Any reasons as to why the iPhone 5C isn't cheap

[anon(4698833)]

Apples prices are almost never fair, which is especially evident by their high margin price on memory increases for iOS devices.

What is "fair"? I find Apple's pricing perfectly fair, especially after considering the kind of support you receive with such, because you simply will not find this level of consumer focused support anywhere else in the market...customer service alone serves as a good pricing justifier, and that's just one piece of the pie. Once you start factoring in things like product satisfaction amongst the consumer, near effortless ownership experience and an unmatched value retention...the cost of Apple products begins to almost become a BARGAIN in comparison with other products on the market.

Apple is a business first and foremost, and they are in this game to make a profit...they just happen to have a pretty good hold on the proper way to do this successfully year after year...by making a great product but also, supporting the great product with even better service.

 

[kch50428]

Apples prices are almost never fair, which is especially evident by their high margin price on memory increases for iOS devices.

And what would be "fair" to you? From each according to their ability, to each according to their needs?

 

[Fausty82]

And what would be "fair" to you? From each according to their ability, to each according to their needs?

Is that you, Karl?

To the OP, I agree with the others... Apple's prices are fair... they produce a quality product, back it up with a warranty and hands on support like no other. But the great thing about a free market economy is that if you don’t think it’s a fair price, you don’t have to buy their products.

 

[Derrick4Real]

Apples prices are almost never fair, which is especially evident by their high margin price on memory increases for iOS devices.

I don't think fairness is an issue. I find apple devices overpriced and expensive. Always have been. And the only devices i've ever felt worth the added cost until now was the ipod and the iphone. That said i'm going to get my first mac book when the pros get new chips which they should have a long time ago but apple doesn't seem to be able to deliver but i digress. They charge what the market bears and it's my choice as a consumer to buy or not buy it. But fairness isn't an issue. Apple owes me nothing. Well they need to pay their taxes but other than that they don't owe me a price.

 

[YorkieRay]

“However, the reality of the iPhone 5c is completely different, with Apple offering a phone with a $173 BOM and manufacturing cost, and a $549 price tag—without subsidies. Once again, Apple has stuck to its old tried-and-true formula of optimizing its iPhone hardware gross margins to attain maximum profitability.”

Apple Continues Familiar Design and Pricing Strategy with iPhone 5c, IHS Teardown Reveals - IHS iSuppli’s® Teardown portal provides deeper insights into bill of materials, BOM cost, photo analysis and graphical representation of electronics. To le

 

[Fausty82]

“However, the reality of the iPhone 5c is completely different, with Apple offering a phone with a $173 BOM and manufacturing cost, and a $549 price tag—without subsidies. Once again, Apple has stuck to its old tried-and-true formula of optimizing its iPhone hardware gross margins to attain maximum profitability.”

Apple Continues Familiar Design and Pricing Strategy with iPhone 5c, IHS Teardown Reveals - IHS iSuppli?€™s® Teardown portal provides deeper insights into bill of materials, BOM cost, photo analysis and graphical representation of electronics. To le

And your point is?

Want to compare your bank account balance to Apple's?

 

[Fausty82]

Apples prices are almost never fair, which is especially evident by their high margin price on memory increases for iOS devices.

I don't think fairness is an issue. I find apple devices overpriced and expensive. Always have been. And the only devices i've ever felt worth the added cost until now was the ipod and the iphone. That said i'm going to get my first mac book when the pros get new chips which they should have a long time ago but apple doesn't seem to be able to deliver but i digress. They charge what the market bears and it's my choice as a consumer to buy or not buy it. But fairness isn't an issue. Apple owes me nothing. Well they need to pay their taxes but other than that they don't owe me a price.

"Fairness" is relative. When everyone talks about the "cost of materials" and want to argue that Apple is gouging its customers, the one thing that is always left out of the equation is R&D. It’s not a "component" in the sense that a memory chip or a screen is a component, but it is a vital part of the device. And at what cost? Do you know what Apple spends on research and development? I don’t have any idea. But I know that developing cool stuff takes a lot of hard work, and their products are certainly worthy of their price tag. The market certainly seems to agree. They sell enough of them... and when things are priced not as inexpensively as some would want, everyone says that Apple is overcharging and/or not "fair". Not sure what that even means.

And as far as Apple's tax situation, they pay every dollar that they owe. They also take every tax break to which they are entitled. I’d wager that you do, too. So let’s leave the inference of any tax impropriety out of the discussion, shall we?

 

[jmr1015]

As others have stated, the "C" in iPhone 5C was never meant to stand for cheap.

and as for people arguing Apple's pricing structure: Once again... Apple isn't forcing anyone to buy their products.

It doesn't matter how much the phone is worth in raw materials and components. It doesn't matter how large the margins are on the iPhone. It doesn't matter how Apple arrived at the price they are asking. It doesn't matter how much other products in Apple's lineup cost relative to the iPhone.

Straight up, Apple is charging a price. People are willing to pay that price. End of story.

 

[YorkieRay]

And your point is?

Want to compare your bank account balance to Apple's?

I'm not revealing what my bank balance is here, but I can tell you that Apple's bank balance in cash, at the last count, was US$130bn. That's enough to buy out many a small and medium sized country.
I have seen claims here that Apple is a "luxury" or "premium" brand to be compared to Gucci or Bentley. There is nothing wrong with making products and then pricing them for a particular sector of the market. The problem is that you should not need to have to buy a Bentley to complete a particular journey, when a Nissan would be perfectly sufficient. Also, wouldn't a luxury device lose its exclusive status if every other person with a smartphone has one? Verizon have just reported that half of the smartphones they sell in the US are iPhones.
I'm in the UK and we subscribe to Virgin Media for cable tv. They have a remote access service called TV Anywhere for which the only mobile devices that can access it are those made by Apple. This is not unique and you know that often the only available apps for particular services are for the iPhone and iPad.
I had expected Apple to price a wholly new phone at around $350, but they took the easy option and just re-skinned the iPhone 5 and only marginally reduced the price.
They have the perfect situation, for them, in that they have the largest selection of apps AND the most expensive phones, which means that they are only second to Exxon as the world's most profitable company. They really should be making genuinely cheaper phones themselves or licensing others to make phones running iOS.

 

[YorkieRay]

Apple is not a charity. It's a corporation that has a fiduciary duty to its shareholders to make as much money as possible. They have determined that their current price structure fulfills that duty. At such point that it no longer does, I would expect them to change.
There is no reason they "should" make cheaper phones just because you would like to pay less when many millions of people are willing to pay the current prices.

I noticed that you have picked on what was probably my weakest comment, nothing else that I said had been challenged.
I think that most Apple customers are just not aware of how much money the company makes from them at present and the high margins they have on their products. This may change if Apple ever surpasses Exxon to become the world's most profitable company.
I challenge you to ask your iPhone owning friends to guess how much profit Apple made during 2012. I just wonder how many will get even close to the real figure of $41.6bn.

 

[Fausty82]

I noticed that you have picked on what was probably my weakest comment, nothing else that I said had been challenged.
I think that most Apple customers are just not aware of how much money the company makes from them at present and the high margins they have on their products. This may change if Apple ever surpasses Exxon to become the world's most profitable company.
I challenge you to ask your iPhone owning friends to guess how much profit Apple made during 2012. I just wonder how many will get even close to the real figure of $41.6bn.

Apple also provides the type of high-end customer support/service that it's customers have come to expect. I am willing to pay my hard earned money for a quality product that "just works" and provides the exceptional customer service. Apple doesn't just sell phones, tablets and computers ? they sell an experience.

Samsung, HTC, Microsoft and RIM cannot compete on that level. They never will because they are all about the bottom line.


Sent from a galaxy far, far away via Tapatalk.

 

[jmr1015]

I have seen claims here that Apple is a "luxury" or "premium" brand to be compared to Gucci or Bentley. There is nothing wrong with making products and then pricing them for a particular sector of the market. The problem is that you should not need to have to buy a Bentley to complete a particular journey, when a Nissan would be perfectly sufficient. Also, wouldn't a luxury device lose its exclusive status if every other person with a smartphone has one? Verizon have just reported that half of the smartphones they sell in the US are iPhones.

Apple is a premium brand. They make high quality products at a premium price and offer a user experience, and customer service and support, unrivaled in each products respective category. The iMac is a premium desktop. The MacBook Pro and Air are premium laptops. The iPod is a premium media device. The iPhone is a premium smartphone.

Apple is not making luxury, or exclusive items. Their price may make them seem luxury or exclusive to those who can not afford them. But they are simply premium items.

and no. More people owning a premium device does not decrease the devices status as premium. It shows that many people see value in that device, and are willing to pay that premium price.

I'm in the UK and we subscribe to Virgin Media for cable tv. They have a remote access service called TV Anywhere for which the only mobile devices that can access it are those made by Apple. This is not unique and you know that often the only available apps for particular services are for the iPhone and iPad.

Cool. Guess you should get an iOS device to take advantage of that service that Virgin Media has decided to only offer on iOS. Having an exclusive app selection is part of that whole premium experience.

I had expected Apple to price a wholly new phone at around $350, but they took the easy option and just re-skinned the iPhone 5 and only marginally reduced the price.

A lot of people expected Apple to make a cheap phone. A lot of people were wrong. Just like a lot of people were wrong thinking Apple would make desktops and laptops to compete in the low to mid range PC price bracket.

and they didn't take the "easy option". They made a new device to sell in place of the iPhone 5. Which normally would be marginally discounted and sold alongside the iPhone 5S. Instead, they designed a new body and colors for the iPhone 5's internals, and offered that, in place of the 5. They never said it was going to be a whole new, or a cheap phone. The media and bloggers were the ones spitting that out.

They have the perfect situation, for them, in that they have the largest selection of apps AND the most expensive phones, which means that they are only second to Exxon as the world's most profitable company. They really should be making genuinely cheaper phones themselves or licensing others to make phones running iOS.

Why should they be making cheaper phones? Or letting other manufacturers tarnish the iOS reputation by putting it on their crap devices? It's literally been said time and time again: No one is forcing people to buy Apple products. Apple is charging a fair price for a premium device that offers a premium experience. Many many many people see the value in the device at its pricing... indeed, some see value above Apple's price, which is why some are being sold on eBay and Amazon above Apple's retail pricing.

Apple's success is equal parts margins, and demand. They could sell the iPhone for $2000 for a 16gb model, and some people will still see the value in it and buy it. But pricing it where it is, is in the sweet spot between high margins and affordability for the masses. They do not owe anyone a cheaper price... and as stated above, as a publicly traded company, they have a duty to their shareholders to maximize profitability. Luckily, they have managed to do this without reducing the quality of their products or support services... or pricing their products out of reach for the masses, as the sales numbers support.

 

[BlackBerry Guy]

I noticed that you have picked on what was probably my weakest comment, nothing else that I said had been challenged.
I think that most Apple customers are just not aware of how much money the company makes from them at present and the high margins they have on their products. This may change if Apple ever surpasses Exxon to become the world's most profitable company.
I challenge you to ask your iPhone owning friends to guess how much profit Apple made during 2012. I just wonder how many will get even close to the real figure of $41.6bn.

Is it a bad thing for a customer to know how much profit a company makes off them? If they product is good and provides value in their mind, they will pay for it. Doesn't matter if it's Apple. Louis Vuitton, Omega, or Mercedes Benz. Profit is not a bad word. For me, my only consideration is, if they're making good money selling a product, then their customer service better be top notch.

 

[jmr1015]

and just comparing: the iPhone 5C's initial price at launch of $549 for an unlocked 16gb model is equal to the Blackberry Z10's initial price at launch in the US. AT&T offered it for $549.99 off-contract. 16gb to 16gb.

People didn't see value in the Z10 at that price, or the $199 subsidized price. Which is why Apple moved more iPhone 5C's launch weekend than Blackberry moved of the Z10 and Q10 combined at the end of their entire launch quarter. The Z10 can now be had for free on-contract, or $399 or less unlocked and contract free. Blackberry is still sitting on $900 million worth of these handsets. Why? Because Blackberry is charging a premium price, for a device that doesn't offer the same premium experience you get with iOS, or even Android... or Windows.

Blackberry has a seriously weak app selection and overall ecosystem, as well as simply adequate customer service and support... and many of their features can be had on an Android handset for cheaper, and at least Android handsets have Googles expansive services as an ecosystem and a large selection of apps without needing to side load from someone else's app store.

I stand by the statement that Blackberry OS 10 is great... but they need a much better handset to put it on, and much larger 3rd party app selection, if they want to ask iPhone money for it.

 

[YorkieRay]

Is it a bad thing for a customer to know how much profit a company makes off them? If they product is good and provides value in their mind, they will pay for it. Doesn't matter if it's Apple. Louis Vuitton, Omega, or Mercedes Benz. Profit is not a bad word. For me, my only consideration is, if they're making good money selling a product, then their customer service better be top notch.

I work for a major international company and I'm a shareholder in that company too. We are a much bigger company than Apple and we also make huge profits, yet they are still less than a quarter of Apple's. When we announce big profits, our customers complain that we are ripping them off, the same goes for Exxon, yet Apple's high margins and huge profits are celebrated by the customers who are paying for it. I doubt that Louis Vuitton or Omega even aspire to or aim for 50% of any market though.
I would like to see the Chinese do the same for the smartphone market now to what the Japanese did to the car market back in the 60s by bringing hardware prices down with good quality product. They are already producing phones that have 1080p full HD 5" screens, 13MP cameras and 2GB of ram that are less than half the price of an iPhone or a BB Z30 or a Galaxy S4. Sure the build quality will not be up to the Apple standard, but they are already assembling for Apple and they will get better. This is because companies like Xiaomi are prepared to produce high spec phones at a much lower price and then make their money off software and services. You have to hand it to Apple that they are clearly making huge profits from both, I just think that it will not be sustained into the future and that the market may react.

 

[YorkieRay]

and just comparing: the iPhone 5C's initial price at launch of $549 for an unlocked 16gb model is equal to the Blackberry Z10's initial price at launch in the US. AT&T offered it for $549.99 off-contract. 16gb to 16gb.

People didn't see value in the Z10 at that price, or the $199 subsidized price. Which is why Apple moved more iPhone 5C's launch weekend than Blackberry moved of the Z10 and Q10 combined at the end of their entire launch quarter. The Z10 can now be had for free on-contract, or $399 or less unlocked and contract free. Blackberry is still sitting on $900 million worth of these handsets. Why? Because Blackberry is charging a premium price, for a device that doesn't offer the same premium experience you get with iOS, or even Android... or Windows.

Blackberry has a seriously weak app selection and overall ecosystem, as well as simply adequate customer service and support... and many of their features can be had on an Android handset for cheaper, and at least Android handsets have Googles expansive services as an ecosystem and a large selection of apps without needing to side load from someone else's app store.

I stand by the statement that Blackberry OS 10 is great... but they need a much better handset to put it on, and much larger 3rd party app selection, if they want to ask iPhone money for it.

I agree that BlackBerry charged too much for their devices, especially the Q10 and the PlayBook. I negotiated a 30% discount on the contract for my Z10 with a zero deposit.
They have at least released a choice 4 wholly new models in 2013. Apple, with billions in the bank that could be spent on R&D, just have 2 phones with the same 4" screen, the 5c was the first additional new model from Apple in 6 years.

 

[YorkieRay]

I have just found someone who seems to share my point of view on Apple's pricing and margins, it's John Sculley, the former CEO of Apple in an interview with the UK's Daily Telegraph. The "commoditisation" of the iPhone also matches with Verizon's recent sales figures which suggest that one out of every two smartphones that they sell, is an iPhone. He is also right about software, I had already suggested that access to the iOS ecosystem should not be just limited to the most expensive, high margin devices on the market.

The challenge that Apple faces with its current business, Sculley says, is the rapid commoditisation of the products it is designing. "iPhone is beautiful. But guess what; so is Samsung, so are HTC’s phones. The hardware commoditises over time. It’s really all about the software."

Sculley says that Apple’s greatest problem will therefore be maintaining its customary high profit margins, and points to the prospect of the company moving in to payments or TV services.

John Sculley: Apple, Misfit Shine and the future of technology - Telegraph

You may also care to read this.

http://news.cnet.com/8301-13579_3-57609265-37/iphone-5c-5s-too-pricey-for-russian-shoppers-report-says/

 

[Auturi]

The iPhone 5c isn't cheap, and the iPhone 5s isn't cheap. Neither of them are cheap. They are both expensive.

People refer to the iPhone 5c as having last year's technology when it has the same 4 inch retina display as the iPhone 5s, and despite the fact that it has better battery life than the iPhone 5, and despite the fact that most apps need to be taking advantage of the A6.

Apple knows that people are confused by the 5c, and their change in marketing tactics will reflect this.

 

[jmr1015]

I have just found someone who seems to share my point of view on Apple's pricing and margins, it's John Sculley, the former CEO of Apple in an interview with the UK's Daily Telegraph.... ...He is also right about software, I had already suggested that access to the iOS ecosystem should not be just limited to the most expensive, high margin devices on the market.

The challenge that Apple faces with its current business, Sculley says, is the rapid commoditisation of the products it is designing. "iPhone is beautiful. But guess what; so is Samsung, so are HTC’s phones. The hardware commoditises over time. It’s really all about the software."

Sculley says that Apple’s greatest problem will therefore be maintaining its customary high profit margins, and points to the prospect of the company moving in to payments or TV services.

John Sculley: Apple, Misfit Shine and the future of technology - Telegraph

First: where in this article does Sculley talk about Apple's pricing structure regarding the iPhone? All I see is him making the asinine statement that the iPhone is being commoditized... which is a load of crap. The only people trying to commoditize the iPhone are the talking heads on Wall Street who only care about market share and stock valuation. The consumer has certainly not commoditized the iPhone. If that were true, then iPhone sales would steadily decline year over year as cheaper priced competition enter the marketplace.... which the 5S/5C release proved is not the case. People are willing to pay top dollar for a product, a brand, they trust and see value in.

Second: Where in the article does Sculley talk about iOS should be on other devices besides Apple devices? I see him talking about Apple needing to move in to TV, or a software payment system (like Microsoft has for Office) because it might be hard to keep profit margins high in the case of commoditization (which by definition would lead to pricing competition) and Apple is, thankfully, doing the exact opposite... giving away this software for free. Why? To differentiate their products, to infuse intrinsic value in to their ecosystem for their customers, to avoid a price competition and keep from the commoditization of their products.

Third: John Sculley... haha, the same guy who predicted in the late 80's that the USSR would land a man on Mars within the next 20 years? The same guy the board of Apple gave the boot because he was running the company in to the ground? Yeah... I'm sure he knows what Apple should be doing.

I love that so many people have an idea of what Apple should be doing, yet many of them wouldn't even be able to reach the levels of Apple's success given the same resources. In John Sculley's case in particular. He had his shot running Apple. He failed.

You may also care to read this.

iPhone 5C, 5S too pricey for Russian shoppers, report says | Apple - CNET News

Relevance? So Russians can't buy iPhones with carrier subsidies... so what? If they want an iPhone, guess they'll have to buy one at full price then. Is this another track from the broken record "Apple owes me a cheaper iPhone"?

The "commoditization" of the iPhone also matches with Verizon's recent sales figures which suggest that one out of every two smartphones that they sell, is an iPhone

Commoditization by definition means that products that are distinguishable in terms of their unique attributes or brand name, become simplified commodities in the eyes of the market and/or consumers. Which means it would fall from differentiated, to undifferentiated and be subject to a price competition with its competitors, as it no longer stands apart.

Verizon's sales figures argue the exact opposite of this. By the numbers, one of every two smartphones Verizon sells is an iPhone... despite the plethora of lower priced devices from the competition. That shows that the consumer sees the iPhone as a unique product, worth its higher asking price.

 

[anon(4698833)]

I find it hilarious that a person would try to find fault in Apple because they didn't make an assumption they had come to reality...especially an assumption that was never based in a realm of reality, and was just based on a groundless rumor about a "emerging market" phone and the kinds of prices you would expect for such.

I think I'm going to wake up tomorrow and assume the iPhone 6 will have a magical money printer on it, and when it doesn't, I'm going to ramble on and on about how Apple dropped the ball, lol.