Thursday, January 06, 2005

Finally, a Mac for the rest of us

Apple today unveiled a $499 version of the Mac called the Mac mini. Why is this significant? Price. Steve Jobs has historically been opposed to pricing things cheaper, preferring to innovate rather than compete on a price basis. Look at the Mac family v/s anything that is out there - Mac is always more expensive, and feature-rich.

Jobs says that they would now like to go after a low cost market that has historically not seen any innovation. So, does a stripped down mac mean innovation ? Or does it mean a demo-ware loaded machine that serves as a sampler to upgrade?

Marketing books tell us that there are 4Ps that you need worry about - Product, Placement, Promotion and Price, and that the last one is the easiest to change, but is the hardest hitter towards profitability. Undercut the market and you set the stage for low-cost innovations, a la Dell. There is no other way to go but down. So being caught in a commodity war with the other PC makers hardly seems like a prudent step. I would expect similar cuts to follow from Dell, Gateway and others-hey, if Apple can release a Mac for under $500 with 5% market share, why can't the big boys for the same reasons?

The new $99 iPod shuffle does not seem to have the same oomph that the original iPod did - most notable is the lack of display and the innovative roller wheel to control what was playing. This like a direct strategy to capitalize on the iPod brand and sell it cheaper to unsuspecting crowds taken in by the iPod glitter and make a very ordinary purchase. The other way to look at this is - how could Apple keep their music download business healthy if the original iPod is still out of reach of a large market segment (the under $149)? Since $0.99 download must be losing money, this is an excellent way to make sure that the volumes will push that part of the business into profitability.

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