I think most of you have noticed that new iPhones are coming by this winner. Thanks to Sanne’s reminder (because I saw her post yesterday), I watched the annual event yesterday. Since I am not a fan of Apple (I am using OnePlus three anyway), it has been my first time to follow this event which might be a big day for most of Apple fans.
Actually, I googled “iPhone 8 and iPhone X” before the event started, tons of results with fancy titles were generated. All of them discussed the projected selling prices and associated times; however, two pages attracted my attention.
The first was doubting if new iPhone Series would be successful in Chinese market due to its premium pricing. I wholeheartedly agree with augmentations proposed. The astonishing prices charged for these phones particularly for iPhone X will render the majority non-core customers to other substitutes. As techniques for mobile phones tend to be matured these days, technical differentiation for mobile incumbents appears to be increasingly difficult. I would never be supervised if any phones feature dual lenses today, but this was not a case before Huawei released P9 at 2016. Besides, many Chinese mobile producers such as Huawei, Xiaomi, and other startups are offering mobile phones with similar technologies but much less money, so If you are not an Apple fan and you are not an active member of Apple ecosystem, here comes to a question: why not stick to Apple?
Another interesting journal came from World News, titling “How people in Netherlands get the new iPhone 7 for only 1 €”. Wait for a second, one Euro for iPhone 7? That is true, and this campaign is exclusive for Dutch market and still available until the moment I am typing. Apple lost nearly 35% market shares during last year in the Dutch mobile market. This dramatic and catastrophic drop has forced Apple to think differently- one Euro to most of us means just a bus or tram ticket, but the logic behind is that Apple wants to steal customers and lead them to the Apple ecosystem through this free trial (almost). Once, these customers have integrated and be locked to the entire system to some degree; it is not easy for them to give up any products from Apple. Rising switching costs indeed can prevent existing customers to “battery” the Apple brand in the short run, but, in the long term, this is not an efficient method, as every competitor is doing the same at the same time. Google is updating its synchronisation functions every day, and Apple is actually not alone! On the other hand, this kind of trial is not feasible to implement at a large scale. The associated costs must outweigh the gains between certain point. Perhaps, that’s the reason why the “1 Euro for Ipnone 7” campaign is only alive in the Netherlands.
Nevertheless, it is no doubt that Apple has done a quite good job in building its ecosystem. The connection of multiple Apple deceives, like iPhones, Ipads, Macs, Apple Watches, and even Apple TVs, and shared data among these platforms redefine the way of people’s daily life. Apple indeed has played pioneer role and disrupted the entire mobile industry during the “Jobs era”. However, with the Androids penetrating, the first mover privilege and advantages are increasingly getting blurring.
All in all, the mobile phone market has become more diversified, and many new entries have shared the big pie. If Apple doesn’t rethink its business model particularly pricing strategies, it would be expected that its premium strategy will not work and its market share will go down steadily. Perhaps, there is a new ear for mobile phones industry. However, there would not be only one big winner in the coming years.
Sources:
“Why iPhone X Isn’t The Answer To Apple’s China Problem”
https://www.forbes.com/sites/ywang/2017/09/12/why-iphone-x-isnt-the-answer-to-apples-china-problem/#1e58a36110a2;
“How people in Netherlands get the new iPhone 7 for only 1 €”
http://world-news.site/iphone7/?ref=uprealtime.com&action=view&encrypt=yWksULp9hCJmAD4NwoPBW98nYLxGvyVxceVNK7dsD3IFD4&c=20486&utm_source=revc&utm_medium=cpa&utm_campaign=v2i&site=WEBtopic_16285_2257596_editorial_news
Really a thought-provoking article! It’s my first time of hearing “1 euro for trial” promotion, the author explains the trick behind the activity, and that’s true, free trial can just act as an solution in the short run. However, if iphone can’t offer any further innovations, no matter that in pricing or features, those incumbents and new entries will take on more bites.
Hey Yu,
Thanks for your reply! Actually, I was also shocked by this campaign. In my opinion, Apple really wants to cultivate Dutch potentials and to gain back its market shares. With more and more mobile producers entering the industry, I quite am curious and cannot help to watch out what will happen.
This is not a very thoughtful comment – I don’t have much to say beyond that a thousand Euros is a ridiculous price only fools would pay, and unfortunately there are many fools that care about status symbols – but wasn’t the ‘iPhone 7 for one Euro’ fake, and not real?
Hey Roy,
Thanks for your reply! Actually, I failed to pay the one Euro at the last step because neither my credit cards nor Ideal worked. I think all my billing addresses of my credit cards are filled in China which don’t match my current address here in Rotterdam. Perhaps, you are welcome to check it out, one Euro is not a big deal.
Hi Bing, thank you for sharing your thought on this topic!
I am an iPhone fan and following all the latest news about iPhone in particular to make the decision on when to change to the next generation of iPhone and if the new iPhone really worth the investment (as mentioned in you post, it is quite expensive comparing to other brands). But when you are talking about the pricing strategy of the iPhone, it reminds me of the time when people are debating or say, complaining about the storage of iPhone and its price.
The data showed that in 2015, when buying iPhone 6s, 18.5% of customers chose 16G while the other 71.7% chose 64G; And in 2016, 37.2% of customers chose 32G, while the other 54.7% chose 128 G, given the fact that at 2015’s conference press, it was announced that the storage of memory will be double, and the price would remain the same, while with 16G unchanged. As you can see that the 32G iPhone is clearly more cost-effective for the user, however, it is likely to result in the loss from the users of the middle range memory, to the next smaller memory space. The reason why the iPhone6s users will tend to choose 64G, not because iPhone users need more storage space, but compared to the 16G of storage, 64G is more cost-effective.
On the other hand, I think the existence of 256G is being treated as an opposed to reaching extremes, yet another example to the cognitive bias of relativity, when you add a middle price, just for comparison, this can lead to relative view on the other prices. The effect of three options is bigger than two options.
This is a very interesting article I came across on the subject of the iPhone pricing based on storage:
https://www.aboveavalon.com/notes/2014/12/18/apple-will-save-3-billion-in-2015-by-selling-16gb-iphone-66-plus