Why Apple Will Probably Never Launch A “Cheap” iPhone

Yes, iPhone 5C has been touted as a cheaper iPhone but we all know by now that iPhone 5C is not a cheap phone by emerging market standards. But the pundits at Wall Street seem to have taken Apple to cleaners due to the lack of a cheaper iPhone a.k.a lack of a emerging market strategy

While I personally would like to see how a cheaper iPhone positions Apple in emerging markets, I seriously don’t think Apple as a brand and company will launch a cheap iPhone. Let me clarify that with cheap I mean a phone priced in the Rs. 25,000 range.

Reasons Why Apple will not launch a cheap iPhone

apple-iphone-cheap

Apple’s is about “Price Skimming” not “Price Penetration”

Price penetration seems to be the strategy that is working for the likes of Samsung in the Indian market wherein they flood the market with  enough low price phones that sell.

Apple on the other hand has always adopted the ‘Price Skimming’ strategy wherein they launch a new product with higher price point and then lower the price over a period of time. If you notice, every new iPhone launch marks a reduction of prices in the previous version phone thereby allowing late adopters to get an iPhone.

Apple has successfully used this pricing strategy for decades now and for all its products. there doesn’t seem to be a strong reason to change that for iPhone.

Apple has never played the “Cheap” game

One of the strongest reasons Apple has been able to use the ‘price skimming’ approach is due to inelastic demand- something which Apple has achieved by positioning its brand over the last few years.

It’s not in Apple’s DNA to play the game everyone else plays! Remember the ever popular ‘Think Different’ ad campaigns that Apple launched. Well, if everyone (read Samsung, Micromax) have cornered the market with feature packed yet “cheaper” phones suited to emerging markets, expect Apple to think differently and operate in the market differently.

So from a purely brand perspective, Apple will not like to be seen as a “me too” brand which is likely to happen if a cheaper iPhone enters the market.

Profit Leadership not Market Leadership could be the mantra

It is easy to look at market share statics and sing praises for Samsung’s position in the global smartphone market. Kudos to Samsung but then what if Apple has never been interested in playing the ‘Market Share’ game and rather focus on being  the profit leader that is. Apple apparently had gross margins of 49-58% on iPhone sales which is unheard of for any consumer electronic product.

Let’s forget the iPhone for a second. Pick any other Apple product and see that any product (Macbook, Macbook Air, iPad) is always priced higher than the competition. Could Apple not launch a cheaper Macbook with a plastic body and try to fight the marketshare battle with other laptop vendors. It could but you and me both know that it wouldn’t.

Also, for those who think Apple is not going to ruffle any feathers in the emerging markets, iPhone 5S reservations are almost sold out in Beijing, Hong Kong suggesting that there are enough buyers for Apple’s higher end iPhone for it to bother about launching a cheap iPhone.

What are your thoughts on industry’s expectations with Apple to launch a cheap iPhone?

3 Responses to Why Apple Will Probably Never Launch A “Cheap” iPhone

  1. That is one enlightening post on Apple’s market strategy! I am concerned & curious to see if Apple could maintain its powerful brand position in the market with the niche it has developed across innovation and user experience in coming years w/o legendary Steve Jobs.

    Samar
    wonderint.com

    • Thanks. It will be interesting to see how Apple answers the question around its ability to innovate like it used to but I don’t think change in pricing strategy is going to be on the cards

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