As it did for the iPhone 5S and 5C, Apple has tweaked its product portfolio with two new products to maintain premium positioning in an increasingly competitive tablet market. Both the iPad mini 2 (starting at $399) with Retina display and the iPad Air (starting at $499), which is thinner (43% thinner than the iPad 4), lighter, and faster (with a super-fast A7 chip) are great additions to the iPad product portfolio and come with new colors and covers. As always with Apple, expectations on systematic breakthrough hardware innovations are irrational. Apple is good at inventing new products (e.g., iPod, iPhone, or iPad) and at maximizing profitability of its product range over time through software innovations and clever marketing. Yes, at some point, the company will need to disrupt a new market once again, but today’s announcement is really about making sure it maintains the premium brand experience for the holiday season when competition is heating up — not just for tablets but also for the amazing new line of Mac products.
Competition is heating up
Amazon recently announced several new products, including the Kindle HDX and its potentially disruptive customer care service functionality. Tesco — another retailer — recently launched its Hudl. More recently, the company behind the Datawind Aakash tablet made headlines at Wired’s 2013 London event when it shared some new information regarding its progress in delivering a full-featured Android device for just under $50. Google’s Nexus 7 is already available. Microsoft Surface devices are on sale today. And just this morning, Nokia launched its first-ever tablet, based on Windows 8.1 RT and with integrated LTE connectivity. This product, designed before Microsoft’s acquisition of Nokia devices, could potentially compete with the new Surface, and the respective positioning of the two products is yet to be clarified. The challenge for Nokia is not so much about its ability to deliver new product experiences but in the brand perception — especially when entering a new market like tablets. I believe that its new flagship “phablet” (or “bigger smartphone”; whatever you want to call it), the Nokia 1520 with a 6-inch display, as well as the Nokia Lumia 1320 low-cost alternative, is better aligned with Nokia’s mobile DNA and close a clear gap in its product portfolio.
A shift in Apple’s services and software strategy
Some players, like Amazon, can afford to slash prices because they have a different business model based on content and commerce. Microsoft makes money via software. Apple is increasingly offering free content, services (iLife, iWork, iPhoto, iMovie etc.), and software across iOS and OS X (Mavericks for Macs is free) to increasingly offer cross-platform engagement on top of its million-app ecosystem. The value lies in loyalty to the Apple ecosystem. While Apple has shared $13 billion to developers since 2008, it has made less than $6 billion out of apps. A huge stat, but low in comparison with Apple’s quarterly results. Software, services, and apps are the glue that holds the Apple experience together. However, Apple’s focus is on maintaining a premium for its products. It can only see a dilution in its tablet market share since it created the market, less than four years ago. However, there is still huge room for growth, as Forrester expects the installed base of tablet owners to reach more than 900 million individuals by 2017. Tablets are only now entering the critical-mass stage (15% to 20%-plus penetration) while smartphones have already reached the mass-market stage (50% penetration rate) in many developed countries. As a consequence, it is no surprise that we see more and more choices in brands, product sub-categories, and features.
What It Means For Marketers
For marketers, tablets – and in particular iPads (170 million sold so far) – offer many opportunities to engage consumers differently. Forrester's data shows that most consumers use their tablets, even those with 4G connectivity, at home. That means tablets play a much stronger role in the discovery and explore phases of the customer life cycle. They are therefore stronger enabler of direct commerce transactions than are mobile phones. Don't lump smartphones and tablets into the same “mobile” bucket. People use them differently.
However, the iPad Air, which is much lighter than the previous iPad, and the range of prices and sizes mean that more people will buy tablets and use them in more locations. So be sure to analyze your own customers' use of tablets, including their physical context, their lean-forward versus lean-back involvement, and their simultaneous screen use in order to find the right combination of marketing approaches and goals.