Apple’s latest quarterly earnings show an increase in iPad sales. This follows the release of new iPad Pro models, which were widely praised in the tech press. However, it’s not these new iPads that have led to an increase in sales.
As Jason Snell highlights in his article on SixColors, year-over-year sales of the iPad have increased 15%. However, iPad revenue only increased 2%. In addition, the average selling price of the iPad decreased to $435. What this means is that, in spite of two new higher-priced iPad models, what has led to the increase in sales is Apple’s low-end model. In March of this year, Apple replaced the iPad Air 2 with a cheaper version starting at $329. Compare that to the starting price for the 10.5 inch iPad Pro which is twice as expensive at $649.
Yesterday’s numbers were interesting because they show that sales of the new, more expensive iPads are not necessarily stellar, but that Apple made a savvy decision by releasing a less expensive model. It’s likely that people with older iPads finally decided to upgrade at this more affordable price.
Apple does not have a history of competing by price. Their products are generally premium products at premium prices. There have been exceptions over the years, with low-and laptops, and cheaper versions of the iMac, and maintaining an older model in the product line as a teaser, but in general Apple’s prices generally do not compromise. But the company has seen that offering a low-price model of the iPad is extremely effective. It probably doesn’t bite into their high profit margin very much, and it keeps users in the Apple ecosystem. It’s worth noting that this iPad is not an older model, but an update to an older model with a new, faster processor; it’s not like when they still sell the iPhone 6 when the iPhone 7 is the current device.
Apple also saw this when they released the iPhone SE last year. The company was clearly unprepared for the success of this phone, which has proven popular both because of its low price and its diminutive size.
With two such low-priced successes, will Apple continue to offer some of its products at lower prices? It clearly makes sense for the bottom line.