How will iPad2 be priced?

Update on 9/13/2012: While this article is dated, look at this in the context of 5th generation iPad Touch pricing. Apple kept their 4th gen iPad touch, the 16GB and 32GB versions and only introduced 32GB and 64GB versions for 5th gen. As you read this article you will follow their likely reasoning.

I do not know more about iPad2  or its release date than what is already known through news media. However, I am here to make predictions about how iPad2 will be priced.

Given than even iPod Touch has retina display and front/back cameras for Facetime, it is a safe bet that iPad2 will have these features as well. Traditionally, when Apple introduced nextgen of any of their product they added lot more features but kept the price the same.

So will a new iPad with additional features be offered at current prices of $499, $599 and $699?

Apple most likely underestimated the demand for iPad and priced at inelastic part of demand curve. They are likely to consider better price realization with iPad2 and correct past mistake for at least three reasons

  1. Demand will be at least as high as iPad
  2. Considering all those who considered buying but sat out this version, the demand is bound to be higher
  3. Ubiquity and popularity of iPad, will probably bring in new customers who had not considered iPad as a gadget for them

However, the low prices of iPad have set a strong reference price. One way to break this reference price is to maintain the clear value difference between the old version and features in the newer version.  They also will make visually distinguishable difference between iPad and iPad2 (say using colors or otherwise).

By offering the “crippled” (not really, figuratively speaking) older version along side higher priced and richly featured newer versions, they let their customers self-select themselves to the one they are willing to pay.

This however does not mean offering 6 versions (as there are cognitive costs to customers). So here is my prediction for iPad2 versions pricing.

4 thoughts on “How will iPad2 be priced?

  1. You are correct that there was no real scarcity – could that be because of the “elastic capacity” Apple now gets from its outsourced manufacturers?
    I do not know if they had anticipated 1 million per month uptake for a new product.

    Does the high price of Galaxy tab (even though it was only 7″) help Apple with the justification for higher price realization for the second gen?
    You are correct on the second opportunity to reset price expectation.



  2. I’m not sure that Apple underestimated demand for the iPad. I haven’t heard any reports of scarcity, like I remember for some versions of the iPod, and I doubt they would have produced too much excess capacity.

    Another thing to consider is the emergence of next best alternatives to this category. As people understand the iPad better, they can compare it’s value to the value of their iPhone, their iMac, or another tablet. I suspect this will depress iPad prices over time, but Apple has another opportunity to set a price level for the category that others might position around.


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