Commentary

Cheap Shot: Did Apple's Cook Overestimate The iPhone's Low-End?

How’s this for damning a marketing strategy with faint praise: the late Steve Jobs was right and current Apple management is wrong?

“Last month, [Apple CEO] Tim Cook introduced the colorful iPhone 5c, a less-expensive version of Apple’s smartphone, to ‘serve even more customers’ around the world. It turns out people so far are more interested in its pricier, feature-rich cousin, the 5s,” writes  Bloomberg’s Adam Satariano after pointing out the Apple co-founder famously “emphasized high-end consumer gadgets over cheaper ones.”

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Satariano is following up on a report by the Wall Street Journal’s Lorraine Luk, Eva Dou and Ian Sheer (among others), earlier this week that Apple reportedly reduced orders for the 5c device from its suppliers and that “retailers and telecom operators report tepid demand for the device, prompting some to cut prices.”

This despite heavy advertising for the 5c, which retails for roughly $100 less than 5s models, although specifics vary by market.

“A recent Consumer Intelligence Research Partners survey reported that “64% of U.S. iPhone customers were buying the iPhone 5s, which sports a better camera, faster processor chip and fingerprint-reading security features and starts at $199 with a carrier contract,” Satariano writes. The iPhone 5c has been bought by 27% of buyers, according to the survey. Earlier versions of the phone are also available.

In fairness to CEO Cook, he recently made the point that “I don’t subscribe to the common view that the higher end, if you will, of the smartphone market is at its peak,” during an earning call, as AllThingsD’s John Paczkowski reported earlier this week. “I don’t believe that,” Cook said for emphasis.

CNN Tech’s Doug Gross, in a piece that asks, “Is Apple’s iPhone 5c a Flop?,” advances the argument that the price may still be too much in emerging markets but that the differential between the new models may not be enough in markets like the U.S.

“In China, where phones aren't subsidized by mobile carriers, the 5c is selling for 3,500 yuan, or about $560” he reports. But in the U.S., where it’s available for $99 as long as consumers sign a contract, “the 5C doesn't sport features significantly upgraded from the iPhone 5, which can be had for as low as $199. The two-year-old iPhone 4s can be had for free with a data plan.”

"Apple needs new customers to keep growing, and the 5C was supposed to appeal to a new, more price-conscious consumer," Forrester Research analyst Sarah Rotman Epps tells Gross. "Turns out that acquisition is a lot harder than retention."

Reuters’ Clare Jim and Paul Carsten point out that, at least in the short term, “the decision by consumers to spend more on the pricier 5s benefits Apple. The company's shares rose on Wednesday, touching a one-month high above $502.”

And they also pass along a caution by analysts and Apple executives about “reading too much into supply chain adjustments, which are common in the fast-moving electronics industry.”

Meanwhile, critics are also buffeting Apple’s new mobile-device operating system.

“It's Apple's most problematic operating system launch so far," Raluca Budiu, senior researcher Nielsen Norman Group tells USA Today’s Scott Martin and Alistair Barr. The consultancy’s recent report about the “move away from the skeuomorphic design that characterized earlier versions of iOS” finds “some of the new features are welcome usability improvements, whereas others are likely to cause pain.”

Among the discomforting features, Martin and Barr report, are “buttons that used to stand out now blend with the background, and links that used to be visible may now be mistaken for plain text, the consulting firm said.”

Functionally, text messaging via the built-in iMessage app apparently isn’t what it used to be on the new OS, leaving “users fuming,” and “some users of Apple's new flagship iPhone 5s have even experienced a so-called blue screen of death, familiar to many who have seen a Windows computer screen freeze and turn blue.” Not to mention “flawed results” from the motion sensors — you may know them as the accelerometer, inclinometer and gyroscope.

Defenders say Apple is a victim of its past success in making things so easy to use and expect that the bugs will be fixed in due course.
2 comments about "Cheap Shot: Did Apple's Cook Overestimate The iPhone's Low-End?".
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  1. Jeff Copus from Highmark Caring Place, October 18, 2013 at 8:57 a.m.

    $100 is not a huge difference looking at the two year life of a phone. The cost of a 5s over 2 years is $1,759($199 + $65 data per month)
    The cost of a 5c over two years is $1,659 ($99 + $65 data per month). If Apple wants to appeal to a more budget conscious consumer the cost of a data plan plan must also be considered.

    The people I know who don't have an iPhone (or other smartphone), don't own one, not because of the upfront cost but, because of the long-term cost of paying for data.

  2. Maarten Albarda from Flock Associates (USA), October 18, 2013 at 6:20 p.m.

    You mean those same analysts that wanted Apple to bring out a cheaper version so as to compete more effectively with Android models and in emerging markets? Just google "analysts want cheaper iPhone" and set as a range "before May 2013"... Here is one example: http://www.electronista.com/articles/13/02/22/calls.for.6.percent.dividend.in.fy.2013/

    Analysts, schmanalysts...

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