Thursday, September 6, 2007

Best price discriminators around?

Apple loves to do price discrimination (ala Hal Varian’s advice in his book. They’ve been doing it for years, crippling low-end products to avoid stealing sales from the high end ones, setting prices that maximize yield per customer.

However, sometimes companies that try to squeeze their customers for every penny piss off their squeezed customers. Or, those that worry about cannibalizing themselves let competitors do it instead.

Posting late after class last night, I missed a couple of important points about the iPod Touch vs. iPhone price discrimination. Both have the same screen, form factor, virtual keyboard, operating system and roughly the same memory.

A point that I knew but didn't emphasize is that (although the iPhone is $200 cheaper and pissing off the innovators), Apple does not have a $399 8Gb iPhone. What they have is an iPhone which you can get for $399 down plus $1400 over 24 months (with voice and data plans thrown in). So the $299 8Gb iPod Touch is quite a bit cheaper than the "$399" Cingular-subsidized iPhone.

So thus Apple went ahead and really crippled the iPod Touch: the similarities are only skin deep. Yes, both can download music at Starbucks over WiFi. (So what?)

But the iPod Touch is not a phone because it has no microphone (unless Griffin or Belkin add one). It has no Bluetooth (which presumably could connect a Bluetooth headset), although hackers suspect it’s on the motherboard and can be enabled. Clearly many potential iPT buyers (not just me) want to find a way to add a mike or headset to their phone.

What I found particularly lame, however, was the plan to cripple the iPT software. OK, some think it’s idiotic to have a WiFi tablet without e-mail. It doesn’t bother me leave the e-mail out — I want a real keyboard and a real machine to do e-mail, not a portable device.

The one I can’t understand (or necessarily believe) is the statement that the iPT left out “Google maps”. What does this mean? Both machines have a web browser, so can’t you just go to like anyone else? If the experience is different, did Google cripple it? Did Apple remove something that enables AJAX-style Google applications? (The iPT does have WebKit, the underlying engine behind the Safari browser).

Maybe the application difference will be minor, either because Apple includes the apps or 3rd parties find a way to provide a work around.

Still, given the crippling of the iPod Touch, I think Apple’s made a big mistake for the Christmas sales season. The two products together could have provided a blowout, but now the uncertainty and confusion about the iPT threaten to limit it to people who want a video iPod with a large screen that has an undersized disk drive (and doesn’t play SciFi channel shows).

Other firms are not so clever in their price discrimination, and thus will take sales that Apple doesn’t want to make. The Nokia N800 isn’t intentionally crippled: Nokia made the best possible Internet tablet (but without a GSM radio), and so people who notice the iPT limitations will give it a second look. The Intel Moblin devices that the Taiwanese will ship in 2008 will also be designed to be the best possible product, rather than to protect an existing high-end product.

Once upon a time Apple wanted to win markets. Now they seem to be hung up on controlling their ecosystem, maximizing customer yield, or protecting their lock-in with the iPod and iTunes store — rather than aggressively fighting for new customers and to vanquish rivals. In other words, they’ve gotten too clever by half.

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1 comment:

Joel West said...

According to Belkin tech support, their TuneTalk stereo microphone (part # F8Z082) is compatible with the iPod Touch. At $70, it's an expensive (and ungainly) way to add a microphone to the iPT, but only time will tell whether Skype (etc.) users will use this as the best way to make VoIP phone calls with the iPT.