A Huge, Plastic, Cheap iPhone 5!

Well, that's what's being reported, anyway. 

I still hope that this isn't the case. 

But analysts keep saying it

But I still don't think it makes any sense. Apple's iPhone is one of the most profitable products in the history of mankind. 

It's a luxury item. It commands a premium on the market. And people are willing to pay that premium. 

Just to be associated with the brand. Because they like what owning an iPhone says about them as a consumer. 

This way of thinking - no compromises, no price battles - has led Apple from the brink of bankruptcy, to becoming the most valuable company in the world. 

Look at the Macintosh. Despite Apple's stubbornly small market share, which (to my knowledge) has never topped 10 percent of PC sales, Apple rakes in a giant share of the industry's profits

This is a fundamental truth, and one which Steve Jobs conclusively proved at Apple: create great things, and people will aspire to own them. They will happily pay more for your product

If you create a commodity product, you will inevitably be engaged in a race to the bottom on prices, until all competitors' profits are obliterated. 

So why would Apple introduce a new, "lesser", iPhone, solely in order to chase market share?

I understand that there are markets where a $600 un-subsidized iPhone isn't going to sell well. Some people mention India as an important emerging market, and they're right. 

However, when I talk with Indian co-workers, it's clear that the iPhone is held in the same high esteem in their market as it is in ours. It's a product that people truly wanted to own, even before it was available in standard channels.

And as evidenced by the first wave of iPhone sales in that country, there are a substantial amount of emerging-market consumers who will purchase an iPhone, given the opportunity. 

This is the balancing act that Apple faces. Ideally, they could sell an iPhone to everyone on the planet, while maintaining their margins and their perception as an "aspirational" brand - a brand that people will pay a premium to own. 

I'm not sure that balance is possible. I'm not sure even attempting that balance is desirable. I do know that if a company can only compete effectively in one segment of the market, they're a whole lot better off competing with high-end products, for the most profitable consumers. 

For the last 15 years, Apple has chosen wisely. They've entered profitable markets, and more importantly, they've created profitable markets. 

If Apple's plan for 2013 is to boldly move toward commoditizing the iPhone, they should watch their step.


Post a Comment