“Katy Huberty from Morgan Stanley and Steve Milunoich from UBS came out with reports on Apple rumored upcoming iPhone announcement with updated models and estimates for what the new iPhones 5C will be priced,” Chuck Jones reports for Forbes.
“Both have settled at $399 as compared to independent analyst Horace Dediu at Asymco who is projecting a price between $450 to $500,” Jones writes. “I’m going to take a middle ground at $425 to $450 because I believe Apple will start at a decently high but not too high price for at least three reasons.”
Jones writes, “The first is it gives the company margin dollars to play with for promotions such as the type they have implemented in India, the second is that Apple will sell a good number of them at a higher price and therefore the company generates additional profit and the third is to have a price that they could drop within six months if needed.”
Read more in the full article here.
$350 to $399 would hit all the right buttons for the economy market. Take the airlines industry as an example. More people fly coach than first or business class but that’s where the airlines make the majority of their profits from – serving the first or business class customers and cosseting them with top notch service.
Actually, airlines make their money on business class customers. The occasional traveler just fills up some empty seats. But it’s their mileage programs that they run that brings in the big bucks for them. I only fly about six or seven times a year but it is getting increasingly more difficult to find cheap airfare. The recession and airline consolidation has hurt the consumer looking for a bargain. Plus some of the airlines have parked a lot of their fleet. Less planes means less seats which means higher prices. So I just stick with Southwest Airlines. I earn points with their credit card and end up getting a free trip or two every year. And while flying in and out of LAX is okay, there’s nothing like landing on that short runway at Bob Hope in Burbank. Whoa! Bob Hope, it’s small easy to access and has just as many celebrities if not more than LAX. Always something to look at. Lots of eye candy. I love it.
If Apple expects to be able sell a bunch of 5C’s at $425 or $450, then that is what the initial price will be. Apple does not sacrifice profits for market share/unit sales unless there is an obvious competitive disadvantage. In addition, the greater the price differential between the 5C and the 5S, the more likely that the 5C will cannibalize sales of the more profitable, premium 5S. The 5C is intended to attract new buyers who might otherwise go with a discounted Android handset, not to encourage other iPhone users to “downgrade” when they purchase a new handset.
That said, I hope that the price of the 5C is no greater than $399. That appears to be a psychologically important price point that would make the iPhone 5C more competitive worldwide.
You don’t to fall into too much of a niche status in the electronics market because that brings its own set of ills. Apple have already amortised the cost of designing the OS for the iPhone and the cost of purchasing additional SoC or baseband radio or the hundreds of sub-components that go into the making of an iPhone becomes cheaper the more units there are to spread the cost out over.
Not to mention the potential for upgrading to an iPhone 5S for greater functionality (whether screen size or some other differentiator) once you accumulate enough wealth to do so. If there’s no entry level phone, you’re potentially losing the sale to a competitor, so despite slimmer margins, it’s still a better proposition than a no sale.
“The first is it gives the company margin dollars to play with for promotions such as the type they have implemented in India, the second is that Apple will sell a good number of them at a higher price and therefore the company generates additional profit and the third is to have a price that they could drop within six months if needed.”
This entire quote reads like “water is wet” statement. I mean no shit!
If it will be $399, then there will be no change in the scale of sales; period.
$399…. Means iPhone 4s will be EOL.. There will be no free version of iPhone 4s.
The pricing of iDevices has been $x29, $x49, $x50, $x59, and $x99.
Okay lets look at current product. What if, the iPhone 5c is like the 16GB iPod touch, which sells for $229? Same specs, but with cell phone added on. The 4s 16GB is $549, and $99 on contract. Free for the iPhone 4 8GB is $450.
Sorry, it’s up in the air. The materials differences really change the game for pricing. I can’t imagine selling the 5c for over $500, but based on pricing of the lowest tier product, which is the 16GB iPod touch, which is also made from milled aluminum, there is no oranges to oranges comparison. But the discrepancy between iPod and iPhone, is close to $500, and $350 at the lowest end.
I am going to have to say the sweet spot is going to be $429 or $450.
But $399 for which model–32, 64, or 128 GB?