Opinion: Can Apple afford to go cheaper with new iPhones?
Interesting question. Based on how Apple has branded itself it can't go cheaper. They are doing fine with their current marketing strategy. What they should do is expand the screen size up to 5 inches but keep the same premium materials. Too be honest they should do with the iPhone what they have done with the iPad. Make two different models. Keep the current model / screen size and just make bigger one.
That will steal market share from the bigger phone screen makes and still be true to the apple brand.
Who knows, maybe Apple will release an iPhone without storage, i.e. just a phone no app store. People on low incomes who can't afford a smartphone don't buy from apps or from iTunes anyway so why give them storage space for things they don't need.
Who knows, maybe Apple will release an iPhone without storage, i.e. just a phone no app store.
That makes zero sense.
People on low incomes who can't afford a smartphone don't buy from apps or from iTunes anyway so why give them storage space for things they don't need.
People on low incomes who can't afford a smartphone (anyone can afford a smartphone if they want to game the system hard enough) don't have iPhones in the first place! This isn't a concern for them!
Why would Apple make a product for a MARKET THAT BY DEFINITION CANNOT BUY SAID PRODUCT?!
People on low incomes who can't afford a smartphone (anyone can afford a smartphone if they want to game the system hard enough) don't have iPhones in the first place! This isn't a concern for them! :???: :no:
Why would Apple make a product for a MARKET THAT BY DEFINITION CANNOT BUY SAID PRODUCT?!
They would be making a cheaper product. We've remedially explained this.
And most of the world can afford a smart phone if they are cheap enough. At about $200 you hit the world mass market. A market where incomes aren't stagnating.
I get a fair amount of Westernised snobbery in the opposition to a cheaper model - otherwise the opposition doesn't make sense( why care if the manufacturer of your phone produces other models? In fact why not be in favour of it since it increase platform size and guarantees developer interest?).
I still don't understand how this US centric websites insist on saying that the on-contract price of any phone, IS the actual price of the device.
Yes, the iPhone (the original one, the mistakenly known as "2G") was 599 at release, and then was slashed to 399 in the following months. However that was the price to own the device, not a subsidized price that has yet 2 years of monthly payments (including service) ahead, to fully own the device.
When the iPhone was released on 2007, it was handled completely different to any other device on existence: you had to pay the full price on the store, and later you could activate at home. You could bypass the need of a contract (sure, you were locked to AT&T, but this iPhone has to be the easiest to unlock in the history of mankind), and own the device for 399.
But then, the 3G came, and was offered at 199. But it was the subsidized price ON-CONTRACT. So realistically, the FULL PRICE of the iPhone 3G WAS NOT 199, nor it was "offered at half the price of the original iPhone".
And don't let me start on inflation... 399 2007-USD were more money than 399 nowadays-USD. But thats another story.
I honestly think in their next update, Apple needs to drop both the 4 and the 4S, and come out with one "lower end" phone to replace those, and one "higher end" to replace the succeed the 5.
For the iPad, they should drop both the iPad 2 and the iPad4, update the mini to retina, and introduce the iPad 5 ("new iPad) for $399. This will simplify the product line and make the full sized iPad more lucrative. I doubt they want the mini eating most of the sales of the regular sized iPad, and right now the price gap between the 2 is too large. So they would have:
- new lower end iPhone (polycarbonate?)
- iPhone 5
- new higher end iPhone (5S? Larger screen?)
- iPad mini (retina)
- iPad (using mini design)
This would also serve to deprecate all non lightning products, and I think make it easier for people to make a decision. I understand the need for the "in between" products because of pricing dynamics, but I think they can move past that now. Oh, and they should also drop the old style MBPs soon.
Fully agree with this hi-lo strategy. The problem in this plan is the risk. Apple puts out one phone a year. If they have issues ("your're holding it wrong"), then they won't have last year's tried and tested device to sell while fixing the current one. The only work around is offsetting launches for the hi and lo products.
Beyond that, there's risk that a hi-lo strategy will hurt margins in a number of ways. To start with, costs will be amortized over a much shorter run and new costs will be introduced. Today Apple can design an iPhone and get a 3 year run out of it. In the future, it'll get a one-year run before having to redesign the same internals in a plastic shell.
On the iPad, the strategy is less risky. I think the iPad 2 probably hurts them. I am willing to bet that if it wasn't offered, sales wouldn't suffer a ton. Those who could afford it would upgrade to the full-size iPad and those who just wanted to enter the pool would go down to the Mini.
Your figure is over the lifetime of the account? In that case (at least in the US) Apple still makes a lot more money off the hardware (don't forget, there are carrier kickbacks).
What i was saying was that iTunes accounts + carrier kickbacks are the reason Apple will make a lower-cost phone.
Figure is over the lifetime of the account up until when the study was conducted. I have no idea what the "average age" of an iTunes account in England is, but i would assume something like 3-4 years; similar to how long most people keep their phones/iPads.
Also, I think iTunes sales have the potential for far more growth per-customer than hardware sales. Not sure how Apple can get more out of iPhone users on a per-customer basis besides getting people to replace phones more frequently or jacking up profit margins. On the other hand, they still have a ways to go before they get iPhone users to purchase 100% of their content via iTunes.
So presumably between $3BN and $4BN profit. Not too shabby.
Between 12/9/12 and 6/2/13, iTunes sold 5 billion songs alone. If that pace is steady, that's about 15 billion songs/year (when in fact sales are rapidly accelerating). At 99 cents per song, apple's 30% cut is about $4.5 billion - just for music. iTunes is now the dominant retailer in the music industry, and getting to the same position in the video/television industry is only a matter of time.
It'll be interesting to check out the earnings report and see the year-over-year growth compared to phone sales and compared to computer sales.
Your figure is over the lifetime of the account? In that case (at least in the US) Apple still makes a lot more money off the hardware (don't forget, there are carrier kickbacks).
Just a note...
If you meant the monthly contract sharing, it stopped with the first iPhone. That idea failed because of all the unlocked phones being sold to people on carriers with no monthly Apple payment deal.
Instead, with the iPhone 3G, Apple switched to the usual subsidy model, where carriers simply paid Apple full price up front. As AT&T stated at the time:
"The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple."
Now, there are minimum sales deals, such as the one that Sprint made with Apple where they promised to sell X amount of iPhones.
As for revenue kickbacks, Apple is said to share a small portion of App Store sales with the associated carriers.
Can't really measure this since we don't get iPhones directly from Apple. Apple officially don't sell to Sri Lanka. (One of Apple's issues) and we get through various channels that I am only the last link.
So new iPhone 5 16GB the best I can give is 750USD with about 30USD. Max I sell it for 790USD.
The other issue is Apple's own marketing is zero here, it's only vendors like us do the little marketing. Apple's presence is zero on local terms.
Against that Samsung is heavy on their marketing. They have official presence here. As a dealership and all carriers ties. So everyone is marketing Samsung. And of cause cheap Android knock offs gives Samsung a premium spot in the market.
Apple simply do not understand the real situation here on American perspectives, this is I am sure how India is, world's second largest mobile market. Where others also heavily market (RIM, NOKIA, Indian Brands)
So Apple is the disappearing kind. Unless they come of really new very soon.
Your question.
Samsung here have flooded the each and ever price point from cheap feature phones to Android 110USD Galaxy Y to 860USD Galaxy S4, Tabs, phablets, phones, TVs, printers, electronics everything...
Someone who makes a smartphone that is basically as good as the iPhone--or at least "good enough"--will radically undercut the iPhone on price.
(happening - Samsung, Android)
That's what tends to happen in consumer technology markets. And Apple's massive profit margin leaves it highly exposed to this kind of competition.
If a high-end smartphone market radically undercuts the iPhone on price, Apple will either be forced to sit and watch as it loses sales to the cheaper competitor... or match the competitor's price.
A big issue with a "cheaper" iPhone would be what features they could take away from, or what features they could add to the high-end phone.
They can't release a smaller-storage version, because that would handicap content sales via iTunes. -> full phones mean people are less likely to buy those TV episodes/movies/apps, especially the folks who aren't big on micromanaging what's on their phones. They can't release a non-retina phone or a slower processor phone because it would cause too much instability in the App Store - relying on all developers to support too many configurations would risk breaking the simplicity of the current product lines and the relative stability of everything on the store.
That basically leaves the camera, siri and materials as the only ways I can think of that would be places where apple could go 2-tier. Problem is, those things maybe wouldn't differentiate the high end phone enough for most people to justify spending an extra couple hundred bucks - really, if you could save $200 by going with a 6MP camera instead of 12MP, plexiglass/plastic backplate instead of aluminum, and no Siri support but otherwise same screen and internals, don't you think a lot of people will just go for the cheap version?
So, probably their best bet will be to continue the current "cheaper phone is last year's model" system, unless there is a new killer feature on future phones that might give them a better opportunity for a neutered/cheaper phone - maybe a much upgraded lens for the camera, "custom" or "luxury" back panels or something like 4G versions selling at a premium (would maybe only work until the majority of android phones were 4G, at which point it would become expected on all phones)?
You are "very"American color. The world is ultra luminous ;-D
Just look at the Samsung portfolio you will see how to differentiate. I know it is a soup of 90 devices a year. But it DID established the Android Platform for Google.
So ain't Apple smart enough to figure out at least three (5 ideally) market segments?
This is not a demographics on my view, rather price points or features, hardware or software.
Category 1
1. School (Safety/ Being in touch/ Locate)
2. Teenage (Fun)
Category 2
3. Worker/ Starter (Work)
4. Junior Executive/ Manager (Management/ Work)
Category 3
5. Affluent/ Celebrity (Hype)
6. Specific high-skill professional market (photographer, doctor, scientist)
If you meant the monthly contract sharing, it stopped with the first iPhone. That idea failed because of all the unlocked phones being sold to people on carriers with no monthly Apple payment deal.
Instead, with the iPhone 3G, Apple switched to the usual subsidy model, where carriers simply paid Apple full price up front. As AT&T stated at the time:
"The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple."
Now, there are minimum sales deals, such as the one that Sprint made with Apple where they promised to sell X amount of iPhones.
As for revenue kickbacks, Apple is said to share a small portion of App Store sales with the associated carriers.
Can't really measure this since we don't get iPhones directly from Apple. Apple officially don't sell to Sri Lanka. (One of Apple's issues) and we get through various channels that I am only the last link.
So new iPhone 5 16GB the best I can give is 750USD with about 30USD. Max I sell it for 790USD.
The other issue is Apple's own marketing is zero here, it's only vendors like us do the little marketing. Apple's presence is zero on local terms.
Against that Samsung is heavy on their marketing. They have official presence here. As a dealership and all carriers ties. So everyone is marketing Samsung. And of cause cheap Android knock offs gives Samsung a premium spot in the market.
Apple simply do not understand the real situation here on American perspectives, this is I am sure how India is, world's second largest mobile market. Where others also heavily market (RIM, NOKIA, Indian Brands)
So Apple is the disappearing kind. Unless they come of really new very soon.
Your question.
Samsung here have flooded the each and ever price point from cheap feature phones to Android 110USD Galaxy Y to 860USD Galaxy S4, Tabs, phablets, phones, TVs, printers, electronics everything...
It's the new SONY here.
Interesting, thank you! It looks like Samsung's strategy is simple -- look at the map, find untapped markets, pounce. Can't fault them...
Comments
Opinion: Can Apple afford to go cheaper with new iPhones?
Interesting question. Based on how Apple has branded itself it can't go cheaper. They are doing fine with their current marketing strategy. What they should do is expand the screen size up to 5 inches but keep the same premium materials. Too be honest they should do with the iPhone what they have done with the iPad. Make two different models. Keep the current model / screen size and just make bigger one.
That will steal market share from the bigger phone screen makes and still be true to the apple brand.
Originally Posted by aderutter
Who knows, maybe Apple will release an iPhone without storage, i.e. just a phone no app store.
That makes zero sense.
People on low incomes who can't afford a smartphone don't buy from apps or from iTunes anyway so why give them storage space for things they don't need.
People on low incomes who can't afford a smartphone (anyone can afford a smartphone if they want to game the system hard enough) don't have iPhones in the first place! This isn't a concern for them!
Why would Apple make a product for a MARKET THAT BY DEFINITION CANNOT BUY SAID PRODUCT?!
They would be making a cheaper product. We've remedially explained this.
And most of the world can afford a smart phone if they are cheap enough. At about $200 you hit the world mass market. A market where incomes aren't stagnating.
I get a fair amount of Westernised snobbery in the opposition to a cheaper model - otherwise the opposition doesn't make sense( why care if the manufacturer of your phone produces other models? In fact why not be in favour of it since it increase platform size and guarantees developer interest?).
It's a misguided financial snobbery.
Yes, the iPhone (the original one, the mistakenly known as "2G") was 599 at release, and then was slashed to 399 in the following months. However that was the price to own the device, not a subsidized price that has yet 2 years of monthly payments (including service) ahead, to fully own the device.
When the iPhone was released on 2007, it was handled completely different to any other device on existence: you had to pay the full price on the store, and later you could activate at home. You could bypass the need of a contract (sure, you were locked to AT&T, but this iPhone has to be the easiest to unlock in the history of mankind), and own the device for 399.
But then, the 3G came, and was offered at 199. But it was the subsidized price ON-CONTRACT. So realistically, the FULL PRICE of the iPhone 3G WAS NOT 199, nor it was "offered at half the price of the original iPhone".
And don't let me start on inflation... 399 2007-USD were more money than 399 nowadays-USD. But thats another story.
Just a clarification.
Quote:
Originally Posted by Slurpy
I honestly think in their next update, Apple needs to drop both the 4 and the 4S, and come out with one "lower end" phone to replace those, and one "higher end" to replace the succeed the 5.
For the iPad, they should drop both the iPad 2 and the iPad4, update the mini to retina, and introduce the iPad 5 ("new iPad) for $399. This will simplify the product line and make the full sized iPad more lucrative. I doubt they want the mini eating most of the sales of the regular sized iPad, and right now the price gap between the 2 is too large. So they would have:
- new lower end iPhone (polycarbonate?)
- iPhone 5
- new higher end iPhone (5S? Larger screen?)
- iPad mini (retina)
- iPad (using mini design)
This would also serve to deprecate all non lightning products, and I think make it easier for people to make a decision. I understand the need for the "in between" products because of pricing dynamics, but I think they can move past that now. Oh, and they should also drop the old style MBPs soon.
Fully agree with this hi-lo strategy. The problem in this plan is the risk. Apple puts out one phone a year. If they have issues ("your're holding it wrong"), then they won't have last year's tried and tested device to sell while fixing the current one. The only work around is offsetting launches for the hi and lo products.
Beyond that, there's risk that a hi-lo strategy will hurt margins in a number of ways. To start with, costs will be amortized over a much shorter run and new costs will be introduced. Today Apple can design an iPhone and get a 3 year run out of it. In the future, it'll get a one-year run before having to redesign the same internals in a plastic shell.
On the iPad, the strategy is less risky. I think the iPad 2 probably hurts them. I am willing to bet that if it wasn't offered, sales wouldn't suffer a ton. Those who could afford it would upgrade to the full-size iPad and those who just wanted to enter the pool would go down to the Mini.
Quote:
Originally Posted by igriv
Your figure is over the lifetime of the account? In that case (at least in the US) Apple still makes a lot more money off the hardware (don't forget, there are carrier kickbacks).
What i was saying was that iTunes accounts + carrier kickbacks are the reason Apple will make a lower-cost phone.
Figure is over the lifetime of the account up until when the study was conducted. I have no idea what the "average age" of an iTunes account in England is, but i would assume something like 3-4 years; similar to how long most people keep their phones/iPads.
Also, I think iTunes sales have the potential for far more growth per-customer than hardware sales. Not sure how Apple can get more out of iPhone users on a per-customer basis besides getting people to replace phones more frequently or jacking up profit margins. On the other hand, they still have a ways to go before they get iPhone users to purchase 100% of their content via iTunes.
Quote:
Originally Posted by igriv
So presumably between $3BN and $4BN profit. Not too shabby.
Between 12/9/12 and 6/2/13, iTunes sold 5 billion songs alone. If that pace is steady, that's about 15 billion songs/year (when in fact sales are rapidly accelerating). At 99 cents per song, apple's 30% cut is about $4.5 billion - just for music. iTunes is now the dominant retailer in the music industry, and getting to the same position in the video/television industry is only a matter of time.
It'll be interesting to check out the earnings report and see the year-over-year growth compared to phone sales and compared to computer sales.
Quote:
Originally Posted by igriv
Your figure is over the lifetime of the account? In that case (at least in the US) Apple still makes a lot more money off the hardware (don't forget, there are carrier kickbacks).
Just a note...
If you meant the monthly contract sharing, it stopped with the first iPhone. That idea failed because of all the unlocked phones being sold to people on carriers with no monthly Apple payment deal.
Instead, with the iPhone 3G, Apple switched to the usual subsidy model, where carriers simply paid Apple full price up front. As AT&T stated at the time:
"The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple."
Now, there are minimum sales deals, such as the one that Sprint made with Apple where they promised to sell X amount of iPhones.
As for revenue kickbacks, Apple is said to share a small portion of App Store sales with the associated carriers.
Can't really measure this since we don't get iPhones directly from Apple. Apple officially don't sell to Sri Lanka. (One of Apple's issues) and we get through various channels that I am only the last link.
So new iPhone 5 16GB the best I can give is 750USD with about 30USD. Max I sell it for 790USD.
The other issue is Apple's own marketing is zero here, it's only vendors like us do the little marketing. Apple's presence is zero on local terms.
Against that Samsung is heavy on their marketing. They have official presence here. As a dealership and all carriers ties. So everyone is marketing Samsung. And of cause cheap Android knock offs gives Samsung a premium spot in the market.
Apple simply do not understand the real situation here on American perspectives, this is I am sure how India is, world's second largest mobile market. Where others also heavily market (RIM, NOKIA, Indian Brands)
So Apple is the disappearing kind. Unless they come of really new very soon.
Your question.
Samsung here have flooded the each and ever price point from cheap feature phones to Android 110USD Galaxy Y to 860USD Galaxy S4, Tabs, phablets, phones, TVs, printers, electronics everything...
It's the new SONY here.
Simple. Don't make two products with the same features.
Make the iPhone cheaper, or figure out how to differentiate two enough.
If Apple don't respond. Don't worry. This will happen.
http://www.businessinsider.com/what-people-who-think-apple-is-bmw-dont-understand-2013-4
More likely,
In the Asian market.
Someone who makes a smartphone that is basically as good as the iPhone--or at least "good enough"--will radically undercut the iPhone on price.
(happening - Samsung, Android)
That's what tends to happen in consumer technology markets. And Apple's massive profit margin leaves it highly exposed to this kind of competition.
If a high-end smartphone market radically undercuts the iPhone on price, Apple will either be forced to sit and watch as it loses sales to the cheaper competitor... or match the competitor's price.
(Starting to happen Amazon, nexus)
A big issue with a "cheaper" iPhone would be what features they could take away from, or what features they could add to the high-end phone.
They can't release a smaller-storage version, because that would handicap content sales via iTunes. -> full phones mean people are less likely to buy those TV episodes/movies/apps, especially the folks who aren't big on micromanaging what's on their phones. They can't release a non-retina phone or a slower processor phone because it would cause too much instability in the App Store - relying on all developers to support too many configurations would risk breaking the simplicity of the current product lines and the relative stability of everything on the store.
That basically leaves the camera, siri and materials as the only ways I can think of that would be places where apple could go 2-tier. Problem is, those things maybe wouldn't differentiate the high end phone enough for most people to justify spending an extra couple hundred bucks - really, if you could save $200 by going with a 6MP camera instead of 12MP, plexiglass/plastic backplate instead of aluminum, and no Siri support but otherwise same screen and internals, don't you think a lot of people will just go for the cheap version?
So, probably their best bet will be to continue the current "cheaper phone is last year's model" system, unless there is a new killer feature on future phones that might give them a better opportunity for a neutered/cheaper phone - maybe a much upgraded lens for the camera, "custom" or "luxury" back panels or something like 4G versions selling at a premium (would maybe only work until the majority of android phones were 4G, at which point it would become expected on all phones)?
You are "very"American color. The world is ultra luminous ;-D
Just look at the Samsung portfolio you will see how to differentiate. I know it is a soup of 90 devices a year. But it DID established the Android Platform for Google.
So ain't Apple smart enough to figure out at least three (5 ideally) market segments?
This is not a demographics on my view, rather price points or features, hardware or software.
Category 1
1. School (Safety/ Being in touch/ Locate)
2. Teenage (Fun)
Category 2
3. Worker/ Starter (Work)
4. Junior Executive/ Manager (Management/ Work)
Category 3
5. Affluent/ Celebrity (Hype)
6. Specific high-skill professional market (photographer, doctor, scientist)
Quote:
Originally Posted by KDarling
Just a note...
If you meant the monthly contract sharing, it stopped with the first iPhone. That idea failed because of all the unlocked phones being sold to people on carriers with no monthly Apple payment deal.
Instead, with the iPhone 3G, Apple switched to the usual subsidy model, where carriers simply paid Apple full price up front. As AT&T stated at the time:
"The new agreement between Apple and AT&T eliminates the revenue-sharing model under which AT&T shared a portion of monthly service revenue with Apple."
Now, there are minimum sales deals, such as the one that Sprint made with Apple where they promised to sell X amount of iPhones.
As for revenue kickbacks, Apple is said to share a small portion of App Store sales with the associated carriers.
Interesting. One lives and learns, tnx!
Quote:
Originally Posted by Chandana
Can't really measure this since we don't get iPhones directly from Apple. Apple officially don't sell to Sri Lanka. (One of Apple's issues) and we get through various channels that I am only the last link.
So new iPhone 5 16GB the best I can give is 750USD with about 30USD. Max I sell it for 790USD.
The other issue is Apple's own marketing is zero here, it's only vendors like us do the little marketing. Apple's presence is zero on local terms.
Against that Samsung is heavy on their marketing. They have official presence here. As a dealership and all carriers ties. So everyone is marketing Samsung. And of cause cheap Android knock offs gives Samsung a premium spot in the market.
Apple simply do not understand the real situation here on American perspectives, this is I am sure how India is, world's second largest mobile market. Where others also heavily market (RIM, NOKIA, Indian Brands)
So Apple is the disappearing kind. Unless they come of really new very soon.
Your question.
Samsung here have flooded the each and ever price point from cheap feature phones to Android 110USD Galaxy Y to 860USD Galaxy S4, Tabs, phablets, phones, TVs, printers, electronics everything...
It's the new SONY here.
Interesting, thank you! It looks like Samsung's strategy is simple -- look at the map, find untapped markets, pounce. Can't fault them...
Apple will release a new low cost iPhone only if it makes sense.