The Four Ps of Marketing and the iPad
One common way of examining what a firm is marketing is to look at the “Four Ps”, namely the product, promotion, price, and placement of the product. Given the rather unremarkable nature of the hardware behind Apple’s iPad, it is likely that its success or failure will hinge on these Four Ps. So, what are they in this case?
Product
The iPad is a simplified computing product for people who do not wish to deal with the difficulties of managing a full computer. Application installation and uninstallation is handled through the App Store. There are no files to manage, as all the applications store files within themselves. Basically, it is a product that trades customizability for ease of use. Second of all, the iPad is large. People say that it reminds them of a “large iPod Touch” and have difficulty understanding who would want that. The answer is people with limited vision and manual dexterity. I think that the iPad will appeal to a 55+ audience that struggles with using full-blown computers and with pushing small buttons on gadgets like the iPod Touch.
Promotion
The promotion behind the iPad is the standard Apple promotion machine. Steve Jobs hypes it, it appears in newspapers, and likely in magazines. As a result, it appears in places seen by the general public, more so than many competing netbook products. While netbooks appear in the popular press in the generic, very rarely is it that the media refers to a specific model of Eee PC. So, the promotion behind the iPad is likely to reach a less tech savvy audience.
Price
The iPad is priced at around the same price as a discount laptop in a retail store like Best Buy. It’s a bit more expensive than a netbook, but old people can’t use the little screen and keyboards on netbooks anyway. They tend to prefer laptops with larger screens, which can be difficult for them to use, but easier for them to see. As this is a premium product, it makes sense that Apple is not seeking to be a price leader.
Placement
It is not fully clear where iPads will be sold. However, they will likely be sold at a minimum in Apple Stores, online, and in a handful of other retail stores. Apple Stores tend to be located in busy malls that sell a variety of different items. As a result, people without a strong interest in computers see the front displays in Apple Stores. (This would not be the case if they were big-box stores in outdoor malls or were in relatively isolated locations.) So, the placement helps Apple advertise its products to light computer users.
To conclude, I believe that the current version of the iPad will be very popular with people who are older and are light or non-users of computers. It offers a very simplified and elegant user experience at a competitive price. While it may simply be a larger iPod Touch, that is exactly what some people need.
In: General · Tagged with: Apple, elderly, Four Ps, iPad, marketing
FarmVille and the Entrepreneurial Spirit
After hearing about all the money that Zynga has made on its games, I felt compelled to check them out. FarmVille (and its cousins) is a real-time simulation of a business – a farm. It is essentially SimCity for the post-millennial generation. While I do not like the fact that it encourages children to spend real money to get ahead in the virtual world or that it encourages them to send unsolicited spam to their friends, I do think that it and other similar games play an important role in educating children about entrepreneurship. Here are the lessons I have gleaned:
- The initial size of any business is constrained by the initial amount of available resources.
- The available resources for investment in the business can only be expanded through either accumulating past profits or though the contributions of outside investors (i.e. parents with credit cards willing to buy game currency)
- As the scale of a business grows, its potential level of profitability per unit time increases
- The scale of a business can be increased through patience and the steady reinvestment of resources into ever more profitable endeavors
- Not all investments are equally profitable or require equal effort to maintain
- New investment opportunities are available to large businesses (in the case of FarmVille, new seeds and animals, which are not available to smaller firms
- A business will fail if it is neglected. The invested resources may become worthless (i.e. the plants die), and it may be unable to continue if a substantial amount of resources are lost.
The one very artificial aspect of all of the simulation games that I have played is that the prices and costs of resources tend to remain constant. That is, when a FarmVille farmer plants crops, he knows the price that he may sell them for before he plants them. In real life, businessmen do not have precise knowledge of their future revenues when they make investments. Although this would be an area for potential improvement, I think that these games are valuable in that they teach children lessons about entrepreneurship and help develop in them the drive to seek profit. Nonetheless, hopefully some kids will put down their mice and try to set up lemonade stands.
FarmVille
Gold and Silver – Birds of a Feather?
When we think of gold and silver, we often consider them to be very similar. Sure, gold is more valuable than silver. But, they are both precious metals suitable for jewelry and investing. When people get scared that their currency is going to weaken (become rapidly able to buy less), they tend to buy precious metals as a way to maintain the value of their wealth. If gold is simply a more valuable version of silver, then there should be no need to diversify between the two. On December 11th, 2009, gold cost $1,115.10 per ounce, and silver cost $17.13 per ounce. Is investing $10,000 in gold (buying 8.97 ounces) really financially equivalent to investing $10,000 in silver (buying 583.77 ounces)?
Perhaps suprisingly, changes in the prices of gold and silver are not that tightly correlated. The price of anything is determined by a combination of supply and demand. The size of the supply of gold and silver is determined by mining operations. As gold and silver are mined separately, the discovery of ore of one type does not influence the price of the other. Secondly, the nature of the demand for gold and silver differs. In addition to being used as a store of wealth, both are used for a myriad of industrial uses. Gold is particularly inert, which makes it invaluable for many applications. So, while the inflation and deflation of currencies may influence demand, there are many other factors driving demand as well. These other sources of demand likely drive the difference in performance between the metals.
Exactly how different is their performance? Examine these trailing performance statistics for December 11th, 2009:
| Period | Gold | Silver |
| 1 day | -1.25% | -1.25% |
| 5 day | -2% | -5% |
| 1 month | 0% | -2% |
| 3 month | 10% | 2.50% |
| 6 month | 17% | 12% |
| 1 year | 35% | 65% |
| 2 year | 40% | 20% |
Note: These statistics are rounded, and are meant for illustrative purposes only.
So, what should an investor do? The answer is to diversify into both. If you are investing in gold and silver to protect yourself from currency risks, you might want to buy a bit of both to protect yourself from risk due to other shocks in their supply and demand.
In: Financial Crisis, General · Tagged with: commodities, correlation, currency, deflation, gold, inflation, silver