Can Apple afford to stay high-end only?

[Laura Knotek]

Not sure what you are getting at here since most people do purchase phones "On Contract" and not off. I suspect a lot of people who are in the market for "any" smartphone from their wireless carrier will be looking to save some money by taking the subsidized pricing. The Nexus 5 is currently only being sold at full retail for $350. I believe the contract price of the iPhone 5S in the same smartphone category would be the better deal at $199.

What everyone is missing is emerging markets. Apple products are not affordable to most people in those areas.

Can Apple afford to cede emerging markets to Google (and Android OEMs) and Microsoft (and Windows Phone OEMs)?

 

[MERCDROID]

Can Apple compete price-wise off contract? No, not unless you finance your phone though a store like Best Buy or are able to get financing through Apple (as I did with my i5). But on contract, Apple's prices are just as competitive as the competition. As others have said, most people subsidize phones, so it becomes a matter of aesthetic and appeal.

I completely agree with your comment. However, although the vast majority of people purchases their devices on-contract, I still think the iPhone does compete, price-wise off-contract. The off-contract price of the iPhone 5s is $649, for the 16GB version: this is comparable to the Galaxy S4, which is priced at $640. It is only undercut by the HTC One and LG G2, which both come in at $600, and the Moto X, which costs $550. Let's not forget, Apple is the only other OEM (besides HTC) to release a 64GB version of their flagship: although pricey, it is an option that really isn't available anywhere else.

The situation will be slightly (possibly dramatically) different, in different areas of the world.

In reply to Tre Lawrence:

I don't think Apple needs to create a "budget-priced," off-contract device, yet. Even with the Nexus devices offering a lot, at their price point, the majority of people still don't flock to them.

Apple has found its target market and caters to them well. Until the market decides that off-contract devices are the way to go, moving forward, then Apple has no reason to stray course. Just my opinion.

 

[MERCDROID]

The thing is Apple is losing ground in emerging markets, since even a 5C is too expensive for most users in those markets. Devices like the Nokia Lumia 520 are selling well in emerging markets, and the new Motorola Moto G will probably be a great seller in emerging markets.

I agree, that Apple's products are too expensive for people in emerging markets. However, I wouldn't say that "Apple is losing ground in emerging markets," since they really don't target those markets. In the future, this could change.

And agreed, on the Lumia 520 doing well. At $99, its a steal, for what you get; not to mention, it's actually seen a price-cut, since its launch (as low as $69, in some places).

 

[taz323]

Contract-priced Nexus 5 (16 GB) at Sprint is at $49.99, which is well under the iPhone 5S' 16 GB $99 price. Granted, there's a couple of web-only discounts that put it down to that price point, but that's the best deal on that phone at the moment. T-Mobile oddly enough is selling their Nexus 5 at about $100 over the Google Play Store price, which is perplexing.

Not to put the Nexus down, but for me it's a matter of preference. The Nexus at $49.99 and iPhone 5s at $99. I'm gonna go with the 5s. IPhones fit my needs in every way.

 

[jsarino]

Not to put the Nexus down, but for me it's a matter of preference. The Nexus at $49.99 and iPhone 5s at $99. I'm gonna go with the 5s. IPhones fit my needs in every way.

No worries...I figure at iMore, most of the members would lean towards the 5s if given the above choice anyways. I only pointed out the price as it's the only carrier that's selling the Nexus 5 at a contract price. Why T-Mobile is overcharging is beyond me.

I don't think Apple needs to create a "budget-priced," off-contract device, yet. Even with the Nexus devices offering a lot, at their price point, the majority of people still don't flock to them.

I think that the Nexus phones' target market for years was to first to developers and tech enthusiasts and not the average consumer. The Galaxy Nexus was marketed to be more mainstream by being offered on contract with Verizon and Sprint. However, the issues owners had with getting timely updates from either carrier, not to mention making it difficult to root and unlock a phone that's meant to be tinkered with may have caused Google to take more control again when the Nexus 4, and now Nexus 5 came along. Personally, as much as I like my Nexus 5, I would probably steer the average consumer to purchase a more mainstream Android (or Apple, Windows, etc.) phone. The Nexus 5 in essence is a "minimalist" phone which isn't for everyone.

 

[jmr1015]

The only people that really think Apple should expand in to emerging markets are Wall Street types... Because all they think is emerging markets = dollar signs... and since Apple is a publicly traded company, all they want is what's best for the stock valuation and share holders. Not what's best for the products, or customers.

Apple has always managed to balance on that razors edge... Right between building high quality, high value products, that offer a best in class user experience with unmatched post-purchase support, for a very competitive price when compared to similarly equipped alternatives... and maintaining great profit margins.

A company doesn't need to dominate market share in order to be successful. Especially in a market whose base is growing, and diversifying exponentially like the mobile industry. Considering Apple sells more iPhones, year over year, and makes more money, year over year, even with their loss of market share... I don't think they have much to worry about.

 

[Alik Malix]

Considering that 99% of cheap-end phones are NOT making any money for their manufacturer - I don't see how building a cheap iPhone will help Apple. Apple never claimed iPhone 5C was cheap, nor was it their intention. I really dont think Apple is interested in the "Junk" market (Tim Cooks words, not mine). From all the interviews, or keynotes, I get a feeling that Apple cant care less about the low-end market taking up 100% of its (low-end market) share. Just like a mechanic who can fix any car (and be profitable) only prefers to work on Porsches - he can afford that choice.

To answer Original Post: Can Apple profit from the low-end market? Yes, sir. Should it take advantage? I think it may harm the company more than it will benefit. And dont forget, China and India SOLD out with the latest offering from Apple - 5S super expensive alternative to other phones (<---sarcasm) is selling off just as fast as in the US.

I rather they concentrate on ONE only model - give us the BEST of Hardware+Software combo possible, not spread the goodies amongst a few models such as: Samsung Active (waterproof, but lower specs), Samsung S4 (popular but slowed by too much bloat and hit-or-miss gimmicks), Samsung Note3 (big battery, but too expensive), Samsung Mini (easy to handle, but 2 year old specs).... etc...

 

[Easy-G]

Yes, I know its recent offerings were supposed to cover different segments, but can Apple really afford to NOT court the same markets that the Moto G and Nexus 5 are aimed at?

On the one hand, Apple wins by not diluting its products with overly cheap offerings. Customers perceive iOS products to be premium, and high satisfaction scores indicate they remain happy. On the other hand, IDC numbers seem to indicate Android (in particular) and even WP8 are getting headwinds. Can Apple sustain growth without a "real" budget offering?

Discuss.

Two reasons why they must stay high-end only. 1) Public perception of being high-end requires that they only put out products of a particular quality and price point. The use of the Apple logo as a signalling device is hugely important to their brand. 2) I think there's a trade-off in putting out more affordable devices that isn't in Apple's favor. For the mom's, pop's, grandma's and grandpop's out there, there's no need to buy top-dollar Apple products if an affordable alternative is there with the same essential user-friendliness. Apple is already hurting from this in the iPad 2. For the younger, status and feature-conscious crowd, I think the top-dollar offering is all they want out of Apple. The 5c is all the price break they can afford without cannibalizing their flagship offering too much - $100 off, updated front-camera and battery, colour, all current iOS features, and performance that is indistinguishable from the 5s for the average user.

 

[Algus]

Apple has some great mid-range products. The Mac Mini base model is an outstanding computer for $700. If Apple has missed the boat anywhere, it's that I think they could bring some great displays at lower price points and still have the beauty and quality that the Apple name has come to mean. A 21.5'' 1080p screen wouldn't be unreasonable and an entry-level style Macbook (aka letting me get a nice 15.6'' laptop that doesn't cost $2k) would also be feasible. I personally feel like it was a mistake to retire the Macbook and keep only the Air and Pro lines and that there is a niche they could fill there.

Eh, as long as I keep getting raises and promotions at work. Now that I've been able to buy into OS X, I don't want to go back.

 

[Chris Parsons]

The thing is Apple is losing ground in emerging markets, since even a 5C is too expensive for most users in those markets. Devices like the Nokia Lumia 520 are selling well in emerging markets, and the new Motorola Moto G will probably be a great seller in emerging markets.

While I totally agree here, I often go back and forth on whether or not Apple even cares about emerging markets. I mean, they're not exactly hurting for money and their devices sell plenty outside of emerging markets. It feels like leaving money on the table but do they want to make a 'cheap' product, just to serve those regions?

 

[jsarino]

I personally feel like it was a mistake to retire the Macbook and keep only the Air and Pro lines and that there is a niche they could fill there.

It doesn't necessarily have to be a budget-conscious laptop. Maybe something that's mid-priced ($700 range like a Mac Mini) and decent (and possible to upgrade components on your own), and heck, I'd consider getting one as a second laptop.

 

[Becjr]

If love to see Apple bring their quality of excellence into a more affordable device. I'm sure they've investigated the option; in fact I wouldn't be surprised to see the iPhone 5C evolve into this mythical device over the next few years... Apple is like Blizzard in this respect.

 

[Laura Knotek]

If love to see Apple bring their quality of excellence into a more affordable device. I'm sure they've investigated the option; in fact I wouldn't be surprised to see the iPhone 5C evolve into this mythical device over the next few years... Apple is like Blizzard in this respect.

I'm sorry if this is a dumb question, but what is Blizzard?





Sent from my Lumia 900 using Tapatalk

 

[jmr1015]

If love to see Apple bring their quality of excellence into a more affordable device. I'm sure they've investigated the option; in fact I wouldn't be surprised to see the iPhone 5C evolve into this mythical device over the next few years... Apple is like Blizzard in this respect.

I think for what Apple offers, in terms of quality, their devices are very affordable. Competitors have similarly priced equipment that doesn't even begin to touch Apple's level of quality. What competitors offer at those cheaper price points that Apple doesn't, is low quality junk, in my opinion.

What people seem to want, wether they realize it or not, is Apple to make junk. You can't really realistically expect Apple to make products of similarly high quality of their current offerings, yet priced for emerging markets, and expect those products not to cannibalize the sales of their higher priced, higher margin products. That would be a recipe for decreasing profits at the expense of marginally increasing overall market share and revenue, and possibly commoditizing a brand that currently is the most valuable brand on Earth.

All for the sake of recovering market share that they never truly had in the first place in the emerging junk market? No thanks. Let Samsung, LG, Xiaomi, and whatever other Chinese and/or Korean manufacturers want to, duke it out for king of the cheap junk handsets.

 

[anon(4698833)]

I'm sorry if this is a dumb question, but what is Blizzard?





Sent from my Lumia 900 using Tapatalk

Makers of World of Warcraft (and other console MMO games).

As far as the original question...why wouldn't Apple be able to "stay high end only" (as you put it)? People aren't buying Apple products because they feel it's the top dog of the market, people are buying them because of preference, quality and service standards...truthfully, I don't even consider Apple's products to be "high end only". Do they command a premium? Sure! Just like a BMW or Mercedes would...and I guess in the comparative way you'd look at a BMW vs. a Kia, you could make the "high end" generalization...but the reality is, it's simply a preference, and these days, it's really not that much more than a comparable product from another manufacturer (a couple hundred bucks is really nothing).

 

[Ipheuria]

I love Apple but I find that defending them by saying their stuff isn't more costly is just not reality. You can go to most places and buy a Windows laptop for anywhere from $400 - 900 and I'm not talking netbook. So when I'm giving friends and family advice I don't try to sell them on Apple. I give them an honest answer. Yes it is more expensive the cheapest laptop is going to start at around $1,000 for very basic specs. However there is so much that goes along with owning an Apple that make the purchase of more value than the laptop you get at BestBuy. The ability to call or go to an Apple store for a problem whether you bought it there or not, try that with a Toshiba or whatever you buy. The resale value holds up so much better because after paying $800 for a Windows laptop how much would you really expect to sell it for in a year or two? Now the same goes for the phones, they are expensive. Talking about the subsidized price means nothinig when you talk emerging markets because most people in that marking at looking at the cost unsubsidized. The problem is that the people on Wall St. or wherever pressuring Apple to make a cheap iPhone while thinking about money are not thinking long term. There could actually be a potentially earning less money even with gaining more market share, where have I heard that before? There is no way Apple could make a cheap iPhone and only sell it in other countries people in NA would cry bloody murder and sue if they can. Now if that cheap iPhone is sold in North America sure some parents will buy it for their kids, some feature phone users will upgrade to it. The problem is people who would have upgraded to a 6 or 6s will also just get the cheaper one. Cheap also means cheap internals so then you're looking at increased returns, warranty swaps, genius bar appointments. It is just not needed in North America, what the people mean when they are saying cheap iPhone is actually an iPhone just at a cheaper price. Why would Apple lower the price on the iPhones when they have always sold more than the previous model? Obviously people are buying them so what happens when they sell it for cheaper and it does nothinig to the stock price? Really what do the analysts know about running a tech company? It's like a food critic telling a chef how to make the dishes on the menu.

I will always maintain Google can afford to give Android away for free because what they really care about is more people using it. The more people use the services and search and the other stuff they make the real money from is their real concern. Other than Samsung are the other manufacturers making profit? So why would anyone look at this as what Apple needs to do? Sure I admit as an iPhone user I have noticed a shift and an increase in the number of people I notice with Android devices. What I also know is that The PC industry is really in trouble right now and Apple still doesn't have huge problems with Macs. So decades from now when the market is completely full of Android devices of all types and they are dirt cheap and the manufacturers can barely make any profit from it and Apple is still selling their devices at a profite I'm not so sure people will look at it as a lost oppurtunity.

 

[kch50428]

I will always maintain Google can afford to give Android away for free because what they really care about is more people using it.

Actually, Google gives away Android because it's a captive audience for advertising, and a source to mine resellable data on user behaviors... Google's bread and butter.

 

[Algus]

It doesn't necessarily have to be a budget-conscious laptop. Maybe something that's mid-priced ($700 range like a Mac Mini) and decent (and possible to upgrade components on your own), and heck, I'd consider getting one as a second laptop.

I'm not really looking for a sub $1000 dollar notebook. I'd just like a 15.6" notebook that doesn't cost $2,000

Sent from my Galaxy Note 3 using Tapatalk 4

 

[jmr1015]

I'm not really looking for a sub $1000 dollar notebook. I'd just like a 15.6" notebook that doesn't cost $2,000

Sent from my Galaxy Note 3 using Tapatalk 4

You can get a Certified Refurb, direct from Apple, with a 1-year warranty, for far less than $2,000

 

[Metro1088]

I think Apple should stay at the high end. Google can afford to release a cheap phone with zero profit because they profit from services. Apple doesn't do that. It's business is selling hardware at a profit. Going down in prices would only harm good business. Right now it is so difficult to have a good business with payed apps on the app store. Imagine what would happen if the iPhone is bought by people who would otherwise buy a cheap Lumia or a cheap galaxy and never even use the browser. It will be candy crush and cheap ad-infested apps.

People who buy cheap phones don't usually use them very much or enjoy them. Apple has never been after that kind of market and I don't think it should ever try to. Tim Cook did a nice interview about this around the time the iPhone got released this year. He said he doesn't want to sell an iPad to someone who just wants to make their kid shut up. I can't agree more.