The iProduct Cycle

There is news today that Google is close to launching a Smart Watch. Chances are they will and will hope to sell millions of units as they will price it for the mass market. This will inevitably follow what I call as the iProduct cycle.

  1. Amazon, Google or Someone else take big risk in the hope of adding another revenue stream, uncover new market and introduce a fairly rudimentary version of a product
  2. The product, typical for 1.0, will do limited things and will be priced to reach broadest possible market
  3. They will sell a few million units, but sell close to cost and almost no contribution margin left to recoup fixed cost investments
  4. All along Apple will stand on the sidelines for others to uncover demand, develop the market and do customer discovery
  5. When the market seem to look like millions of units but could grow if there were options Apple will introduce iProduct targeting a segment of customers within the aforementioned market with significantly higher willingness to pay for value – let the customer with higher willingness to pay step forward and line up in front of Apple stores
  6. Apple will scoop up this segment which will be barely 3% to 8% of some analyst defined total market but will grab 80% of all profits in the market
  7. iProduct will add a few billions to Apple’s cash pile
  8. Incumbents and others will try to mimic iProduct but will continue to reach the broader market at much lower price point
  9. Some others will have the audacity to price it same as the iProduct saying, “our product deserves its price tag” or “it is because if cost” – soon these products will hit EOL (Think HP and Motorola tablets)
  10. iProduct while making billions in profit but will continue to garner only single digit share of market ( defined by some analyst) while others hold 90% with no profit
  11. Analysts and bloggers will write articles saying why Apple should sacrifice profit, cut prices and go for market share because all the market share will one day pay profits, without stopping to explain the uncertainty of future outcome and the fact that they are already making boatload of profit
  12. go back to step 1

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