Is a $329 iPad mini Good Business?

Oct 25, 2012
1 minute read

I posed a question earlier today about Apple’s new iPad mini pricing. Is there anyone who would have bought the iPad at 299thatwouldntpurchaseitat299 that wouldn't purchase it at 329? My guess is no. There are reasons such as brand/price perception, the supposed $299 psychological barrier, and more that I don’t want to really cover, so I’ll pose it as a simple mathematical statement.

If less than 10% of users are willing to stand their ground and say no, this is too expensive, then Apple has made a solid play. If it is higher, Apple has done poorly. The 10% comes from the fact that for every person why buys it at 329,Appleismakinganextra329, Apple is making an extra 30 in revenue. That means that every 10 they sell at 329isenoughtocoverthedifferenceonthatonepersonwhosaysno,Iwillnotpaytheextra329 is enough to cover the difference on that one person who says “no, I will not pay the extra 30.”

Assuming Apple’s margins are similar to their usual 30-35%, and [I’m really assuming] that the cost is around 210210-220 to produce the low end model, then they would raise their margins from the 30% or so, to 35-ish% by adding that $30 in profit. Apple won’t have to worry about making up the margins in volume.

That said, I’m not going to get one, but that’s because outside of development I never use my iPad, not because I think it’s too expensive. I probably wouldn’t have gotten one at 249or249 or 199 either.

Joe Fabisevich is an indie developer creating software at Red Panda Club Inc. while writing about design, development, and building a company. Formerly an iOS developer working on societal issues @Twitter.

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