On iPod pricing, competition and the value of a full package

I love the fact Microsoft consider they can compete with their Zune garbage... the one thing they (Apple's competitors) fail to consider is the reason the iPod is so successful isn't cos of loads of features and big colourful screens... it's cos it looks gorgeous and has the funky name that has basically become the noun for portable music player. When you mention portable music now about 99% of people will say iPod, even if all they mean is an mp3 player. Best self-replicating advertising ever.

Nothing wrong.. some people need the ability to play videos, games, or need as much storage space as possible, while others prefer an ultra-slim light device that plays totally skip-free music (and is black, too).

well, lest we forget that the 30 GB iPod video is definitely ... the same price as the 8 GB nano. Something seems wrong there.

Go go Gartner ANALysts... What thoughtful insight. How about looking at Dyson who introduced the most expensive vacuum cleaner the UK market had ever seen and wiped the floor with the competition. (Don't know how they're doing with US market share). Up to a point, people will pay more for a better product, be that ease of use, features, design or all of the above. It's not all about price.

I'm surprised those comments came from Gartner. Schill or not, pricing a product at $250 when materials cost $130 seems like a bargain to me. I'd be surprised in fact if the nanos carried even that high a meterials cost. The $90 could be close, but the $130 has to be lower given the retail pricing.

Selling price typically rises by at least double from manufacturing to distribution. And then possibly double again to retail. Take Harmony remote products that sell retail for $120-$300 with manufacturing costs of between $18-$50.

Perhaps one needs to look at Creative who are likely scraping for all they can to push out the lowest price in order to grab even a tiny fraction of Apple's market share.

The other factors, like Jon mentioned, play the biggest cards. In addition, you're paying for the brand, not just a music player. Apple can still push a few more bucks out of people because they are willing to pay it. They know it's a superior product. Until solid competition comes along, there's not a reason to reduce its price.

"(...) like Creative and Microsoft's new Zune could start chomping at the iPod's market share, based solely on the profit margins of one member of the family"

No solely. It actually reads like this:

"But a lack of revolutionary new functions in the latest lineup of iPods coupled with just a small price reduction could give rivals, Microsoft and its new Zune in particular, room to gain market share this year."

"Full package?"

[snort!]

Don't talk about "full package" when it comes to iPods. My 3rd Gen iPod came with a (real) case, software CD, firewire cable (plus adapter), earbuds (with sponges), power brick - all in the most amazing packaging ever. Later, they came with both USB and Firewire cables.

Now you get earbuds, USB cable and a dock insert. That's it.

Price then: $399. Price now: $349.

$249 for an 8GB Nano is very competitive.

Plus, keep in mind that Gartner is basically a shill for Microsoft.

Don't forget that other factors affect the price too, such as marketing, R&D and legal issues (e.g. safety standards testing). It's not just based on material costs.