The iPad's average selling price, or ASP, has been declining for two years as customers opt for less-expensive 9.7-inch models or, increasingly, the $329 iPad Mini. (Data: Apple.)
There's no question that dropping the Mini's price would reduce per-tablet revenue, accelerating the current decline.
Over the last 12 months, the iPad ASP, or "average selling price," has dropped 19 percent, from $538 a year ago to $436 in the most recent quarter. The largest quarter-over-quarter ASP slide since the iPad's 2010 introduction was an 8.1 percent plunge in the first quarter of this year, less than two months after the Mini reached retail.
That wasn't a coincidence.
"The consistent drop in ASP since the iPad Mini launch suggests that the sales mix has been shifting towards the iPad Mini, in other words that the sales of the full-size iPad have seen consistent sequential declines thanks to cannibalization," said Sameer Singh, an analyst who covers smartphones and tablets on his Tech-Thoughts blog.
That mix was recently analyzed by Consumer Intelligence Research Partners (CIRP), a Chicago-based firm that conducted a survey with Apple customers in the U.S. earlier this month. According to CIRP, the iPad Mini accounted for 33 percent of all iPads purchased between April and June. The rest were evenly split between the aged iPad 2, which Apple sells for $399, and the current-generation Retina-equipped 9.7-inch tablet that starts at $499.
With the exception of the iPad 2, the most popular models were the least-expensive, said CIRP, implying that Apple customers are no different than any other tablet maker's: They're sensitive to price.
Cutting the price may be a risk -- it would further depress ASPs and result in lower margins for Apple -- but the analysts agreed that it's a move the Cupertino, Calif. company should make if it wants to stay in the game as it faces ever-fiercer competition.
"They need to take big steps to show there's a difference between an iPad Mini and a Nexus 7," said Gottheil, referring to Google's flagship 7-inch tablet. Earlier today, Google unveiled the newest Nexus 7, and said the high-resolution tablet -- it uses a 1920 x 1200-pixel display, almost triple the pixel count of the Mini's 1024 X 768 screen -- would sell for $229 (16GB) and $269 (32GB).
"If Apple can come up with a Retina iPad Mini at $329, and can lower the price of the existing Mini to $249, and do that profitably, that's a killer," said Gottheil.
"Apple's margin declines are permanent," said Baker, echoing Gottheil in arguing that Apple must first acknowledge as much, then realize that cutting prices won't be its doom. "After all, they're so much better than anyone else in hardware, even now."
This article, Forget the high margins, Apple -- cut iPad Mini prices, was originally published at Computerworld.com.
Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is firstname.lastname@example.org.
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