Apple's iPhone 5c bet: Mass market without lowest pricing

Apple's iPhone 5c bet: Mass market without lowest pricing

Summary: Tim Cook and Apple management have said repeatedly that they don't do cheap. It's unclear whether that bet ultimately backfires

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Apple CEO Tim Cook told Bloomberg BusinessWeek that the company never set out to make a low-cost phone with the iPhone 5c.

In an interview with BusinessWeek, Cook said the objective was to "sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”

That lower cost wasn't low enough for many analysts. In the U.S. the iPhone 5c goes for $99 with a two-year contract and that's a good deal. Overseas, the iPhone 5c will run you $550 unsubsidized, a price tag that's too high to make a dent in markets like China.

Previously: Apple iPhone 5C freakouts unwarranted

The conundrum highlighted in the BusinessWeek story revolves around whether Apple wants to be BMW or a mass market brand. My hunch is that Apple is really trying to thread the needle between the two points with the iPhone 5c.

For instance, Wal-Mart is offering the iPhone 5c at $79 with a two-year contract. It's unclear how Wal-Mart did that other than making it clear it could move volume. Perhaps other retailers follow.

Here's a possibility for all the iPhone 5c naysayers when it comes to emerging markets.

  • Apple gets more scale in developed markets with the iPhone 5c.
  • Component costs come down due to volume.
  • Apple cuts deals with carriers in emerging markets and lowers the effective cost. Apple doesn't have to be the cheapest phone in China just in the ballpark.

Cook and Apple management have said repeatedly that they don't do cheap. It's unclear whether that bet ultimately backfires, but there's a third way that may pay off: Low-cost enough with a dash of premium relative to cheap Android smartphone.

Topics: Smartphones, Apple, iPhone, Mobility

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40 comments
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  • just say no!

    Just say no!
    mytake4this
    • Overseas

      Americans can "just say no" to an unsubsidized 550$ 5C. Overseas we can "just say no" to an 800$ 5C. Not sure who got the better deal, but my faith in humanity will probably hit an all time low if the 5C is a success overseas.
      Sacr
  • We don't do cheap and

    We don't do cheap, and paying more for less are two different things. When the competition gives you more in the way of spec, quality and innovation for less money, it is called value. The people want value. And where again is that phone assembled? Oh, it is not the USA now, is it.
    mytake4this
    • Of course people want value. Your mistake is thinking

      that your value is the universal metric by which all value must be measured.
      baggins_z
      • Because in Bizzaroworld...

        Value is defined as less features for more money, not more features for less money.
        jvitous
      • This...

        is pretty cut and dry. Apple products have never been about "value". Apple is about paying more for less... but isn't it pretty!!
        kstap
        • Just because you can't see the value proposition of Apple....

          ...Does not mean it is not there.

          You are simply using a single metric, the purchase cost, to make that judgement.


          True value is calculated using many things, beyond purchase cost. Apple products tend to have a longer useful life than other manufacturers, they tend to have a much more stable and consistent ease of use, which many people value, they tend to have a much higher resale value when you are ready to upgrade, etc.

          Many people find those are worth paying more for.
          yoshipod
          • Please provide examples

            @Yoshipod> That's a common lie spread by iFan. Please give me true facts about longer useful life of their products.
            Wall.iPhone4
          • Its quite simple really

            Go to one of the online sites that buys old computers and phones.

            Look at what models of Apple products they want to purchase, then look at what models of non Apple products they want to purchase.

            See how many 3-4 year old non Apple products are listed, vs how many of the 3-4 year old Apple ones are.


            Or, look at usage share statistics compared to market share. Most usage share stats show Apple products having a higher percentage than they do of market share. That means a higher percentage of Apple products are still being USED.
            yoshipod
          • Value

            And, can you put a value on a 1 year old phone that just got a firmware upgrade to look, and act, like a new phone? What's that worth to you, and how many updates has the Galaxy S3 had?
            rphunter1242
      • hype and fashion

        Hype and fashion, I do not consider as value. Although I admit, if someone considers it to be this way, then for them it becomes a value. I was saying for the masses, using facts and substance to base a value on of a phone, the iPhone5c lacks value. My value is a common value.
        mytake4this
        • Value

          It has about the same capability as the iPhone 5 of last year, and a few tweaks, and a new OS, and colors. MANY people begged Apple to come out with a variety of colors. Now that they have, the same people are criticizing because the phone isn't $100. Amazing! Do they really expect to get the same innards with a shiny new case, and 'new look' for less than what the iPhone 5 would have been priced if Apple did the same thing as they usually do? Some people would complain if they were going to be hung with a brand new rope.
          rphunter1242
    • cheaper?

      And how much would a Moto X cost, made in the US, if sold in NZ or OZ?
      rphunter1242
  • Then I feel they're doomed to repeat what happened with the Mac.

    Smart phones require developer support. Developers go where the market is. While Apple currently has a decent market share continued erosion could result in developers focusing their efforts first on Android and secondly on iOS. Perhaps they may even abandon iOS altogether. This is very much like what happened with the Mac.
    ye
    • Developers go where the money is.

      There. I fixed it for you.
      baggins_z
      • How does that change what I said?

        nt
        ye
    • I bet they hope so...

      ...because no PC manufacturer comes close to the profitability of Apple.
      yoshipod
      • And?

        Apple is very profitable. How does that change anything I wrote?
        ye
        • It does not change anything

          The point is that market share is not relevant to success. Apple has 5% market share in the PC world, but they are the most profitable company, and users have no shortage of software. In fact more and more developers are writing programs for Mac OS X.

          As was pointed out, developers go where the money is.

          Android has a much higher market share then iOS, but iOS sells more apps.
          yoshipod
  • Article: "they [Apple] don't do cheap"

    Apparently, "they" [Apple] don't do mid-market either. Because mid-market is most definitely not cheap.
    Rabid Howler Monkey