Would you buy 8-inch iPad?

Wall Street Journal claims that Apple is testing a smaller tablet, around 8 inches. The question: Would you buy one, if available?

Who knows, maybe your answer will help Apple, given how super-secretive is the company's product development. You can be the customer research Apple should seek before launching new products, particularly now that Steve Jobs -- master of good taste and guiding voice of one -- is gone. Please answer in comments and take our poll. But first read this perspective on what 8 inches could mean.

Pricing Continuum

Analysts have debated whether or not tablets are PCs. Canalys and DisplaySearch say yes, Gartner and IDC say no. But from Apple's perspective, the answer is meaningless. The company sells a continuum of mobile computing products available to consumers from free to $2,499:

  • iPhone: free, $99, $199, $299, $399
  • iPad: $499, $599, $629, $699, $729, $829
  • MacBook Air/Pro: $999, $1,199, $1,299, $1,499, $1,599, $1,799, $1,999, 2,499

The only meaningful gaps are $1,399, $1,699 and $1,899 -- and up in that range, does it matter? No. At the low end, Apple has pricing covered, and that's ignoring any overlap from iPod nano and touch. Apple doesn't price to compete with other companies so much as to offer a full spectrum of its own stuff. The approach presumes the buyer already thinks "I want to buy Apple" and just needs something that fits his or her needs and budget.

Pricing is an important consideration for anticipating any Apple product strategy because the company is master of the upsell, providing something just a little bit better -- different/additional benefits -- for a little more money. Related: Offering something a little bit less for lower price to attract new buyers. So immediately I ask: Where does 8-inch iPad fit in?

Size Matters

The question is important because Apple also maximizes margins like no other hardware manufacturer selling consumer products. Where would an 8-inch tablet add to overall sales without taking away from (presumably) higher-margin iPad 3? More importantly, does size matter that much as a differentiator?

In the laptop space, Apple shows that size does matter, given the popularity of MacBook Air and Intel's push to get every OEM in the Windows camp to adopt ultrabook. Consumers (and many business users) want something lighter and thinner to carry around; heck, even iPad sales -- 55 million since launch -- is proof point. Additionally, Amazon's success selling 7-inch, $199 Kindle Fire shows there is a market for lower-cost, smaller tablets. The strategy proved most successful with iPod, where size was a huge sales differentiator.

Taking the size conundrum before price, there's question: Does the buyer benefit more from an 8-inch iPad versus 9.7 inches, which is what Apple offers today? iPad 3 is the answer, if rumors about high-resolution display and other features are true.

Apple typically doesn't lower prices like many of its competitors. Rather, the company introduces something else, with different features, for less money while adding more value to the product line already available for higher price. From that perspective, 8-inch iPad makes lots of sense. iPad 3 would sell for the same prices as today, while the smaller tablet would cost consumers less, maybe as low as $299 to start. iPad 3 would differentiate from its smaller sibling with extras like higher-resolution display, better camera (maybe none on the 8-incher) and Siri, for example.

Where some readers will disagree: The reason. I don't see Apple responding to competition from Kindle Fire or other, smaller, cheaper tablets so much as conducting business as usual. Apple effectively used this kind of pricing strategy throughout iPod's rise. Lower prices on newer, smaller models -- like the original iPod nano seven years ago -- broadened the customer base of buyers. Same can be said of MacBook Air, which compelling features are size and price. If consumers want more graphics capabilities, larger screens or higher resolution, they pay more for MacBook Pro.

iPhone is an interesting variation on the model. Rather than introduce new, lower-cost smartphones, Apple chose to keep older ones (with less storage capacity) in market selling for less money. The approach is possible because wireless carriers subsidize the phone's price, which keeps Apple's margins still fairly high. Nevertheless, people choosing free iPhone 3GS or $99 iPhone 4 get less than they would with 4S. Apple broadens the iPhone market after initial sales expansion to more buyers. But only after maximizing margins from smartphones selling for more money.

Teach Me

So what about iPad? Is there room in the continuum for a smaller, lower-priced tablet? Yes is the answer based on Apple's historical strategy. The question: Is it too soon, since iPad still sells so well starting at $499? Normally I would answer yes.

But there is another consideration: electronic textbooks. Last month, Apple kicked off a major push into the e-textbook market with iBooks 2, iBooks Author and iTunes U. Seems to me that an 8-inch iPad would be much better suited to reading books than iPad 2 (or presumably its successor).

However, just because Apple might be testing an 8-inch iPad doesn't mean we'll ever see it, or anytime soon. Apple is known for testing lots of products that either never come to market or do so much later as something else. For example, Apple was rumored to be testing a smartphone for years before Jobs announced one in January 2007.

So I regard any rumors of smaller iPad as only being somewhat credible. However if Apple was to release a smaller iPad this year, back-to-school season would make sense, except it would be uncharacteristic for a model so different to release so soon after major update to a flagship product -- in this case the forthcoming iPad 3.

So back to the question, if available, would you buy 8-inch iPad? Again, please answer in comments below and take the poll above.

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