iPhone vs. iPod Touch

A few months ago, to much fanfare and (possibly well deserved) hype, Apple released the iPhone.

People oohed and ahhed.

And a small number (1, 2, 3) OK…lots of people bought them.

Then Apple did something really interesting. Within a few months of the iPhone release, they dropped the price of the iPhone, by 33% (from $599 -> $399), and almost simultaneously released the iPod Touch.

The price drop really annoyed existing iPhone owners, and the new iPod Touch once again made people ooh and ahh.

The iPod Touch, is essentially an iPhone, without the phone, camera and a number of other features. The Touch is only 15 grams (1/2 ounce) lighter and 3 mm thinner than an iPhone. They have the same sized screen and function almost identically.

Why is this at all interesting?

First, people paid a premium price for the iPhone even though it was clearly quite expensive, AND it had a poor cell phone carrier plan. With the price drop, a customer revolt ensued, but Apple seems to have handled it well with a $100 Apple credit for any of the original iPhone purchasers.

Second, that the difference in price between an 8GB iPhone and an 8GB iPod Touch is only $100. $399 for the phone. $299 for the Touch. Makes you wonder. Is the phone portion such a commodity or are Apple’s margins really good on the Touch?

Third, and most important IMHO, Apple now has two different products that fundamentally share the same technology. And while this can be viewed as line extension (iPod, iPod nano, iPod shuffle etc.), in many ways this is really a big step forward for the iPod. It now becomes a mobile, wireless device, and not simply a portable music/video player. And the rumours are that the multi-touch pointing technology is next headed for the laptop.

So from a Product Management perspective, what can be learned?

  1. Always keep innovating.The iPhone may be as great as all the hype, maybe not, but it truly is different in many ways when compared to other high end mobile phones. But note that in all the hype about the iPhone, was there any mention that this was Apple’s second kick at the telecom can? Anyone remember the ROKR? OK, it was a Motorola phone, but Apple was certainly involved in it’s development. Can anyone say boooring?
  2. Communicate those innovations in intelligent and articulate ways to your market/customers in advance of the launch. By giving people 3 months notice of the launch of the iPhone, Apple ensured that word would spread and demand would grow. Many software companies wait until the ship date to communicate to the market and customers. This is a guaranteed way to delay revenue.
  3. Leverage your technology investments and deliver multiple solutions to different market segments.It’s always great to create a completely new product with new technology and new functionality. But, what’s even better is to get multiple returns on a single technology investment by being able to repackage, reposition, and resell different slices of the same technology to address problems for different users and use cases. If you are in the BUSINESS of technology, and not simply the technology business, this is something you really need to focus on.