“Large-screen smartphones have become an important segment in the smartphone category, with no company benefiting more from the sales of these ‘phablets’ than Samsung,” Bill Shamblin writes for The Motley Fool. “But Samsung’s decision to offer these displays on a large number of models across pricing tiers is making it increasingly difficult for the Korean conglomerate to differentiate its high-margin, premium devices from its lower-priced smartphones.”
“A recent Canalys report noted a trend showing demand for larger displays shifting to premium smartphones. But, despite the company’s dominance in the large-screen smartphone category, Samsung may be missing the boat. In Samsung’s most recent quarter, the company reported slowing demand for its premium smartphones. And despite increases in total smartphone shipments, profits for the company’s mobile business actually declined,” Shamblin writes. “What Samsung failed to realize: When larger displays are reserved for premium devices, the high value of the feature can be used to support a company’s premium pricing tier and help buyers quickly identify a company’s flagship products.”
“The iPhone 6, with an anticipated 4.7-inch screen, is expected to have a subsidized starting price of $299 on a two-year contract — a $100 increase over the iPhone 5s,” Shamblin writes. “The history of iPhone sales indicates the new pricing strategy has a good chance for success. With the 2013 introduction of the iPhone 5s and iPhone 5c, Apple discovered that iPhone buyers chose the higher-priced iPhone 5s at rates that exceeded the company’s expectations. The proclivity of iPhone buyers to ‘trade-up’ in price is allowing Apple the opportunity to test a new ‘super-premium’ iPhone pricing tier.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Mr. T” for the heads up.]
Smartphone manufacturers are getting it all wrong – there is no perfect smartphone, only perfect smartphones. Rather than making a single iPhone with a single screen size, have multiple iPhones with a variety of screen sizes.
Many people in this forum have advocated that approach, and I strongly suspect that Apple is going to do just that when the iPhone 6 is released. Yes, it is a long overdue step, but better late than never.
“In Samsung’s most recent quarter, the company reported slowing demand for its premium smartphones.”
You can colour it the way you want.
Perhaps consumers want larger sized phones that are cheap. If Samsung only offered larger phones at premium pricing those same customers that bought the cheaper large sized Samsung phone, might have just went with an iPhone 4S or 5C.
If Apple only offers larger phones at premium pricing it may backfire on Apple as we may see frugal customers continuing to purchase the larger cheaper Samsung phones.
We see this all the time with 15″ laptops. Not everyone wants to spend $2000 to get a 15″ laptop. Apple loses out on quite a few sales because of it.
Apple doesn’t care about chasing the $400 laptop customer. The manufacturers in that space are fighting over tiny crumbs, and they aren’t the companies spending on R&D. Apple chooses to “delight”, not simply “fulfill”. Don’t worry about all the sales Apple is losing out on. There is very little value in investing time and resources on the low end.
I agree, Apple doesn’t care to chase the $400 laptop customer… that wasn’t my point.
As it stands, you can purchase a 13″ MBA for as low as $1,000 but you are up to $2,0000 if you want a 15″ screen. I see plenty of older customers with very basic need coming into our store looking for a bigger screen only to be turned off by the price tag of the 15″. Perhaps Apple would sell a lot more 15″ laptops if the spread wasn’t so large.
I was trying to apply the same principal to the phones.
Apple seems to have the formula right with the iPad mini with Retina Display vs. the iPad Air. They are essentially the same product, short of the screen size. Most users see the value in bucking up the nominal $100 for the bigger screen. Having the product specs similar also makes for an easier decision.
principle.
Well, problem then as they no longer delight as they once did on the software side.
Samsung “reported slowing demand for its premium (larger screen) smartphones” because premium customers know that a larger iPhone is coming.
RUBBISH:
The iPhone 6, with an anticipated 4.7-inch screen, is expected to have a subsidized starting price of $299 on a two-year contract — a $100 increase over the iPhone 5s
Nothing-at-all indicates this speculation. For all we know, Apple’s verified queries about charging an extra $100 were specific ONLY to their rumored 5.5″ iPhone. Obviously, if you’re selling a bigger phone with a bigger screen, it’s going to cost MORE than your smaller offering. How DUH can you get?
Not sure where you are, but “Totally Duh” is the legal limit around these parts.
One would hope. But a lot of tech analcysts and journalicysts have racked up a backlog of tickets for breaking the DUH limit.
I don’t think the next iPhone, even with a larger display, is going to start at $299 (with contract). It will take the top spot in the lineup, and continue starting at $199, with a larger storage choices at $299 and $399. The current iPhone 5s (16GB version) will be the $99 choice. And the current iPhone 5c (at 8GB and maybe some new colors) will be the “FREE” choice.
iPhones are already expensive enough, I doubt Apple will be raising the price of the base model. I understand their inclination to avoid the low end of the market, but a $100 jump in price would alienate too many customers.
It would be a PR nightmare.
I completely and strongly disagree with your position, mplas. As I often posit to friends and family alike, I will never be able to afford the very best automobile on the market. Nor the best house. Nor the best boat. Nor the best vacation excursion. Nor the best clothes.
But, by Gawd, I CAN afford the very best smart phone in the world. Yes, the very, very best. No sheikh, no hedge fund manager, no movie star, no plutocrat anywhere in the world can own a better communication device than I will have. And for that privilege, I will gladly pay a little more. I, too, will live–admittedly in extremely small measure–like the rich and famous.
You would have to be either too wealthy to care, or in need of mathematical reeducation to see a 50% price increase as “a little more”. A $100 price increase on the base model would be a slap in the face to Apple’s customer base, especially after already charging obscene amounts for incremental storage upgrades.
That would be like asking #$1348.50 for the base model MacBook Air instead of $899, would you gladly pay that?
Absolutely, if it meant the MacBook Air still existed at $899 and the $1348.50 model was 13″ with a retina display.
So I guess what I’m trying to say is… Add Value for those who can afford a larger price tag.
It’s no slap in the face to anyone if Apple creates a higher price point device as long as they don’t eliminate the price point that existed before it.
No, no more $899, 1348.50 is the price of admission. No retina, 11.6″, 64 GB RAM. That’s a 50% increase.
You know that the price of the phone isn’t really $199, right? Without a contract it’s $649. That’s the real price.
I don’t buy off contract phones. T-Mobile service stinks around here. It’s either Verizon or AT&T if you want to use the phone as a phone, so it’s $200, $300 or $400 for a 5s. Every Two years I go for the one with the highest storage capacity and spring for AppleCare+. OTOH, there are people who go for the 16 GB model and forego the AppleCare because $200 IS ALL THEY CAN AFFORD. If the base price goes to $300 they’ll either switch to a longer interval buying cycle or buy a high end Android. Apple Will lose customers.
I’ll be buying a 6S with 128 GB 4.7” screen (5.5” is ridiculous) and pay for AppleCare in a year and a half, BUT a lot of people will be learning to make the most of their Samsung, LG or other affordable Android phones for the first time.
Ratios are simply not the best ways to view the difference. Going from $200 to $300 is a real dollar difference of $100. You do not have to be swimming in caviar and flying your own private jet to a 6 star resort reserved for you and your 300 best friends for 3 weeks to be able to pay that extra $100. Someone working construction, or as a teacher, or as a number of middle class jobs can scrape up an extra $100 for something that they will use for at minimum a full year.
Contracts last over 2 years, so for most people that is 200/24 = $8.33 per month, which is a small fraction of the price of a monthly bill in the US for a smartphone on all major carriers.
I just cannot see how you can justify the argument that this is a “slap in the face” to any Apple consumer. It certainly does not stand up to an “economic hardship” argument.
The additional $100 isn’t going to break the bank for me, I make it a point to get the iPhone with the highest storage capacity and was disappointed when the 5S didn’t come with 128 GB. I would gladly paid extra for that. Plus AppleCare. I don’t cheap out on my phone. BUT a $100 price increase to the BASE model will price it out of the hands of a LOT of people who can barely justify $200 for a phone. There are a lot of people who see $100 as a lot of money, and if Apple raises the cost for a 16 GB iPhone to $300, they’re going to lose a lot more customers to cheaper, high end Android phones.
Great point. I am so stealing that.