The iPhone Effect: What Will Happen to Apple's Other Products? 17 comments
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iPhone is a revolutionary gadget. With its Wifi and a whopping 8gig memory, these features are enough to communicate effectively through the net and bombard somebody's ear with thousands of genres of music. However, these great features have great opportunity costs.
Let's take Apple's iPod as an example. What is going to happen to iPod sales (i.e., iPod Nano, video and the micromini version)? These Apple products will probably become irrelevant to a big chunk of Apple's target iPhone market upon its release. Consequently, a possible billion dollar loss for Apple might be triggered upon the introduction of the revolutionary gadget in the market.
Nonetheless, Apple has different options to mitigate the possible loss.
New Marketing Strategies
Offering its iPhone to a different market segment to minimize competition for its iPods would be a great option. A key step to mitigate a huge loss of profit would be if Apple offered the iPhone to businessmen and other high income earners, while marketing its iPods to teenagers or fashinistas (this does not mean, though, that there should be a huge gap in the prices of the iPhone and iPod). This way, sales generation for iPods would still be effective. Thus, additional but significant profit would still be realized by Apple. Plus, the good thing about this strategy is it provides distinction or identity to Apple's products.
Discriminating the price of the iPhone from the iPod would also be considered a great option. Apple could take the path of letting the iPhone be a high end product by making its price high and letting the iPods become a cheaper option. But, in this case, the price of the iPhone should be able to cover up for the lower price of the iPods so as not create a loss of profit for Apple. In this strategy, illusions of making the iPod a very affordable product for consumers would be enabled without revealing the true essence of the strategy.
Or Apple could just go for the easy way out by selling all the necessary rights and production facilities of its iPods and focusing more on the production and promotions of its iPhone and its other products, which are not direct competitors of the iPhone. This strategy is a radical one and might, indeed, significantly affect Apple's stock price.
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This article has 17 comments:
Hmm.. let me see.. a billion dollar loss in revenue from one product line, and a SIX BILLION DOLLAR gain from the launch of another.
Some loss.
The big iPods will still sell because they have their own niche. Many people already own a Nano and a big iPod. Tons of used Nanos and Shuffles will become available on eBay and will create new adherents / customers for Apple from people that may not have been able to buy a new iPod... At any rate... Nanos and Shuffles are typically entry level units... And as long as there are kids getting old enough to beg for them... There will be a market for the entry level units.
Prices will inevitably drop on the iPhone and Apple will make deals with other carriers and 18 months from now... iPods will still be king of the hill on mp3 players and iPhones will have made significant inroads into the cell phone business... And Steve Jobs will be on the cover of Time magazine again.
Economy and loss of credibility are simple English terms. need I say more? Now if your are confuse about the issues/ premises, then I suggest investigate first before you comment. And FYI, the reason why marketing strategy is needed in a company is to offset possible loss of profit or to increase profit . I guess, somebody should teach mr/ms ojsimpsoncomplex about marketing so that he/she would be enlightened.
Still a billion dollar loss is a loss. Furthermore, upon loss of monetary unit, loss of credibility in giving high end music players would also be realized. Indeed "some loss".
@Thomas Barta,
But who's economy does not recognize or does not know iPod? only small chunks of economies across the globe do not know iPod.Thus, a huge probability of consumers shifting to iphone instead of iPod would be triggered.
While the devices are similar, they are -- at the same time -- very different.
I don't believe you have included these elements into your analysis.
If Apple gets a cut of say 200 dollars per phone from AT+T and lets say it is real costly to manufacture the Iphone and it cost them 200 dollars to make each phone that’s 300 profit off each phone. Add in Apples cut of the AT+T profit (which I saw mentioned on the web) of an estimated 200 dollars and hmm 500 dollar per phone profit traded for a loss of a Ipod sale. Hmm, looks like Apple and its Stock holders would be laughing all the way to the bank with 26 million Iphones sold in a quarter.
Actually, on release day the Iphone still has plenty of market. First the Ihone is only released for US sales to start leaving the entire rest of the world as customers for the Ipod. Thats a pretty good market alone. Next is some people in this country have no cell phone or phone at all so that adds to the people that can purchase Ipods. And finally some people will not pay the 500 dollars for a cell phone so they will remain as potential customers for the Ipods. So unfortunately, I guess Apple will not lose all of the projected 26 million sales of Ipods this Holiday season although they would love it if they did.
Which is greater in weight? memory capacity or state of the art features? nonetheless, in the end Apple Inc. would still be at the loosing end. Either heavy loss of consumers in iPods would be triggered or loss of iPhone consumers. Thus, the author suggested some possible marketing strategies to mitigate possible enormous loss.
Lets just hope for the best for Steve Jobs and Apple Inc. and hope that iPhone would not cannibalize the sales of iPods in their various target market.
@ojsimpsoncomplex,
Economy and loss of credibility are simple English terms. need I say more? Now if your are confuse about the issues/ premises, then I suggest investigate first before you comment. And FYI, the reason why marketing strategy is needed in a company is to offset possible loss of profit or to increase profit . I guess, somebody should teach mr/ms ojsimpsoncomplex about marketing so that he/she would be enlightened.
But that's just the beginning. Watch out, cable companies. Apple didn't pair up with Verizon because they're in the CABLE biz. Why should you pay $50-$100 a month for cable? With Apple TV you can wirelessly sync TV shows and movies from your computer to your TV.
I don't work for Apple but I'd be a fool if I didn't buy more AAPL stock today. June is approaching!