Nova workboard

a blog from young economists at Nova SBE

“Perceived Failure” to Market Success – Another Apple’s Miracle

Was the launch of the so-called “cheap” iPhone 5C “overhyped”?

One would think that the launch of a cheaper product would boost sales exponentially and catapult this product to the top. The 5C propaganda failed to follow a path determined to conquer the world with its new, cheaper version of its all-time success, the iPhone. The simple fact that this version has not been able to outsell the Apple’s top of the line “brother” 5S even with its $100 price difference does not seem to make any sense.

So why did Apple felt the need for developing such Product?

According to an article from Forbes[1], there are three plausible reasons that can explain Apple’s decision in bringing this new product to the market. The first one is related to the need of offering cheaper iPhones for emerging markets and to more price sensitive customers. “The mid-tier iPhone segment is growing year-over-year and 5C provides a more affordable option for markets where LTE is becoming more established”[2] (the 5C model supports LTE networks, unlike the previous models). Furthermore, there are countries where the two-year contracts often associated with iPhones (enabling price reduction) are not so preferred, so it’s possible that Apple had in mind to provide overall iPhone experience to those markets.

In comparison to the previous model, the iPhone 5, which costs $850 USD in China, this new model iPhone 5C is 14 per cent cheaper ($733 USD). Even so, from one’s perspective, this model can hardly be described as “cheap” since its price is still $184 more expensive than the unlocked price of the same iPhone 5c in the United States. Nevertheless savings may very well be the motivation behind the development of the iPhone 5c once it is a cheaper product to produce that can be sold at a cheaper price.

Moreover, the aim of entering in the kids/younger iPod Touch Market is also perceived as another reason that can explain Apple’s decision in bringing this new product to the market. There is an entire generation used to have Apple’s products (iPod for example) and are now making the transition to the iPhone. The cheerful and colorful design that Apple developed could easily be directed to this youth segment.

At the end of the day, Apple clearly has the intention to distinguish the iPhone 5C from 5S and provide incentives to buy the expensive one. In fact, the difference in prices is not significate and not everyone prefers the colorful plastic iPhone 5C. As far as one can see, customers may be willing to pay more in order to avoid this aspect, which is largely beneficial to Apple allowing the company to sell its premium model making higher profits.

Having all these aspects in mind, one can perceive that the launch of this “lower-tier” was another brilliant strategy not intended to offset the sales of its main attraction, the iPhone 5S, as it was thought to happen, but to reach different markets and different targets.

#695

[1]  http://www.forbes.com/sites/tonybradley/2013/09/16/three-reasons-apple-created-the-iphone-5c/

[2]  http://9to5mac.com/2014/03/18/opinion-why-has-apple-launched-a-barely-usable-8gb-version-of-a-current-model-iphone/

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Author: studentnovasbe

Master student in Nova Sbe

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