products are entering the market at a very favorable market rate. Apple Arcade is just $4.99 per month and its launching with 100 games in the library (check out this really cool video with all 100 in 100 seconds). TV+ is also just $4.99 which Tim put a price anchor thought in our heads stating, “it’s less than the cost to rent one video!”). In my eyes, the biggest surprise was free TV+ for 1 year to any customer who purchased an iPhone, iPad, Watch or Mac. Just pulling the numbers off the top of my head, that means Apple could easily have 250 to 300 million user by this Christmas.
And Apple did not stop there. The new entry level iPad is very, very powerful for the price. The Apple Watch Series 3 is hanging around at an aggressive $199. iPhone 11, at is most common configuration, will be about $50 less than its equalivilant from last year. And finally, Apple’s largest volume phone from last year, the XR, is also sticking around at a $100 to $150 lower price.
In summary, Apple is stomping on the gas and getting more aggressive. I’d be worried if I was one of Apple’s direct competitors.
Something to think about today…
Associate Professor of Marketing
Stillman School of Business
Seton Hall University