Why price points matter: Will buyers push back on highest-end iPhone 6?

Why price points matter: Will buyers push back on highest-end iPhone 6?

Summary: Consumers are becoming smarter about the full price of their phones and manufacturers are offering great fair-priced options. Is Apple immune to price competition when it comes to the iPhone?

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iPhone competition continues to evolve at a fast pace with other platforms providing everything you find in an iPhone — often times much more — at reasonable pricing levels.

Apple's lowest cost model, currently 16GB, is priced higher than most every other highest-end smartphone model. When you then buy a model with more capacity in your iPhone, the pricing skyrockets. While Apple continues to charge a premium for its smartphones, we see almost every other smartphone maker launch their own high-end models between $550 to $650, with the option for storage expansion via low-cost microSD cards.

For the last few years, Apple iPhones have been priced at $649, $749, and $849 for varying degrees of storage. If you live somewhere with sales tax then your price out the door could be greater than $925 for the 64GB model iPhone 5s. When you see the Moto G available for $249, it can be tough to justify the high price of the iPhone.

Recent reports speculate that the new iPhone 6 may come with a $50 premium for the 4.7-inch model and $100 premium for the 5.5-inch model, which Apple is expecting to reveal for the first time on September 9.

If these price premiums turn out to be true, the top of the line 5.5-inch model would cost the average buyer about $1,000.

Highly capable and reasonably priced smartphones are selling like hotcakes, as consumers become increasingly more knowledgeable about the true cost of their phones. 

Previous sales figures have shown Apple to sell millions of its new iPhones on opening weekends, as well as for the following several months. But, I am curious to see if consumers push back a bit on the high price of Apple's iPhone when there are other compelling smartphones available for a much lower price. A recent article in a San Diego business journal raved about the high quality, low cost smartphones coming out of China and I think consumers will soon wake up to understand the real cost of their smartphone. They are not $199 or $299 like US carriers want you to think. Look at the full price and make a decision based on what you really need.

Further iPhone 6 coverage:

Topics: Mobility, iOS, iPhone, Smartphones

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42 comments
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  • Balancing Act ..

    If you look at 'top end' cars, you'll see that some brands still command prices that do make logical sense - the 'brand value' convinces people to allow the huge profit margins demanded, way over any 'extra value' the cars provide.

    But none of these brands command the kind of market share that Apple has enjoyed.

    But as the technology tends to plateau - the incremental added value is reducing, with each new iPhone - people will increasingly decide that they cannot justify paying those prices.

    I suspect Apple will maintain current margins for a while yet, partly by reducing costs, as their market share is falling at a fairly gentle rate. I reckon they'll eventually settle for a 7.5-10% market share, and only reduce prices if market share fails to settle down at those levels.
    Heenan73
    • Apple's market share is falling...

      The US is Apple's market share stronghold, but globally the iPhone is at 11% and falling.
      cybersaurusrex
  • Apple is happy selling to the rich who dont ask or care how much it costs

    nt
    greywolf7
    • People buy iPhones for the brand more than anything else...

      There are plenty of "non-rich" people walking around with iPhones, but there's definitely an attraction to the premium price for a lot of people... because they want to be perceived as owning (and being able to afford) a premium (let's just say, "luxury") device.

      The iPhone hasn't been the best phone out there (spec-wise) for a while now, but people continue to buy them and pay a premium because of the brand. There's nothing wrong with that. It's a free market. But will it cost them market share? Yes. It already has cost them market share. The iPhone's worldwide market share is around 11%... and falling fast. How long before Windows Phone passes it as the second most popular smartphone OS?
      cybersaurusrex
      • Partly true

        There are those who buy Apple for the brand and the illusion of exclusivity. But people also do buy iOS products for the OS and ecosystem. My work team leader who is very tech savvy bought a Samsung for him and his partner after being iPhone users, mostly to get the bigger screens. They hated the OS. Frankly if they would have had pure Android I think they would have been much happier but they don't want to dink around with that, they want to buy something, do some basic configuration, and then just live their lives.

        If WP8 had more apps, it would have been a better recommendation for them.
        Rann Xeroxx
        • Fair point.

          A lot of people don't want a lot of customization. The iPhone definitely delivers on limiting options... but making life simpler. However, if you look at market share, the number of people who want Apple's "walled garden" environment is not very big. On the PC, Macs control about 7% market share. In phones, it's about 11% and falling.
          cybersaurusrex
          • Nobody but geeks discuses "walled garden"

            The average iPhone user doesn't care nor do they notice this so called "walled garden" you geeks love to speak off. The only time I hear walled garden get discussed is among tech geeks on tech sites. The average iPhone user doesn't feel trapped in some walled off garden. Actually it's quite the contrary which is why the iPhone is still the most popular brand of phones. iPhone users get the most choices in accessories and aftermarket products designed specifically for the iPhone. Not some generic choice. iPhone users continue to be first priority from app developers avoiding the fragmentation of Android as best they can. They continue to get access to OS updates from Apple without any carrier or manufacturer blocking. Walled garden is a myth.

            Most consumers are not techies lusting after smart phones they can tweak and break and customize. They just want a smart phone that's easy enough to use and is consistent. A brand they can trust and an ecosystem where they can get any and every app and accessory they will ever need in their life (nothing walled off here).
            dave95.
      • People buy iPhone because they dont "get it".

        And of course if they have the money.

        I owned an iPhone for 3 years. Great device. But the plain fact is my WP8 is much better.

        Its pretty clear that aside from the fanbois those who mostly buy iPhones is because they don't have any real understanding of high tech devices and when they got the money they just buy what they have heard of largely out of fear that they don't really understand what they are buying but they have heard Apple is good (thanks to the Apple fans with massively loud mouths) and so they don't have a clue and so that's what they buy.
        Cayble
        • And...

          you're not a fanboi given your relentless pro-MS and WP posts??? Yeah right....

          and your dismissal of the smartphone market says a lot about your ignorance of how markets work.

          Maybe MS will be successful. But after relentlessly screwing their mobile customers for the last several years (thanks Stevie B), they have a long way to go to grow customer loyalty.
          paddle.
      • Maybe ii is just a great product

        Are you saying, people are stupid and keep buying junk just bcs someone told them to? No, people keep buying iPhones because it is a good product, feels like a good product and compared to droid, it is clean and easy to use.
        peterhelpme@...
        • Vanilla Android kit kat VS IOS 7

          Sorry but no. IOS is not better, or more clean. Its not more user friendly, it does not have more features, it will not magically change your life for $1000.00 dollars. Ill take my nexus on vanilla over iPhone any day and to be honest you would be a fool not to do the same.
          CHNexus87
  • iPhone will always be priced higher

    the only really cheap iphones are used older iphones. you can never expect the iphones sold as new at the apple store to ever be cheap or really low cost. that is what android is for. cannot afford or do not want to pay the always higher prices for a new iphone? then either get a used iphone or get a brand spanking new android or one of those nice new nokia lumia windows phones. if you are not ultra religious in preaching your faith to the great god Apple or the great god Android, then if you want "cheap" or "low cost", then whatever phone matches whatever money is left in your wallet will probably satisfy your hunger for a new cheap low-cost phone.
    i-want-gizmos
  • Android next time round for me....

    That is once my iPhone 5 has bitten the dust which it shows no sign of at the moment. But seriously next time round it will be Android without doubt.
    5735guy
    • No signs of biting the dust yet - EXACTLY!

      One usually gets the quality, performance, utility and durability commensurate with the price paid - and, for Apple products, those are product characteristics that have become associated with their well deserved reputation.

      BTW, my iPhone 5 (destined to become a gift for my sister in a few weeks as I update to the iPhone "Air") has retained it "brand new appearance and functionality" as well.
      kenosha77a
      • Same

        Same with my Nexus 4. Great screen, still zippy (faster actually with ART update from dalvik), battery is still great, device itself looks great, etc. This will be my daughter's phone soon.

        In other words, Apple is not the only ones making great product (and they are very nice), other are as well, they simply cost 1/2 the price or more.
        Rann Xeroxx
      • Just more of the Apple delusions

        All of my "non-premium" Android phones are still working perfectly well, well after being put out to pasture. Even my brother's dinky pre-paid Android phone shows no sign of impending failure, and it gets put through the torture of his work at construction sites.

        To be fair, my old iPhone 3G is still working fine too, but this idea that Apple products are somehow inherently more durable or high-quality because of the price is absurd.
        PC987
      • almost true

        "One usually gets the quality, performance, utility and durability commensurate with the price paid"

        Have you bought consumer electronics sometime in the last century? Stuff like 100$ HDMI cables, headphones that cost 300$ in one shop even tough the same exact phones in the shop next door cost 100$, "branded" DVD players that are produced by the same factory which also produces the no-name DVD players which sell for 50% less (the only difference being a stamp on the case, and the printing on the box)?

        Customers get abused at every price point.
        Sacr
        • Good point

          And yes, I was stupid once and purchased an outrageously expensive "Best Buy" HDMI cable. I understand, Sacr. I really do.
          kenosha77a
        • You are absolutly right as fact.

          Computers are pretty much built every time on components available to any manufacturer. Apple doesn't use the "special parts" or the "only obtainable by Apple" parts. There is no such thing in existence. In fact, we also know that Apple jumped ship to Intel a number of years back because they were not using Intel CPU's which were the most common CPU manufacturers and were producing units of outstanding capacity and capability. Any computer manufacturer can and usually does use Intel CPU's along with all the very same kind of components used by common manufacturers of computer components that go into Apple computers.

          Why the Apple fanatics simply cant just admit they love Apple, hate Microsoft and that's what drives them to Apple products, that's it. Cut and dried. Drop all this complete nonsense and lies about Apple products having some kind of magic. The only magic Apple has ever shown has come from their PR and advertising departments. That's where the real magic happens at Apple.

          And we all know it. Even if the Apple Jacks will never admit it.
          Cayble
          • How do you explain the Surface pricing?

            Why is it so expensive? If I am understanding what you're saying, the Surface Pro should cost no difference from a cheap $300 generic notebook found in Wal-Mart. The Surface uses the same Intel CPUs and same components like any other manufacturer so what justifies the quadrupling of cost?

            Maybe if you could figure that one out you will figure Apple's.
            dave95.