THE THREE PRICE POINTS REMAIN THE
SAME
These price points have helped the
company sell a large number of
iPhones. Apple sold 31.2 million of them
in the most recent quarter, 20
percent more than the same quarter
last year. While the iPhone 5 is
undoubtedly a popular device, it's clear
that the low-cost iPhone 4 and 4S
have been propping up the sales
numbers: Verizon, the nation's
biggest wireless carrier by subscriber
numbers, revealed earlier this year
that half of its iPhone activations in
one particular quarter were iPhone 4
and 4S. Consumers want a cheaper
iPhone, but until now they’ve had to
settle for last year's model.
IT'S A CHEAPER IPHONE, BUT NOT A
CHEAP ONE
With the 5c, consumers do indeed get
a cheaper iPhone — but not
revolutionarily so. In reality, Apple is
positioning it firmly in the middle. The
specs include a 4-inch display, an
improved forward-facing camera, a
bigger battery, and a polycarbonate
colored shell. Essentially, it's an
iPhone 5 with a plastic body that Apple
is willing to sell as a new midrange
device. It’s keeping an 8GB 4s model,
which will be available free on
contract, or $450 less. Instead of
pushing iPhone price points down, as
many had expected, Apple’s new 5c
model is primarily designed to look and
feel new to consumers.
This midrange iPhone will undoubtedly
boost sales, but importantly it may
help with the product line’s average
selling price (ASP). A high ASP acts as
a barrier to penetrating more price-
sensitive markets — like China, for
instance, widely seen as an enormous
target for Apple’s continued success.
Since 2009, the ASP of the iPhone has
been well above $600, but in its latest
quarter that dropped significantly to $
581 from $613 in the previous
quarter. If Apple wants to improve on
that trend, it needs to increase
market share in the face of low-
priced Android devices worldwide. To
increase profits, it needs to sell more
iPhones as the smartphone market
starts to saturate at the high end.
WHAT ABOUT A CHEAP IPHONE FOR
CHINA?
The timing for focusing on lower-cost
hardware couldn't be better for Apple.
Google just revealed it has activated 1
billion Android handsets, Samsung's
devices continue to attack Apple's
smartphone profits, and ultra-cheap
Android handsets eat away at the all-
important Chinese market. A China
Mobile deal, widely expected to be
announced tomorrow for the iPhone
5c, will provide Apple with access to
over 700 million subscribers. This is a
key area of growth for smartphones,
and an opportunity for Apple to
capture some of the profits in a
region where Android devices
currently dominate with over 90
percent of the installed base.
However, without a wildly different
pricing model, or perhaps an 8GB model
of the 5c, it’s hard to see how Apple’s
colorful machine, that's priced at $
549 off contract , is primed to crack
the most populous wireless market on
the planet. Analysts had expected a
price between $400 and $500, a
sweet spot for Chinese smartphone
buyers. Strangely, Apple appears to
still be selling the iPhone 4 in China
for around $422 off contract, despite
not listing it on the main comparison
site. This may well change tomorrow,
too.
The iPhone 5c is Apple's answer to the
Android threat in the midrange, but
it’s merely a cheaper iPhone, not a
cheap one. Given Apple’s old strategy,
the iPhone 5 would have dropped to $
99 on contract today anyway. The
iPhone 5c could be a big deal in
established markets like the US,
where value carriers like T-Mobile
stand to benefit from a new iPhone
that isn’t coming to market with
premium pricing on day one. China,
though, remains a huge question
mark.
A COLORFUL MARKETING TRICK THAT
MIGHT JUST WORK
If Apple can manage to convince
consumers to buy the iPhone 5c in
favor of the free 4S, then it will
maintain and possibly even improve its
lucrative margins. Given the choice,
consumers may be more inclined to
spend $99 on what amounts to a
marketing trick: a "new" colorful
iPhone with the internals of the old,
instead of a free model that features
the last-generation iPhone design.
Apple has always been good at pushing
its customers to spend a little more —
and in established markets, that could
be the case once again with the
iPhone 5c. But for now, all eyes turn
eastward.
RELATED ITE .com/2013/9/10/4716286/iphone-5c-not-a-cheap-iphone-just-colorful/in/4479677
SAME
These price points have helped the
company sell a large number of
iPhones. Apple sold 31.2 million of them
in the most recent quarter, 20
percent more than the same quarter
last year. While the iPhone 5 is
undoubtedly a popular device, it's clear
that the low-cost iPhone 4 and 4S
have been propping up the sales
numbers: Verizon, the nation's
biggest wireless carrier by subscriber
numbers, revealed earlier this year
that half of its iPhone activations in
one particular quarter were iPhone 4
and 4S. Consumers want a cheaper
iPhone, but until now they’ve had to
settle for last year's model.
IT'S A CHEAPER IPHONE, BUT NOT A
CHEAP ONE
With the 5c, consumers do indeed get
a cheaper iPhone — but not
revolutionarily so. In reality, Apple is
positioning it firmly in the middle. The
specs include a 4-inch display, an
improved forward-facing camera, a
bigger battery, and a polycarbonate
colored shell. Essentially, it's an
iPhone 5 with a plastic body that Apple
is willing to sell as a new midrange
device. It’s keeping an 8GB 4s model,
which will be available free on
contract, or $450 less. Instead of
pushing iPhone price points down, as
many had expected, Apple’s new 5c
model is primarily designed to look and
feel new to consumers.
This midrange iPhone will undoubtedly
boost sales, but importantly it may
help with the product line’s average
selling price (ASP). A high ASP acts as
a barrier to penetrating more price-
sensitive markets — like China, for
instance, widely seen as an enormous
target for Apple’s continued success.
Since 2009, the ASP of the iPhone has
been well above $600, but in its latest
quarter that dropped significantly to $
581 from $613 in the previous
quarter. If Apple wants to improve on
that trend, it needs to increase
market share in the face of low-
priced Android devices worldwide. To
increase profits, it needs to sell more
iPhones as the smartphone market
starts to saturate at the high end.
WHAT ABOUT A CHEAP IPHONE FOR
CHINA?
The timing for focusing on lower-cost
hardware couldn't be better for Apple.
Google just revealed it has activated 1
billion Android handsets, Samsung's
devices continue to attack Apple's
smartphone profits, and ultra-cheap
Android handsets eat away at the all-
important Chinese market. A China
Mobile deal, widely expected to be
announced tomorrow for the iPhone
5c, will provide Apple with access to
over 700 million subscribers. This is a
key area of growth for smartphones,
and an opportunity for Apple to
capture some of the profits in a
region where Android devices
currently dominate with over 90
percent of the installed base.
However, without a wildly different
pricing model, or perhaps an 8GB model
of the 5c, it’s hard to see how Apple’s
colorful machine, that's priced at $
549 off contract , is primed to crack
the most populous wireless market on
the planet. Analysts had expected a
price between $400 and $500, a
sweet spot for Chinese smartphone
buyers. Strangely, Apple appears to
still be selling the iPhone 4 in China
for around $422 off contract, despite
not listing it on the main comparison
site. This may well change tomorrow,
too.
The iPhone 5c is Apple's answer to the
Android threat in the midrange, but
it’s merely a cheaper iPhone, not a
cheap one. Given Apple’s old strategy,
the iPhone 5 would have dropped to $
99 on contract today anyway. The
iPhone 5c could be a big deal in
established markets like the US,
where value carriers like T-Mobile
stand to benefit from a new iPhone
that isn’t coming to market with
premium pricing on day one. China,
though, remains a huge question
mark.
A COLORFUL MARKETING TRICK THAT
MIGHT JUST WORK
If Apple can manage to convince
consumers to buy the iPhone 5c in
favor of the free 4S, then it will
maintain and possibly even improve its
lucrative margins. Given the choice,
consumers may be more inclined to
spend $99 on what amounts to a
marketing trick: a "new" colorful
iPhone with the internals of the old,
instead of a free model that features
the last-generation iPhone design.
Apple has always been good at pushing
its customers to spend a little more —
and in established markets, that could
be the case once again with the
iPhone 5c. But for now, all eyes turn
eastward.
RELATED ITE .com/2013/9/10/4716286/iphone-5c-not-a-cheap-iphone-just-colorful/in/4479677
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