Apple continues to introduce cheaper price points into their product lineup. These cheaper options actually serve to increase the total cost of owning an Apple product. Most consumers won’t see it that way, but it will be obvious to firms that analyze the total cost of their technology investments (which also serves to create additional market segmentation).
In spite of the great job that Apple’s marketing department does to create a buzz around their “revolutionary” gizmos and product launches, nearly all technology is evolutionary and not revolutionary. The added benefit of using this year’s technology compared to last year’s technology is usually pretty small. Technology firms quickly discover that their new products have to compete with the resale market for their old products. This is not a new issue or a result a slowing pace of technological advancement – even in their early days, IBM recognized the impact of the secondary markets for their products. They were among the first technology vendors sued under anti-trust laws for their shrewd attempts to capture more of the value of their innovations by using leasing and other sophisticated price maintenance strategies.
In the past, when Apple introduced a product, it would typically be at the same price as the product it replaced; the old product would simply be discontinued. But lately, Apple lets the old products stick around longer – at a lower price. This reduces the resale value of the products in a product line (there’s no reason to buy a used iPad if a new one is available for the same price – the most a used product will sell for is the cost to buy it new). A person willing to perpetually remain under contract with a cell phone carrier could sell their old iPhone and get a new one under contract with little or no out-of-pocket cost. That will hold less true with time. Businesses will need to forecast increased depreciation cost when they analyze the cost of purchasing Apple technology.
The 56 different models of iPad now offered represent a significant change in Apple’s strategy. It’s now a chore to decide which iPad is best. Competitive Android offerings gobbling up market share almost certainly played a role in their decision, but the extra value they may capture from increased market segmentation is an equally valid motivation.