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New iPad owners pay big 'halo' dividends for Apple

iPad users twice as likely to buy only Apple products than other tablet owners

The iPad is giving Apple entree to millions of customers who have never purchased one of company's products before, a research firm said today.

One-in-four buyers of the iPad tablet is new to Apple, said Ben Arnold, director of industry analysis at the NPD Group. Arnold cited a recent poll of 3,000 members of NPD's consumer survey pool for the statistic.

"This is fairly significant because the sheer share of mindshare that the iPad has occupied puts apps on the consumer-in-general's radar," Arnold said in an interview Friday.

The iPad, Arnold continued, has replaced the iPod as Apple's primary "halo" maker -- the way the company attracts new customers to its ecosystem and exposes them to the other products in its portfolio.

"The iPod was music ... and everyone likes music, but the iPad is just a much more versatile device," Arnold argued as he talked about the tablet's halo effect. "The iPad is bringing new people into the brand, people who have had no previous presence in iTunes."

And by bringing in new customers through the iPad, Apple gains advantages other than the money people pay for the tablet.

During Apple's most recent earnings call with Wall Street analysts, the company's chief financial officer, Peter Oppenheimer, noted that iTunes revenue hit $1.9 billion in the first three months of 2012, a 35% increase over the same period a year ago.

Arnold attributed the jump in iTunes revenues to new iPad owners, and to a strengthening of the e-store's content offerings.

In a blog post today, Arnold expanded on the importance to Apple of these new iPad owners.

The average Apple product-owning household has 2.4 Apple devices, said Arnold, again calling on NPD survey results. "[That indicates] many homes are familiar with, if not already entrenched in, Apple's proprietary system of software, apps, and content," Arnold wrote.

iPad owners are likely to own even more Apple products: The average for them is 3.7 devices.

And once a household has entered the Apple ecosystem, it's much more likely to be an all-Apple home.

While just 36% of non-Apple households reported that buying technology from a brand they already own is an important purchasing factor, 45% of Apple owners said the same.

The difference for tablet buyers was even greater: 44% of iPad owners said brand-exclusiveness was important, while only 20% of non-Apple tablet owners cited that factor.

Why the brand loyalty to Apple? Because of the business model Apple pioneered, said Arnold.

"Apple's OS X, iOS and App Store are platforms specially tailored for their products," said Arnold. And consumers notice that interoperability.

iCloud, for example, which is Apple's free synchronization and storage service, is designed specifically for iOS and recent OS X devices, and keeps multiple devices up to date with apps as well as the usual calendars and contacts.

The so-called "walled garden" that Apple has built -- apps for the iPad and the iPhone are available only from the company's App Store -- cements a home's dedication to the Cupertino, Calif. firm's products: The more content they buy, the less likely they are to abandon it for another ecosystem.

"As these consumers consider additional electronics purchases, seamless access to the content they already own is likely to factor in to the hardware purchase decision more heavily," Arnold wrote today.

By NPD's one-in-four estimate, Apple has attracted nearly 12 million new-to-Apple customers in the last 12 months, a stretch during which it sold 47.6 million iPads.

This brand loyalty, and the scale of Apple's sales -- it has sold more than 67 million iPads since its 2010 debut -- puts Apple in a solid position should it decide to enter the smart TV market, Arnold added.

"Certainly, if a TV product came out [from Apple], I would definitely expect that current Apple product owners would be likely to purchase one," he said. "Apple's success is partially due to its ability to scale. However many millions of iDevices Apple's sold means that it has a huge installed household base of potential [Apple TV] buyers."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is [email protected].

See more by Gregg Keizer on Computerworld.com.

Read more about macintosh in Computerworld's Macintosh Topic Center.


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