Apple’s iPhone 5C will sell more 5S models than the iPhone 5 ever would have

“Picture yourself in the not-so-distant future, a consumer in the market for a shiny new iPhone,” Casey Johnston writes for Ars Technica. “You approach a store, be it retail or online, and trail your eyes over the various models on display.”

“Your inexpensive options are a little scattered. There is the free iPhone 4S, hardly a compelling product with its old form factor and hardware profile. If you spend only $100, you can get a brightly colored, plastic-backed model, the new iPhone 5C,” Johnston writes. “Or, for only yet another $100, you get the latest, highest-end iPhone 5S, cast of glass and metal with a futuristic fingerprint reader. Which do you choose?”

Johnston writes, “The 5C’s style will no doubt appeal to some consumers and even capture a couple of new demographics. But as for the “cheap” iPhone we were expecting… well, the iPhone 5C isn’t it. The fact that it is not rounding out Apple’s low-end product line as was predicted suggests that Cupertino might have intentions for it beyond appealing to kids and the fashion-conscious among us. Perhaps the design of the 5C is intended to push buyers into throwing down an extra $100 to get the only viably professional-looking iPhone. Under this scenario, the 5C exists, to an extent, to usher all but the most casual users into the arms of the 5S.”

MacDailyNews Take: In an article for MacDailyNews written and published a few hours after Apple’s September 10 event (Why would anyone buy an iPhone 5c instead of an iPhone 5s?) SteveJack wrote:

It seems to me that Apple is using the iPhone 5c as a tool to push buyers to the 5s (well, at least those buyers who can grasp a simple value equation).

Once Apple gets the customer to the websites or into the stores and the prospective buyer can see and/or hold both phones and learn that they’re only separated by a mere $100, my guess is that Apple figures they’ll have plenty of upsales occurring. Upsales that will boost Apple’s iPhone margins nicely.

Johnston writes, “By changing the outward form factor of its mid-range phone so drastically, Apple is positioning its highest-end model even higher and further away from the rest of its offerings. And Apple isn’t just pushing that difference for this year by taking the identical iPhone 5 off the table as a step down from the 5S; this is likely a change it is making to its lineup for all time, drawing a big visual distinction between its newest phone and all the rest.”

MacDailyNews Take: As we wrote on August 14th, before the “champagne gold” iPhone 5S leaks began:

One other thing we’d like to see is delineation in color for iPhone 5S vs. iPhone 5.

iPhone 5S should be set apart from the previous model. Where iPhone 5 is black or white, if Apple made iPhone 5S, say, “smoke” or “silver,” or whatever floats Jony’s boat (hold the pastels, please), it would help sway the types of customers who stuck with iPhone 4 instead of upgrading to iPhone 4S – or even purchased the less expensive 4 instead of the more capable 4S – because they were indistinguishable on the outside.

We’ve always believed that not making a distinguishable exterior change on the “S” models was a mistake that left iPhone sales on the table.

Johnston writes, “Product segmentation, particularly segments structured with a lower-end product that exists to make the next step up look compelling, is an old, old strategy. Apple’s desire to capture the young-and-casual as well as price-sensitive users with the iPhone 5C is clear, but we can’t ignore the fact that it makes the iPhone 5S look a darned sight better by comparison than the iPhone 5 ever would have.”

Read more in the full article here.

MacDailyNews Take: BINGO! Apple was smart to refashion the iPhone 5 into the iPhone 5C. It’s better for margins and it’s better for sales, not only of the 5c, but of the 5s, too.

Next year, don’t be surprised if the iPhone 5S gets the polycarbonate casing, the iPhone 5c goes to being available only in black or white with the lowest-end storage amount (free with a 2-year contract), and the iPhone 6 becomes the first Liqiuidmetal iPhone (or, if Liquidmetal isn’t ready for prime time by then – anodized aluminum in a distinctive new design).

27 Comments

  1. I don’t think we may have an iPhone 6 per se. I think it’s possible that the 5S will become the 6C and the new flagship will be the 6S. In 2015, the 7C and 7S and so on.

    1. I think there will always be a number release and a S release the following year. Most folks are on a 2 year upgrade cycle (in the US). This is why it doesn’t make sense for Apple to come out with a radical change each year. Few people buy new phones each year.

  2. I posted this in another thread, but I think it’s worth repeating here…

    I honestly think the whole point of the iPhone 5C (besides the obvious cost advantages) is the colors. I think the colors are a bigger deal than anyone is admitting.

    The iPhone, and the smartphone revolution it started, is now seven years old. Just having a smartphone, or even an iPhone, is no longer that big of a deal. When a product reaches this level of ubiquity, consumers like to have options to make their purchase feel truly theirs, and one of the simplest, that always seems to work, is color options. Yeah, my iPhone might not be any different on the inside from yours, but mine’s RED!!

    Don’t believe me? Remember the iPod mini? When it was released, everyone thought Apple was nuts! A tiny iPod with less space for only $50 less than a full model? Who would buy that? But it flew off the shelves and became a runaway hit, because it came in colors. (Especially the pink one!)

    The iPod mini came out at just about the time when the iPod became fully mainstream. Just having an iPod wasn’t a big deal any more. But now you could get a pink one. And the consumers ate it up.

    Mark my words, the iPhone 5C is going to be a huge success, especially among younger consumers. They’ll get to have their iPhone, and pick the color. They’ll love it.

    ——RM

    1. Good post. “C” is for Colour. It’s another point of differentiation in a crowded market, and it awards buyers more choice (something complainers have harped on). I realize hardened tech veterans are dismissive of this sort of thing, but they ought to admit that personalisation options are very important to many general consumers. Apple does tech and it also does psychology.

      1. At a Starbucks inside Target yesterday and two Target workers, both with 4 or 4s in their hands had this conversation. “I think the green one looks really cool.” the other – “OMG I HAVE to get the gold one”

        This is seen as a weak move by Apple, but all I’m seeing is demand generation.

    2. Lord Robin, YES, YES and YES.

      My wife texted me shortly after the announcement claiming, “I WANT THE BLUE ONE”. She doesn’t care about the tech bells and whistles of the more business-like 5s. She wants COLORS, damnit! So, tonight at midnight, she’ll be online, getting her blue one. She and about a billion other people wanting colors!

    3. Agreed — but this move to colors reminds me more of the introduction of the candy-colored see-thru iMacs in the late ’90s when the rest of the industry was sand-beige, grey-beige and black. The iPod example was a similar move along those lines. You can sense they want to inject some color and visual fun into the product.

      1. Except that in the phone market there are several companies offering colorful smartphones (Nokia, Motorola, Samsung). So Apple is not leading the way out of an greyish era. And the other colorful phones often haven’t performed well in the market(esp. Nokia). So I think business will be tough for Apple with this offering. But I may be wrong – hopefully.

  3. The logic is sound except of the half dozen people, four moving from old not very smart phones, that are upgrading to an iPhone, 4 are preordering the 5C. They like the colors and saving the $100 is a big deal to them. Delay discounting appears to be alive and well, and Apple likely knows it.

    1. You are right. In terms of profit per unit, due to the subsidy payment from the carrier, Apple probably makes about the same profit for each iPhone sold no matter which model is chosen by the customer.

      However, product differentiation is important to Apple. Right now, there is good “look and feel” differentiation between the three choices. Every two years, Apple does a major overhaul in iPhone’s appearance, and that makes sense because most are sold with a two-year contract. Therefore…

      > From MDN Take: Next year, don’t be surprised if the iPhone 5S gets the polycarbonate casing…

      That’s possible, but to avoid “redoing” the plastic iPhone every year, this is what I think happens instead, at the three price points.

      This year (as announced):
      – HIGH: Same look iPhone 5s
      – MID: New Plastic iPhone based on iPhone 5 tech
      – LOW: iPhone 4s (no change except storage)

      Next year:
      – HIGH: Brand new look iPhone 6 (“Liguidmetal” or other distinction)
      – MID: iPhone 5s (no change)
      – LOW: Plastic iPhone 5c (no change except storage)

      The following year:
      – HIGH: Same look iPhone 6s
      – MID: New plastic iPhone based on iPhone 6 tech
      – LOW: iPhone 5s (no change except storage)

      And so on… This way, the plastic iPhone can remain the same for a two-year cycle (with maybe a color refresh for the second year). The iPhone with “s” suffix can remain the same for a three-year cycle. The “brand new look” iPhone only exists for one year, but it is “remade” into the next plastic iPhone. And the three choices provide good product distinction.

      1. I agree with most of that. The plastic body of the 5c I think has a significant impact on the profitability of the device, more than people realize. The other cost not included in the 5c but in the 5s is the Touch ID. Who knows what this cost is. My guess is the margins are now much closer than the past year (4s and 5) which will boost the profit margin come quarterly reporting. Maybe the street will like this maybe not. I have no doubt the 5c will be a hit.

  4. Yeah, the 5C makes no sense at just 100 less the the flagship. But, um, how about instead of developing, manufacturing and marketing boat loads of plastic iPhones that will push people to spend 100 dollars more. You just save all the time and energy and just lower the effing price of the 5S?
    I mean the 5C does not offer any real customer choice. So it is colourful. Buy a case.

  5. Some of you guys are missing the point. I have 3 teenage daughters. They all want the 5c, not just due to the colour, but to save $100. To lots and lots of people $100 is a lot of money. Also, they don’t want a phone just like Dad’s. I’m the old guy, they have to be cooler then me and they’ve told me I can’t get a 5c! Some of us on here who can buy whatever Mac we want and whatever phone we want are not as price conscious as most of the population. The 5c will sell like hot cakes, especially to the younger crowd. My girls are already lining of friends to buy their iPhone 4’s so they can get the new phone. Also remember, lots of iPhones get handed down and used without having to get data. We have 5 iPhones in this house that don’t have data and that is due to the fact that they were hand me downs or ones purchased from someone else who was upgrading. In the meantime, I can’t wait to get my hands on my new iPhone 5s!!!

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