Will Apple's Tablet Growth Strategy Pay Off?
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Most marketers and advertisers spend their entire career devising ways to get their clients' products in new customers hands, yet for Apple (NASDAQ: AAPL), it just keeps building a better tablet and the masses keep lining up. The retail industry thrives on the act of attaining new customers, and when it comes to this tactic, news from the NPD Research Group just announced that 25% of all iPad buyers in the U.S. are first time Apple buyers.
Just imagine your first true personal introduction to a brand being something as iconic as the iPad. Imagine a 16-year-old hopping into a brand new Corvette as his/her first point of contact with both, the act of driving a real car and Chevrolet. It would be pretty hard to have a bad brand experience when you start with a flagship product. That favorable first impression is priceless as it comes to building brand loyalty with new fans.
By now, everyone knows that Apple has absolutely mastered the art of the surprise. And, sorry Hewlett-Packard (HPQ), we're not talking about surprises regarding CEO changes and decisions to drop entire product categories. We're talking about surprises in the form of breakout earnings announcements and hyper growth stories. Speaking of hyper growth stories, Apple tablet competitor Amazon (NASDAQ: AMZN) and its famed Kindle Fire just announced better than expected earnings. Recently, the e-tail giant traded at an all time 2012 high.
On the Android tablet front, the Kindle Fire is king with Barnes & Noble's Nook tablet still trying to hold on. The success of the Kindle Fire and Nook tablets completely crosses Google (NASDAQ: GOOG) as the Google app store is not available on those devices. Google is quickly trying to bolster its own ecosystem and will likely launch its own low-cost, 7-inch tablet this year. To date, no Android tablet that is taking on the iPad directly is getting any real traction.
While Kindle Fires sales are hot, Apple iPad sales are hotter. Fresh earnings reported this week showcase the fact that Apple sold 11.8 million iPads in the first quarter of 2012. These figures make the iPad the fastest selling Apple product of all time. This feat is all the more impressive when you consider the notion that 75% of these purchases come from owners that most likely already have an Apple iPhone and/or laptop that basically do everything the iPad can do while wrapped in a different package.
Apple has often been praised for the "halo effect" which makes users who own an Apple product more likely to keep purchasing other products - even if the updates are minimal at best. The halo effect is easily achieved when the user never has to really think about syncing all their personal devices together. With Apple, everything just always seems to work. Based on the halo effect - one can predict that recent news focused on first time Apple users will quickly translate to new Apple consumers for life. Launch a new iPhone 5 and these new Apple fans will be first in line - at least in theory. As an investor in Apple, these are cherished findings.
Much of the recent success of the iPad can be contributed to usability - in other words, no manual needed. The user experience on the iPad is so well executed that Apple is rethinking its retail store setups. It was recently reported that Apple replaced the iMacs that were previously on the kids' table at its retail stores with more kid-friendly iPads. Now that the company has hooked just about every young adult yearning for the latest technology, it makes perfect sense to go after and actively engage children now. It's kind of like handing out free cigarettes - minus all the nasty health risks.
So, we have talked about everything from the Apple iPad becoming the best selling product in Apple history to a recent focus on kids at the retail level. Is there more to this wonder tablet? Yes, there is. How about targeting the K-12 educational market. At the launch of the new iPad, Apple dropped the price of the iPad 2 to $399 hitting a price point that many analysts suspect will attract the tough to penetrate education market.
Peter Oppenheimer, Apple's chief financial officer, recently revealed that in the US, K-12 schools were now buying twice as many iPads as Macs, despite the fact that Apple's conventional computer sales still set a new sales record. Apple CEO, Tim Cook, added that with the change of the iPad entry point to $399, a much higher demand in new markets related to both education and other countries has spiked.
With worldwide demand on the rise, Apple seems to have a firm grasp of the tablet and overall digital ecosystem lead. Sure, Microsoft (NASDAQ: MSFT) is planning to roll out its Window 8 platform on tablets and PCs later this year, but the market in general does not appear overly excited about it. At best, analysts hope that Microsoft's new phone and operating system updates will have connectivity and synchronization similar to Apple's. Nothing like showing up late to the party with expectations limited to a simple demand - "try and at least come close to what Apple has already done. Maybe Microsoft's Xbox 720 holds more promise.
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