I posed a question earlier today about Apple’s new iPad mini pricing. Is there anyone who would have bought the iPad at $299 that won’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, Apple is making an extra $30 in revenue. That means that every 10 they sell at $329 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 $210-$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 $249 or $199 either.