Apple’s focus is not iPhone market share, it’s on dominating the higher end of its markets

“Big companies attract big attention, and none quite as much as Apple,” Zachary Karabell writes for Wired. “As its market cap hovers near $1 trillion, Apple has gradually been shifting its strategy away from grabbing ever-more market share and focusing instead on dominating the higher end of its markets. If there were even a small doubt about that, the recent results made it screamingly clear.”

“For sure, Apple continues to sell an astonishing number of iPhones along with its tablets and computers. It moved 46 million iPhones this last quarter, but that was basically unchanged from the same period last year, and fewer than expected. What was startling was the average selling price—nearly $800 per device rather than the $750 that many had anticipated. If its average selling price continues on that trajectory, Apple could realize close to $1,000 per iPhone in the current quarter,” Karabell writes. “Its decision to stop breaking out numbers of handsets sold, however, is jarring to investors who have, over the past decade, come to evaluate the company based on how many phones its sells along with how much its sells them for. Apple, however, apparently does not judge itself that way, at least not to the degree that Wall Street analysts have.”

“Instead, judging from its new devices, Apple is focusing on price and profits rather than sheer volume,” Karabell writes. “It is gaining share in the wealthy countries of the European Union and in the United States, and flat (or losing) in places such as China, Nigeria, India, and the rest of the world formerly known as developing. But its profit is growing massively, and from what we can tell growing everywhere. In a world where everyone will soon have a smartphone as surely as electricity, and the middle class will likely have a tablet or some form of computer, Apple has elected to be more like Tiffany or Mercedes rather than Walmart or Hyundai.”

Read more in the full article here.

MacDailyNews Take: As it ever was.

As with the Mac, with iPhone, you get what you pay for.

Apple targets high-value consumers. Apple separates the wheat from the chaff with their value proposition. Android phone assemblers generally do not target high-value consumers (they target price-conscious customers with endless BOGOF promos) and when they do go after the high-end, they simply do not compete well against iPhone.

Apple customers are the wheat. [Those who settle for Android] for whatever reason, failed to make the cut; they are the chaff. — MacDailyNews, November 13, 2013

Apple sells premium products at premium prices to premium customers.SteveJack, MacDailyNews, October 23, 2012

Android is pushed to users who are, in general:

a) confused about why they should be choosing an iPhone over an inferior knockoff and therefore might be less prone to understand/explore their devices’ capabilities or trust their devices with credit card info for shopping; and/or
b) enticed with “Buy One Get One Free,” “Buy One, Get Two or More Free,” or similar ($100 Gift Cards with Purchase) offers.

Neither type of customer is the cream of the crop when it comes to successful engagement or coveted demographics; closer to the bottom of the barrel than the top, in fact. Android can be widespread and still demographically inferior precisely because of the way in which and to whom Android devices are marketed. Unending BOGO promos attract a seemingly unending stream of cheapskate freetards just as inane, pointless TV commercials about robots or blasting holes in concrete walls attract meatheads and dullards, not exactly the best demographics unless you’re peddling muscle building powders or grease monkey overalls.

Google made a crucial mistake: They gave away Android to “partners” who pushed and continue to push the product into the hands of the exact opposite type of user that Google needs for Android to truly thrive. Hence, Android is a backwater of second-rate, or worse, app versions that are only downloaded when free or ad-supported – but the Android user is notoriously cheap, so the ads don’t sell for much because they don’t work very well. You’d have guessed that Google would have understood this, but you’d have guessed wrong.

Google built a platform that depends heavily on advertising support, but sold it to the very type of customer who’s the least likely to patronize ads.

iOS users are the ones who buy apps, so developers focus on iOS users. iOS users buy products, so accessory makers focus on iOS users. iOS users have money and the proven will to spend it, so vehicle makers focus on iOS users. Etcetera. Android can have the Hee Haw demographic. Apple doesn’t want it or need it; it’s far more trouble than it’s worth.MacDailyNews, November 26, 2012

“All men are created equal.”

Well, not when it comes to users of smartphones and tablets…

The bottom line: Those who settle for Android devices are not equal to iOS users. The fact is that iOS users are worth significantly more than Android settlers to developers, advertisers, third-party accessory makers (speakers, cases, chargers, cables, etc.), vehicle makers, musicians, TV show producers, movie producers, book authors, carriers, retailers, podcasters… The list goes on and on.

The quality of the customer matters. A lot.

Facile “analyses” that look only at market (unit) share, equating one Android settler to one iOS user, make a fatal error by incorrectly equating users of each platform one-to-one.

When it comes to mobile operating systems, all users are simply not equal.SteveJack, MacDailyNews, November 15, 2014

SEE ALSO:
Apple’s iPhone just had its best year ever – November 3, 2018
Why Apple’s unit sales reporting doesn’t matter anymore – November 2, 2018
The ‘smart money’ shrugs off Apple’s decision to no longer disclose unit sales – November 2, 2018
Apple rams their message home: Think ‘Apple as a Service’ – November 2, 2018
Investors bristle as Apple occludes iPhone unit sales data – November 2, 2018
Apple’s decision to stop reporting unit sales of iPhones, Macs, and iPads is a ‘defining moment’ – November 2, 2018
Apple to stop reporting iPhone, Mac, and iPad quarterly unit sales – November 1, 2018
Apple tumbles 7% after reporting record-breaking quarterly earnings – November 1, 2018
Apple beats Street with another record-breaking quarter – November 1, 2018
Apple’s App Store is destroying Google Play in services and subscriptions – April 18, 2018
Apple App Store users spent nearly double that of Google Play users in Q417 – January 26, 2018
Apple’s iOS continues to attract content apps first, despite smaller unit share – October 30, 2017
Bernstein: Google to pay Apple $3 billion this year to remain the default search engine on iPhones and iPads – August 14, 2017
Higher income U.S. states use Apple iPhones; lower income states use Samsung Galaxy phones – September 27, 2016
iOS users are worth 10X more than those who settle for Android – July 27, 2016
Apple’s App Store revenue nearly double that of Google’s Android – April 20, 2016
Poor man’s iPhone: Android on the decline – February 26, 2015
Study: iPhone users are smarter and richer than those who settle for Android phones – January 22, 2015
Why Android users can’t have the nicest things – January 5, 2015
iPhone users earn significantly more than those who settle for Android phones – October 8, 2014
Yet more proof that Android is for poor people – June 27, 2014
More proof that Android is for poor people – May 13, 2014
Android users poorer, shorter, unhealthier, less educated, far less charitable than Apple iPhone users – November 13, 2013
IDC data shows two thirds of Android’s 81% smartphone share are cheap junk phones – November 13, 2013
CIRP: Apple iPhone users are younger, richer, and better educated than those who settle for Samsung knockoff phones – August 19, 2013

25 Comments

  1. The problem with that strategy is that you risk to drop out of a number of markets if the combination of currency differences, local taxes and median income place you in a segment that does not (or hardly) exist in that market.

    We know that currency changes alone has increased the price of Apple products as much as 20% in many countries. Combine that with the (what seem to be accelerating) general increase of prices both in the iOS and macOS product ranges and you develop a problem.
    The problem is compounded by not updating product ranges for years, where the general consumer will feel they get (comparatively) less for accelerating higher prices.

    If in addition full utilization of the product is dependent on paid-for services, your problem will be even bigger.

    Add to that curating the services in a fashion that goes agains the general grain of the audience in a market, and you have an even bigger issue.

    1. Sounds like a bunch of gobbledygook. If Apple ran its business according to your advice it would go bankrupt. Pleasing the 0.1% of whiners who don’t like the iPhone/iPad focus at the expense of Macs (which have just been updated anyway so moot point) is not a winning strategy. Based on rising ASPs of devices and services revenue Apple is doing very well, until there is any evidence that Apple is shedding customers this hand wringing is silly.

          1. Simple, doesn’t it make sense to Sell MORE phones than less? We’ve been saying for years, when you are forced OUT of 91 % of the market by Android, Just like Windows did to Macs, doesn’t that tell you that there is 91% of the market to gain? How frigging stupid. But in the meantime Apple doesn’t really advertise, and has let their mac Pro base deteriorate, no Mac Pro, no killer apps, no gaming, no new anything but a speaker lately. Cool to see the watch gain some ground, but what’s next? You know what happens fast when sales are down? Cook gets replaced, investors take their money elsewhere, and the Apple pride goes away, So as a stockholder, there is plenty of market share to go after. Hit the bricks and increase sales or you’re fired.

    2. This strategy may not be sustainable. The price of a loaded iPhone is absurd and out of reach of some consumers.

      The skyrocketing price of top iPhones is fueling subsidized plans, which themselves lock people into long term contracts and crap plans.

      Let’s also not forget the iPad Pro. I just dumped $2000 on an iPad Pro and keyboard and stylus.

      I don’t feel good about the purchase at all because of how expensive it is and what I’m getting.

      I’ve skipped the new iPhones this year and am pumping the breaks on buying much from Apple moving forward.

  2. Anal-cysts never like it when they are forced to be honest for once in their misbegotten, wretched & greedy manipulative lives. Now they have to gasp judge Apple fairly.

    And so far investors have never understood the big Apple picture preferring infantile & simplistic metrics to their limited brain function. Maybe they’ll get an inkling now.

    1. Well, either that or just not judge AAPL at all due to lack of information on which to base any sane analysis. AAPL in the future will probably be more of a roller coaster ride due to individual investors being more sensitive to any ‘failings’ that get reported.

  3. “Apple’s focus is not iPhone market share, it’s on dominating the higher end of its markets.”

    This is startling, MIND-BLOWING news!!! The insight is amazing. I would never have guessed!!!

  4. There’s nothing much for Apple at the mid- to low-range of the smartphone market but Wall Street doesn’t care. There’s always that important metric of having unit growth at all costs. I don’t see the point of Apple selling millions of more iPhones at the same price as Android manufacturers but maybe I’m wrong. I only see Apple diluting its ASP numbers trying to compete with cheaper smartphones. Apple’s entire ecology and sales setup are so different from other smartphone manufacturers. Apple carries a lot of overhead most smartphone manufacturers don’t have.

    Wall Street is always saying Apple has a problem but it seems the only problem Apple has is with Wall Street understanding how Apple is being run. I always look back on Nokia and it was surely a company Wall Street should have been proud of as they practically dominated every level of cellphones from high to low with cellphones that should have suited every consumer on the planet. Still, Nokia collapsed by stretching resources so thin and trying to sell to the poorest people on the planet just to keep unit sales high. Nokia’s high-end phone sales couldn’t offset the low-end phone losses and it brought down the whole company. Maybe Nokia simply got too greedy trying to dominate all levels of the cellphone market.

    Wall Street is so hyped up on unit sales numbers and seems to ignore the increased revenue and profits. Apple certainly controls the high-end smartphone business but I guess that isn’t good enough for greedy investors. I’m not going to sweat it. As far as selling iPhones go, I think Apple is doing the best it can in a bad situation. Apple just needs to go and find another revenue stream to offset iPhone sales shortfalls. That MIGHT please some big investors.

    I honestly wish Apple had acquired a cloud business as all the other major tech companies did. That certainly would have made big investors happy to see Apple acquire an unlimited growth business.

  5. Look, we all knew this was happening. It’s mathematically impossible for Apple to increase iPhone sales every quarter.

    So now they are in the adjustment phase. New products and services will be built to create new growth.

    But of course, that can’t happen indefinitely either. So it will be interesting to see where it goes from here.

    1. A voice of reason. As an investor would like to know the exact numbers including the watch. As products and business sales ebb and flow over time the numbers reveal where industries are headed. For one man (Cook) to protect his beancounter career and shield details of company health and trends is rather selfish and self serving, nothing more. Hopefully this defensive move will only accelerate his departure from care taking CEO…

    1. You are too kind. But following your post, SSD prices are the absolute epitome and GOLD STANDARD of APPLE GREED! Dongles overpriced, iPhone cases overpriced, connectors overpriced. Those items do not qualify as premium Apple products. I can buy an iPhone charging cable that is 10X stronger, does not fray and two thirds less expensive than the Apple tax at Walmart. Open your eyes people, Apple is walking the greed path now and it is all about profit while pipeline is in charge…

      1. Greed is the lifeblood of market capitalism. Apple is where they are today because they embraced that truism. Yes, they sugar-coated it with marketing platitudes, and they courted investors without shame. Their holier-than-thou attitude with respect to privacy as a human right, sustainability through energy reclamation and recycling, and humane treatment of workers all can be seen as cynical appeals to the consciences of consumers, even if they do reduce costs and contribute to the corporate bottom line. As for pricing, Apple’s products have always been pricey, but that is a feature of brands perceived as premium by consumers. It’s a fact that prices drop when demand flags. When in fact demand flags for premium Apple products, we can expect to see fire sales. Until then, greed rules. That’s capitalism.

        1. “Greed is good.”
          — 1987 movie Wall Street, Michael Douglas as Gordon Gekko

          Once the greed declines, the faster pipeline is out of a job the better.

          Where is your buddy Derek Currie?…

          1. I don’t know. I don’t keep track. He has a lot going on so I don’t bug him, as he is a national treasurehouse of security information and that is pretty much the paramount issue of our times. Tim Cook is also one of our protectors so I continue to give him a pass on his apparent lack of innovation. To tell you the truth, I would give up any technical superiority I possess in order to protect everyone’s privacy. — the fact that a powerful CEO like Tim Cook is willing to do the same tells me that he is a man of principle.

            At times, I hated Steve Jobs for his attitudes and opinions. Later, I didn’t care much for Tim Cook either because he was a copycat or wasn’t, it didn’t matter which because it was all wrong. What turned out to be right was that the products we buy, the cellphones and computers, should not be spy devices that betray us to the police. I respect the police of today, but nobody can tell me for sure that tomorrow’s will be as benign. That can’t be said about the Chicago police at the 1968 Democratic convention, for example.

  6. Just like Donald J. Trumpf. As I feared, his focus is on his profit or loss, not justice, peace, and what’s good for the citizens. Apple’s core mission is moving away from making good stuff to making tons of money. Good luck with that strategy!

    1. Maybe the strategy is to make tons of money and then use that money to promote justice, peace, and what’s good for citizens. It’s called terminal philanthropy: as you get older and richer, your conscience matures, as it did with Rockefeller, Carnegie, and Gates. You think about buying a stairway to Heaven.

  7. The market share that really matters is how much revenue & profits a given business line generates- an with both those metrics Apple has no competition – no one is even in their same time zone – so let these analysts continue to try & equate others cheap, breakeven to losing money into sales to Apple’s incredibly profitable units & I’ll keep buying on dips when other idiots sell – Buffett isn’t going long on Apple big time for his health! LOL

  8. …and the headline could also have been
    “Apple’s focus is not Mac Pro/Mac/iMac market share” or perhaps “Apple’s focus is overcharging for RAM and SSDs” etc

    1. Apple has to compete against very good competition. But it isn’t. It’s retreating to expensive markets. Iphone SE owners are asking why Apple isn’t making a modest phone anymore, just like Mac Pro owners have been left in Siberia since 2012.

      We are now learning that $1000 phones aren’t mainstream. For all the hype, faceid and oled and huge sizes are fizzling after the fanboy sales surge subsided.

      Market share matters. Unit sales are the best predictor of customers visiting the Apple stores in the future for additional purchases. It is also the metric software developers use to decide what platform to support.

      Apple needs to gain market share if it wants future growth. If it wants to be an esoteric high end fashion brand, that is Timmy’s choice. Just don’t be surprised when AAPL stock slides. Stupid pricing is holding down Mac sales. Looks like Cookie is going to repeat the mistake with iPhone too.

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