Apple refuses to play low-price ball, stakes strategy to premium brand rep

Tuesday's event, iPhone 5c pricing showed Apple has no intention of marching to someone else's drum, says analyst

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Instead, it was all about reminding everyone, consumers most of all, that the iPhone is a premium smartphone that comes with a slew of extras, as one would expect from a luxury brand.

"The presentation [Tuesday] re-emphasized that Apple believes the iPhone is cool, a brand, aspirational. It's not too expensive [Apple believes], because all these people will want it," Thompson said. "Apple doesn't compete on price. That would be to play against all of their advantages. Instead, they doubled down on the brand, the experience, the integration of software and hardware, all the things that they can do."

Thompson expanded on his analysis of the iPhone 5c and its price in a post on Stratechery.com today. "This was Apple, standing up and saying to all the pundits, to all the analysts, to everyone demanding a low price iPhone: No," Thompson wrote.

Some other analysts agreed with that assessment, although they put it in different terms.

"[The iPhone 5c pricing] is an extension of their strategy, it's not an overhaul," said Kevin Restivo, an analyst with IDC. "The iPhone is still premium priced."

Restivo's analysis of why Apple decided to maintain its strategy, however, was slightly different from Thompson's, although the end result was the same.

"The smartphone market is still relatively young, and there's still a lot of profits to rake in [at the high end] from those who spend the most on their smartphones," said Restivo. "Apple can't rest on its laurels, but there's a lot of market here. It doesn't need to pack up its tent and go home by any means. There's a lot of room to grow still."

Others, while not expressly showing disappointment, said the pricing decision looked like a defensive move.

"I don't believe the iPhone 5c is targeted at emerging markets at all, but is an attempt to defend the iPhone's margins and ASP [average selling price] in subsidized markets," said Sameer Singh, an analyst who tracks mobile technologies from his Tech-Thoughts site. "Apple was spooked when it saw a 'new,' and 'good enough' product [the iPad Mini] sharply eat into sales of their flagship tablet. As a result, Apple attempted to minimize the pricing gap between the two 'new' iPhones and attempted to differentiate them based on casing and color."

However, Singh reached the same conclusion as Thompson. "It seems that Apple's product and pricing decisions are aimed at retaining their premium positioning and hardware margins," he wrote Wednesday. "While this may work in the U.S. market, it leaves Apple vulnerable to low-end disruptors in other regions."

Neither Thompson nor IDC's Restivo disagreed with that.

"I do think they're a little bit playing with fire in Asia," said Thompson. "Apps could start going Android-first there, and bigger phones matter there. Clearly, Apple was caught by surprise by the sales of larger phones" such as those dubbed 'phablets.'

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