How Will Apple Price Its Low Cost iPhone 5C?
Apple CEO Tim Cook is expected to take the stage in less than 24 hours from now, at a special media event to be held in Apple’s town hall at its Cupertino headquarters, and unveil the company’s next generation iPhones. In addition to iPhone 5S, the latest successor to company’s flagship smartphone, Apple is also believed to introduce a cheaper iPhone 5C, targeted primarily at the low- to mid-tier market. However, the real question in everyone’s mind right now is that how cheap the lower-priced iPhone will actually be?
Of course we wont know for sure until tomorrow, Ben Thompson from Stratechery believes it’s not likely to be as cheap as many are hoping it to be. He expects Apple to price the so-called iPhone 5C somewhere between $450 and $550, potentially establishing a new mainstream price band between the smartphone market’s high end and its low end. “Given the high bar Apple has set (iPhone 5 technology), I expect the iPhone 5C’s price to be on the high end of estimates, and possibly higher”, he says.
SO WHAT IS THE PRICE?
The fact the 5C needs to be sold in both subsidized and unsubsidized markets makes the pricing tricky; in subsidized markets, Apple is currently receiving a subsidy of around $450 on the iPhone 5. It wouldn’t make sense to unilaterally lower that – after all, it’s not like the carriers are going to lower iPhone service bills. This sets a floor of $450 for the unsubsidized 5C ($0 with contract). This also lets Apple dump the 4S, with its 3.5? screen, 30-pin connector, and lack of LTE.
In other words, to answer this section’s heading, I’m still not sure. Something has to give, whether it be the subsidy amount, avoiding the brand association with $0, or a too-high price.
Meanwhile, Morgan Stanley’s Katy Huberty analysed the data collected from a recent survey of 2,000 Chinese mobile phone owners, according to which Chinese customers believe $486 to be an “acceptable” price range for the iPhone 5C (via AllThingsD). She also noted that if Apple were to launch the iPhone 5C in Greater China at that price point, the company would drastically spike iPhone sales in the region.
“If that’s the case, why not drop the iPhone 5C’s price lower still to drive further market share gains? Because doing so might sacrifice product quality and profit margins. And because, historically, Apple has done quite well for itself using mid-tier products with lots of aspirational appeal to draw budget-conscious consumers into a higher price range.”
Do you think Apple will target the mid-tier market with the iPhone 5C and not go after low-tier?