No one wants a ‘cheap’ iPhone: Apple sells premium products

“Apple, for better or worse, is a premium products manufacturer,” Mike Murphy writes for Quartz. “A recent report from UBS analysts suggests that there’s a large disconnect between the amount of iPhone Xrs that have been produced and how many people actually want them.”

“Apple’s latest phone is a bit of an odd one. It’s cheaper than the iPhone Xs and Xs Max, starting at $749, but it has fewer cameras and a lower-resolution display than its costlier siblings. However, it’s larger than the Xs,” Murphy writes. “Perhaps as a result of weak sales, Apple is advertising both the iPhone Xr and Xs at seemingly discounted prices on its homepage… While this is a common practice in advertising… it’s not really something that Apple, a company that has rarely hurt for demand for nearly two decades, has had to stoop to.”

“Perhaps the company’s premium push, positioning itself as a luxury brand, has worked to its detriment. Or maybe Apple just doesn’t do ‘cheap’ well,” Murphy writes. “Its last colorful, supposedly budget, model was the 2013 iPhone 5c, which was billed as ‘unapologetically plastic’ and wasn’t much of discount over the new 5s, rather like the current Xr-Xs similarities.”

iPhone XR comes in six new finishes: white, black, blue, yellow, coral and (PRODUCT)RED.
Apple’s A12 Bionic-powered iPhone XR comes in six new finishes: white, black, blue, yellow, coral and (PRODUCT)RED.

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Apple's all-new 5.8-inch iPhone Xs starting at $999 and 6.5-inch iPhone Xs Max starting at $1099
Apple’s all-new 5.8-inch iPhone Xs and 6.5-inch iPhone Xs Max

 
Read more in the full article here.

MacDailyNews Take: You can’t do cheap without cheapening your brand. (See the Cadillac Cimmaron.)

Of course and as usual, our own SteveJack explained this rather concisely years ago (Newsflash: Apple sells premium products at premium prices to premium customers, October 23, 2012) and also subsequently offered an idea that would potentially solve Apple’s current conundrum of wanting to sell more than a handful of iOS smartphones in emerging markets: “Apple should buy BlackBerry and sell lower-priced iOS-powered phones and tablets under the BlackBerry brand.”

For as long as Apple has been Apple there have been calls for the company to make “affordable products.” By this, most mean lower price tags. They’re not talking value or Total Cost of Ownership (TCO). When you bring those ideas into the discussion, Apple’s prices are very low indeed. No, this is all about price tags. People want Apple to sell products for less, so that more people can use them and – side benefit – it hurts those ripping off Apple’s intellectual property to produce cut-rate facsimiles of Apple’s innovations. Android, I’m looking at you.

One major problem: Offering low priced products is, as Apple’s leadership likes to say, “not part of Apple’s DNA.” This is a nice way of saying: We can’t dominate entire markets (outside of the fluke iPod/iTunes Store) because it would irrecoverably damage the Apple brand or as Steve Jobs once said, “We can’t do it; we just can’t ship junk.” More recently, this has been parroted by Tim Cook: “There’s always a large junk part of the market. We’re not in the junk business.”

I have a solution that satisfies everyone: Buy an established brand (on the cheap, no less) and design and market products for mid-tier consumers. There are other possibilities – other brands, creating your own (quite expensive) – but the BlackBerry brand would fit the bill quite nicely. No sense letting a widely-known brand just whiter away to nothing.

What would happen if Apple bought the BlackBerry brand and soon after, this new BlackBerry announced two products to start: A brand new 5-inch BlackBerry smartphone and a brand new 7.9-inch BlackBerry tablet, both of which are powered by Apple A-series processors, run iOS 7, and connect to the App Store (or the “BlackBerry App Store” which just so happens to mirror exactly what’s in Apple’s App Store)? Remember now, these aren’t junky products we’re talking about, these will be quality mid-tier Jony Ive-designed products. They will offer quality components and excellent build quality, they just won’t be the very latest, highest-end stuff. BlackBerry will be the best of the mid-tier, not at all low-end.

Here’s what I think would happen: Apple iPhones and iPads would continue to own the high-end smartphone and tablet markets. BlackBerry smartphones and tablets would crush Android in the highly-profitable mid-tier (the low-end can keep buying junk). Apple would, of course, keep all of the money (instead of watching Samsung bank all of that non-Apple revenue using products based on Apple’s IP). iOS market share would rapidly overtake Android; first in the U.S. and then quickly spread elsewhere around the developed world. Even though the mid-tier BlackBerry users wouldn’t buy as many apps, patronize as many ads, spend as much money on services, etc. as Apple user, they would be iOS users. This would only make developers even more enthusiastic about developing for iOS. Many would lose interest in Android rather quickly. Android et al. would be relegated to the low-end. Google would be sucking fumes in mobile advertising. iAd would dominate. Plus, all of these new BlackBerry users would be far more primed to graduate to Apple devices next than even the Android settlers are now.

Mini Cooper has worked very nicely for BMW. BlackBerry could work even better for Apple.

Apple should buy BlackBerry for the brand and use it to preserve the Apple’s brand cachet while hitting Android and Samsung where it hurts, relegating Google’s wannabe OS and Samsung’s wannabe devices to the junk liquidation warehouses where they belong.SteveJack, MacDailyNews, November 4, 2013

Remember, half a decade ago, the BlackBerry brand meant much more to people than it does today. So, where would Apple be today – in markets like India – had they done as SteveJack described above?

33 Comments

    1. Some people know well enough about the power consumption issue (not by much for a small screen) and screen burn-in issue etc of the OLED film. To me, none of those matters much if there are overwhelming benefits of using it in a small screen of smartphones. Yes, some colours may look deeper, black looks blacker and may look sharper to some etc. But I am not going to pay any substantial premium for that. The latest LCD technology gives us a really colourful and sharper image. I for one prefer the LCD screen over the OLED for 6″ and smaller.

          1. OLED Burn in iPhone X….
            Hmm, apparently you’d have to have the same image on the screen for 17 hours. Lots of evidence of no one with an iPhone experiencing it. The definition of Mythical 🙂

  1. If Apple wants to transition to being a ‘services’ company they need more customers to sell services to.

    They’d do this by lowering the price of the devices. Why not keep the iPhone XS Max at $999 and price the XS at $899, and the XR at $699?

    Surely Apple’s economy of scale can allow this to happen without much sacrifice.

    Apple used to REDUCE the cost of hardware as it aged and become cheaper to produce, but now they just RAISE the prices on newer devices. Seriously, the new MBA is $200 overpriced. The new iPad Pro is at least $100 overpriced.

    Sure, people BUY them… but people prefer to actually feel GOOD about their purchase, instead of feeling like they got fleeced.

    1. “If Apple wants to transition to being a ‘services’ company they need more customers to sell services to.”

      You do know Apple is approaching 1.5 billion customers right? How many more do you think they need before a services business model will work?

        1. Are you insane? They need 20 billion! With only 7 billion in the world currently, they need to focus on making people “do the sex” as much as possible. OF COURSE, you don’t see Pipeline pushing for folks to lay more pipe… shortsighted Pipeline Timmy!

          Oh, almost forgot.

          FECKLESS!!!

  2. the people have spoken and they want the XS Max.

    Apple has its own TCO. It’s expensive to support the ‘mid tier’ because they are much more likely to be hospitalized for self injury than iPhone users.

    The lowest paying customers frequently rack up the most costly customer support bills in my business. I would not be surprised if Apple figured out to avoid the schmucks from day 1.

    1. “the people have spoken and they want the XS Max.”

      Apple is not reporting unit sales numbers so your fantasy is not our reality.

      Other reports indicate the older models are selling better than the newer ones, who knows but closed lip Apple.

      What I do know is the small form factor powerhouse SE is gone and would certainly impact model sales…The

  3. There’s a vast chasm between a “cheap iPhone” (which doesn’t, and never did, exist) and the XR. Apple used to fill that chasm with phones that didn’t fit the “luxury brand” that Apple is pushing now. They were still “premium phones,” but at a price point intended to sell to people who were smart enough to see the value of the iPhone, yet not stupid enough to fall for the current slick luxury marketing ploy. Steve Jobs understood the proper price points and products to introduce to grow market share and please the Apple aficionado (he worked on the 5c, 5s and 6 before his death, and advocated small sized phones like the SE). Tim Cook does not get this. Once upon a time Jobs would develop and roadmap products to have introductory models and relatively inexpensive products to fill the niche of Apple buyers or migrators that don’t fit the “luxury brand” that Cook is catering to. And if a near 30% drop in market value from a high of 232 a couple of months ago doesn’t attest to the market’s disagreement with Apple’s move away from “premium product” to “luxury brand” pricing, I don’t know what does.

    1. All Apple needs to do to prove me wrong is to release an SE2 priced a couple hundred below the XR. Same size as the SE (part of the 9th generation iPhone based on the 6s, and introduced 2 1/2 years ago at $399/499), with updated specs to match the 8+ and a price bump of maybe $100.

      If not, they will loose the small-sized market sector to competitors.

  4. The thing is, Apple didn’t use to be a ‘premium’ brand, it used to be a brand that worked. Sure, Macs were more expensive than Windows, but it still seemed reasonable. Nowadays, Apple products are just being expensive just to be expensive.

      1. So go buy other products.

        Many folks already have. You don’t think that all of the Pro market who traditionally bought Mac Pros every 3 years have stuck around, have you?

        For myself, I’m going to be renewing the battery in my 6s instead of buying a new iPhone this year … the savings will buy me a new set of tires in the spring for one of my Porsches /S

      2. 85% of people do.

        Of course arrogant people like you will contend that 85% of mobile phone owners are stupid, but in a competitive market, Apple’s hardware lacks features that people want. Apple hasn’t advertised security advantages. There are no ios apps worth noting that aren’t also on android. So just like in the Mac vs PC war, Apple will eventually lose because of its own arrogance. Cook thinks his garden is pretty but you have to make sacrifices to live in it.

        1. José – Apple isn’t interested in selling bargain basement priced items. And why make sacrifices? If things are so much better in Android and Windows worlds, why are you here?

          hh – “all of the Pro market”: Sorry to say… the business of any company is – business… i.e. making money. And Apple is crushing every other computer and phone company. More mobile profits than ALL OTHER COMPANIES together. What the heck does your 85% figure matter.

          1. @Sean: Apologies … I was referring to the Macintosh product line of Apple, not iOS.

            Frankly, I don’t agree that Apple is actually “crushing” the competition, despite their financial success with iOS. Sure, they’ve been pulling in most of the profits, but the strategy that they’re using looks to me to be shortsighted and thus, introducing a progressive risk that they may price themselves right out of business.

            Presently, Apple lacks diversification in markets other than iOS to be able to adjust to future change, and as other smartphone makers have shown us, this consumer marketplace is fickle and has lead to very sudden crashes.

            TL;DR: I’m not talking about next quarter … I’m talking long term.

            Strategically, Apple has done extremely poorly in supporting the viability of their non-iOS business lines, as well as having put their iOS product lines at unnecessary risk by asking too high of a price for their product differentiation. If the 25% China tariff doesn’t do it, the turning of the Economy will … and if both hit together, it will be a really big “Bag of Hurt”.

      3. “So go buy other products”

        Immature Apple apologist BROKEN RECORD Sean to any legitimate Apple concern is worn out for years. Right now Apple does not need to loose MORE customers…

    1. “Apple didn’t use to be a ‘premium’ brand”
      Apple has ALWAYS been a premium brand. You don’t even need to be an old fart from the Apple II days to know that. Google is your friend 🙂

      1. “So go buy other products”

        Immature Apple apologist BROKEN RECORD Sean to any legitimate Apple concern is worn out for years. Right now Apple does not need to loose MORE customers…

  5. Make no mistake. I do not want Apple to produce and sell “cheap” phones or anything else. Take a hight road Apple. Apple’s product always carried some level of “premium” price, and that’s one of the reasons people favoured Apple, I am sure. We will support you. I am prepared to pay any reasonable premium or Apple Tax or whatever people call it, and I have been doing so almost blindly every year,….. until the last year. We thought we saw through the walled garden and realized the issue was simple. The greed and arrogance. They pushed the consumers over the cliff. Not analysts or institutional investors or whoever else.
    There is a monumental difference between “high end” and “overpricing”, and people are now sensing it. Apple cannot mask it, and the more they struggled to do so, the pettier they look. That’s finally putting Apple in a bad spot. This combined with the hiding of the unit sales numbers, current discount and lowering of prices that Apple never did before and all that really disillusioned the market. Yes, there may be a perception problem, but ultimately the consumers have a say and they have spoken. It may not be easy to regain their trust but Apple has to change their attitude/approach. Nothing more needs to say. People here know things very well, although they may not say what they really think in their mind, lol

  6. I can remember owning an iPhone with a plastic cover. Not new nor was it a bad choice for Apple.

    I’m looking at changing my current 7 for a new iPhone, but I have no desire to pay more for a nicer “skin” and as bit better camera. That leads me to the Xr, which has the same internals.

    It really gets down to the camera because most Wie people will get a protective cover for the iPhone. At 74 my eyes are not good enough to pay extra for the quality differences of the two.

    The Xr is not a “cheap” iPhone. Look at the specs – an A12? Really? Are you turning your nose up at that? Wow!

    When I buy I’ll go for the basic iPhone with top processor and 128GB. I’ll also take the military discount (I served) as well as a sales tax exempt.

  7. I have to chuckle at the stupid headline of the story. Apple has always made premium iPhones, hello? Not so long ago that included the plastic 5C, a great cost conscious phone my father uses everyday. Remember the Jony Ive video hailing and detailing the amazing precision plastic production process, I do.

    If Apple was smart, they have MORE than enough big ass phones on the market (back to 7) that don’t fit small hands or your pocket. Bring back the 5C form factor as the entry level phone. Charge $299 and imagine the sales SOARING in India, China and other developing nations. AARP and Consumer Cellular most likely might plug it as THE iPhone affordable best value.

    Also, bring back the SE2 and upgrade the chip speed and edge to edge screen to make it feel bigger than its size. Other than that, the camera is more than 90% of what people need, the OLED screen is not necessary and lastly, the Face ID magical gimmick is not worth the price. Keep the headphone jack or not and incorporate fingerprint ID onscreen, done. Bring it on for $399, $499 max and imagine the sales around the world.

    ALL sizes and price points for “premium iPhones” completely covered!…

    1. Re your SE2 proposition, that is exactly what has been desired by the market and I do not understand why Apple kept pumping out large and similar sized 3 iPhone X musketeers. One of the problems with the Xr was the size, I believe. I for one am willing to pay a premium for the SE2 like that. Hell, I am even prepared to pay the asking price for the Xr for that (Oops, I should not have Apple get carried away:-). Maybe not $399, $499 max though. Apple won’t do that, unfortunately. But when Apple ganged up with India to produce the SE, I thought they would come up with the SE2 from there. A good export incentive for India too. An OLED screen is definitely not needed, which consumes more power (not by much for the small screen for a phone, but the issue is definitely there). The SE used to have an excellent battery longevity, but with OLED, it would be diminished. The OLED film also has a burn-in issue too.
      Re biometric unlocking, it would be nice if Apple would offer the in-screen fingerprint ID. Chinese are successfully doing it now and no doubt it will be further refined over the coming years.
      Apple, launch the SE2 above. I guarantee the success. You’d better believe it Apple, as KenT is guaranteeing it:-)

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