The recent unveiling of the iPhone 6 and Apple Watch reminds us how far consumer technology has come in the last decade. In 2004, $300 could buy you an iPod capable of holding 10GB of music – no videos, photos or apps. Today, $300 can get you a 32GB iPod Touch, complete with the camera, touch screen and a myriad of apps which we have become accustomed to. 2004 was the same year Texas Instruments’ TI-84 – arguably the world’s most popular classroom graphic calculator – was released. The calculator retailed for about $150; today one can find it for…$151. Yes, while Apple, Toshiba and countless other companies have constantly cut prices and updated their technology, Texas Instruments (TI) still offers many of the same products at the same prices. So how has TI managed to maintain a 93% share of the graphics calculator market for ten years, even when competitors’ products can be half the price?
While peers like Apple and Dell face constant customer demand for updated technology, TI is in a special position – its customers are mostly school students. As a result TI’s customer turnover is exceptionally high, as old students move on and are replaced by new students each school year. Unlike big tech companies that must market new products to the same customers, TI need only sell the same products to new customers each year.
While student turnover plays a role in TI’s success, teachers are its ultimate targets. After all, they prescribe which calculators their students should purchase. The President of TI’s calculator division, Peter Balyta, has admitted that “it’s tempting for us to build in Wi-Fi, Bluetooth, audio, a camera, a whole bunch of things, we could do, but teachers don’t want us to”. If TI updated its calculators each year, teachers would have to put in more effort learning to use them. This is also what keeps TI’s customers from switching to competitors’ products. Amy Chow, the national training coordinator at TI’s biggest competitor, Casio, identified that “to switch over to a Casio, even though we do say it is easier to use, there is a little bit of a learning curve, the system set-ups are just slightly different. That is one thing we do struggle with, teachers worried about how long it is going to take them to learn”. TI does not need to frequently update its technology because it does not need to worry about coaxing the same students into purchasing a new calculator each year, and its real target – teachers – like it that way.
The student-teacher dynamic – where teachers dictate which calculator their students purchase – is also a main factor behind TI’s high prices. Whilst manufacturing costs make up about 50% of a typical iPhone’s price, they can be as low as 10% for TI’s calculators. That is why TI has heavily invested in teacher-support services like the Teachers Teaching with Technology program, which has taught more than 100,000 teachers how to use TI’s calculators since 1986. Such programs have helped TI maintain a 93% share of the graphics calculator market, even when competitors offer similar products for almost half their price. Evidently, teachers’ main concern when choosing their classes’ calculator is not price but ease of use, an easy choice when someone else is footing the bill.
When one examines the unique position TI is in, the company’s success is no surprise. By targeting the real arbiters, educators, TI has managed to maintain a near monopoly on the market, despite high prices and modest technological progress. Until those making the purchase decisions are also the ones footing the bill, 2004 may not seem so long ago.