Many media types and pundits have “called for Apple to make a lower cost iPhone in order to capture more ‘hardware’ sales. But what many of us knew is just selling a lower cost phone doesn’t necessarily mean more money. And, in fact, it could have consequences on the higher margin products,” Ben Bajarin writes for Tech.pinions. “Luckily, Benedict Evans shared a post recently that broke down exactly what I and many others have been saying around the implications of a lower cost iPhone.”
“The thesis was always that a lower cost iPhone would certainly help raise sales of iPhones but would not raise revenues. Selling a lower cost and lower margin product means you need to sell substantially more product to equal similar revenues to selling less of a higher margin good. But as Benedict points out, this does not necessarily mean Apple should not release a lower cost phone — only that it would not necessarily be for the hardware revenue but for the potential value to the ecosystem, in terms of revenue capture beyond hardware, like apps, subscription services, etc.,” Bajarin writes. “Benedict rightly points out Apple has more options than ever and I would add few companies are in [as] full control of their destiny than Apple.”
“Whatever strategy Apple decides, given their approach, they have a limit on their total potential customer base. We simply have no idea what the size of that number is. Employing this strategy means Apple will need to foster opportunities for their customer base to spend more in their ecosystem thus incrusting their average revenue per customer beyond the hardware. The point remains — Apple is in control of their destiny,” Bajarin writes. “Samsung, on the other hand, is a giant question mark.”
Much more in the full article – recommended – here.
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Today, Apple could proudly make a ‘cheap’ iPhone – August 7, 2014