P-day arrives

Stand by for TV news footage of the faithful queueing outside Apple stores in the US. It’ll be like the iPhone all over again. Or will it?.

“The first five million will be sold in a heartbeat,” said Guy Kawasaki, a Silicon Valley entrepreneur who was a marketing executive at Apple in the 1980s. “But let’s see: you can’t make a phone call with it, you can’t take a picture with it, and you have to buy content that before now you were not willing to pay for. That seems tough to me.”

Apple and other technology companies that are introducing a wave of touch-screen tablets face an ambitious challenge. The industry wants to create a market for a new type of device that most people do not really need — or do not yet know they need.

Tablets are intended to allow people to watch video, browse the Web, play video games and read books, magazines and newspapers everywhere they go without the bulky inconveniences of a full-fledged laptop.

The people who have already ordered an iPad or will show up at the Apple store on Saturday “are technophiles — the phrase ‘leading-edge technology’ sends goosebumps all over their skin,” said Eitan Muller, a professor of high-tech marketing at New York University’s Stern School of Business.

But those people make up only 16 percent of the total potential market for the iPad, Professor Muller said. “The main market is made up of pragmatists, and the same phrase sends them into convulsions.”

My hunch is that those people who already have iPod Touch devices will be the hardest to convince. Either way, Apple’s big bet is that the iPad can create an entirely new market niche between smartphone and netbook.

Which brings to mind James Surowiecki’s thoughtful piece in the New Yorker recently about the way the market for devices has evolved. Here’s the nub of his argument:

For Apple, which has enjoyed enormous success in recent years, “build it and they will pay” is business as usual. But it’s not a universal business truth. On the contrary, companies like Ikea, H. & M., and the makers of the Flip video camera are flourishing not by selling products or services that are “far better” than anyone else’s but by selling things that aren’t bad and cost a lot less. These products are much better than the cheap stuff you used to buy at Woolworth, and they tend to be appealingly styled, but, unlike Apple, the companies aren’t trying to build the best mousetrap out there. Instead, they’re engaged in what Wired recently christened the “good-enough revolution.” For them, the key to success isn’t excellence. It’s well-priced adequacy.

These two strategies may look completely different, but they have one crucial thing in common: they don’t target the amorphous blob of consumers who make up the middle of the market. Paradoxically, ignoring these people has turned out to be a great way of getting lots of customers, because, in many businesses, high- and low-end producers are taking more and more of the market. In fashion, both H. & M. and Hermès have prospered during the recession. In the auto industry, luxury-car sales, though initially hurt by the downturn, are reemerging as one of the most profitable segments of the market, even as small cars like the Ford Focus are luring consumers into showrooms. And, in the computer business, the Taiwanese company Acer has become a dominant player by making cheap, reasonably good laptops—the reverse of Apple’s premium-price approach.

While the high and low ends are thriving, the middle of the market is in trouble.

Very perceptive IMHO.