When Apple launched its new iPad last March, the company also offered its iPad 2 at a more affordable price of $399. As it turns out, the discounted second-generation tablet is attracting a new set of buyers, particularly in the education sector. CEO Tim Cook predicted that the cheaper iPad 2 would be attractive to the education market; it appears to be broadening the potential consumer base for the device.
Learning from the Price Point Move
With regards to seeing a potential move to lower price points on iPads over time, CFO Peter Oppenheimer stated in Apple’s quarterly earnings call last Tuesday that they are still learning from it:
“We’re just learning about the elasticity of demand and the $399 price point. It’s doing well. But I have to tell you, the new iPad is on fire, and we’re selling them as fast as we can make them. So we’ll learn more over this quarter especially as we get through the education buying season, which looks terrific for us especially on the iPad.”
He stated that iPad continues to welcome new customers and hopes that the tablet will be a popular choice as the beginning of the buying season for K-12 institutions approaches. K-12 schools are currently buying twice as many iPads as Macs, although Apple’s conventional desktop still set record sales for the quarter.
Unlocking Education Demand
When asked what Apple might be learning about the lower price points of iPhones and iPads, Cook answered that they are actually thrilled with the results. It might be too early to come up with a clear conclusion, but so far it seems that the discounted devices are popular in the education market, which is populated with more price-conscious consumers.
“And so on the early going, we feel great about it. But I’d also point out that the new iPad…was supply constrained last quarter for the full three weeks or so it was shipping and is actually still constrained. And so the mix the new iPad to the iPad 2, we’re not certain of what that is yet.
“But we are certain, with what we’ve seen so far, that the absolute sales of iPad 2, at least in the early going, is very exciting…we continue to be very happy with the moves that we made in pricing just a few months ago on the iPhone 3GS and iPhone 4. And both of them contributed to our ability to achieve $35 million in sales, which is our second highest quarter of all time.”
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