Emergic: Rajesh Jain's Blog

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Apple’s Intelligent Pricing

January 14th, 2004 · No Comments

The first reaction of most people to Apple’s decision to price its mini-iPod at USD 249 came as a suprise. For USD 50 more, one can get the regular iPod with 15 GB storage instead of the 4 GB in the mini. So, has Apple gone crazy? An assessment by WSJ (Tim Hanrahan and Jason Fry) points that it is as simple as market segmentation:

For every buyer of an MP3 player who cares about capacity, there’s another one who cares about size. Or style. Or both. While a wonderful device, the original iPod is still a substantial presence on one’s arm or waistband, particularly if you’re running with it. Not everybody was wowed by the original iPod’s choice of colors, which made Mr. Jobs Henry Ford in reverse. (“You can have any color you like, as long as it’s white.”) And for plenty of music fans there’s no real difference between 1,000 CDs and 3,750 — they’re both “enough.” As one Slashdotter who saw the light wrote, some people “can’t justify $299 just for space, but might justify $249 for style.”

By the way, if you haven’t thought of this a few paragraphs back: It’s smaller, light enough to jog with, and comes in pink. Anybody see a target audience there? We thought so — and we were relieved to see a few female Slashdotters stand up and demand to be counted. We also see a valuable lesson that a lot of MP3 geeks missed, ourselves included: Different strokes for different folks — particularly when their money’s equally green.

So, far all who think that maybe Steve Jobs had lost his mind, think again. After all, as others fight out in the 88-99 cents a tune market, Apple’s got the digital music player that everyone wants – they sold 2 million last year. And that is where the profits are.

Tags: Management

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