Apple HomePod Pricing – Motley's Fool

Apple (NASDAQ: AAPL) launched its first smart speaker in early 2018. The device has been subject to mixed reviews. It was praised for its excellent sound quality, but it probably did not deliver the "smart" part of "smart speaker". In addition to this, it was not an offer to be competitive in terms of price: it was offered at a higher price than other popular smart speaker offerings .

The strength of the Apple brand has allowed it to sell as many of these devices as it has done. Some time ago, Strategy Analytics analysts claimed that HomePod had generated a significant share of the industry's revenue (16%), as well as a share of the smart speaker market. rising to more than $ 200 (70%) in the second quarter of 2018. However, I do not think this product has finally managed to attract so many customers and, apparently, Apple itself hoped.

Source of the image: HomePod.

Apple has been trying to boost demand for the HomePod by giving Apple Music users a $ 50 rebate on the device in the UK. On April 4, 2019, Apple officially (and quietly) reduced the price of its HomePod by $ 50. Here is what it means.

Maximize revenues, profits

Setting the price of a product is a delicate balancing act. If a company allocates too low a price to a product, it can maximize the number of units sold, but this can not maximize revenue or gross profit. If a company attributes a price too high to a product, the turnover and the gross margin per device can be quite high, but it may leave a significant number of deliveries of units on the table without all the way to maximize the turnover and the gross profit.

At the initial price of $ 349, HomePod was an expensive smart speaker. This, coupled with the fact that it was not really an asset, in terms of features and functionality, probably limited its appeal.

As mentioned above, Apple has sold a lot of HomePod devices and it would not be surprising that we learn that the majority of device buyers over the past year were fervent product enthusiasts Apple. More than a year after the initial launch, however, a number of factors must be taken into account:

1. The number of hardcore Apple enthusiasts likely to be interested in HomePod but not having yet bought one has likely declined significantly.
2. The production costs of Apple's HomePod have probably decreased thanks to the experience gained in the assembly of the devices. In other words, the manufacturing rate of return has probably improved and, as the manufacturing costs of the internal components decrease, their respective cost curves have improved.
3. Apple has not updated the product for more than a year.

The first and third factors have likely resulted in a significant reduction in HomePod's sales at the initial introductory price, while the second factor is expected to give Apple some flexibility to reduce prices while benefiting from the gross margin type per device in the initial market. . Sales.

With all this in mind, it is no wonder that the company has just reduced the price of HomePod. The lower price should make the device more attractive to a larger number of customers and the additional unit volume should, hopefully, generate more overall revenue and gross profits than if the company continued to sell the product. device priced at $ 349.

Take away food

Apple is definitely working hard on future generations of HomePod. I expect that Apple will incorporate in its upcoming products what has been learned from the successes and failures of the first generation HomePod.

Maybe once Apple introduces a new generation of HomePod, it can start selling these devices at higher prices. And as long as these devices are convincing enough, Apple may be able to sell more such devices at higher prices than it was able to do with the first-generation HomePod.