Apple iPhone XS, iPhone XS Max and iPhone XR prices, specifications officially revealed. In this picture, an Apple iPhone XS Max. (Image source: Reuters)
Here is the headline you read after the Apple Event:
‘Apple has launched three new phones: iPhone XS, iPhone XS Max, iPhone XR’
Here is the headline you did not read after the Apple Event:
‘Apple pushes its price points up again’
Yes, the big story from the Apple event has to be how Apple has once again pushed up the price points of its new flagship phones. This has been Apple’s great success in the past few years: pushing up the price point of its iPhones even as it sells more and increases its margins.
Apple’s success comes from its understanding that smartphones are now the most essential commodity for a lot of its users across the world. This means they have very limited price elasticity, at least for those users. These customers will buy it a higher price as they are convinced of the value it brings to them.
Over the years, Apple has been able to push up the price with this crowd. Consider this: In 2014, the flagship iPhone 6 Plus was priced $749 onward. Now, the iPhone XR, the most affordable of the 2018 pack, is priced the same. The top end, the iPhone XS Max 64GB version, starts at $1099. That is $350 more than the starting price of its top-end offering four years ago.
And this process of pushing up the price of its products got a huge boost with the success of the iPhone X, launched last year with a starting price of $999. The iPhone X did really well, despite all the initial criticism over the price and this seems to have given Apple the confidence to push the envelope even further.
Ben Wood, chief of research at CCS insight agrees. “Because of the enormous value they associate with the smartphone, people are willing to use their disposable income for owning the best product. That is where Apple saw something that others missed… they weren’t afraid to try and charge more for better products. We can see in the financial performance over the last 12 months that this was a financial strategy that delivered,” he told indianexpress.com on the sidelines of the Apple event.
Apple pushes affordability too
But while pushing the price point up with its new devices, it also wants to offer the feeling that it has more affordable products lined up. Apple’s iPhone XR is the product of this thinking. While the iPhone XS and XS Max look upwards of $1000, here is a new phone that offers most of the features while costing just a third of iPhone XS.
This phone is ideally placed to capture the demand of those whose demand is elastic in relation to price. The so-called ‘hero effect’ of the iPhone XS series will clearly pass on to this phone, despite its awkward pricing. Don’t be surprised if a lot of users upgrading from the iPhone 6 and 7 series end up with this 6.1-inch LCD phone in their hands.
Apple iPhone XS starts at $999, and in India the price is Rs 99,900.
However, this affordable phone is not for markets like India where Apple hopes to drive the numbers. While it will continue to be the top premium smartphone brand in these markets, it will try and cater to the budget conscious users with the lower pricing of its older phones. The iPhone 7 series for instance is still a great buy for users in India.
Apple will also help soften the blow a bit by offering zero down payment with EMIs lasting up to 24 months. While these relatively new affordability plans will be open for all iPhones, Apple might end up seeing a better uptake on the older models with these offerings.
Over the past year or so it has become increasingly clear than Apple sees itself as a clear premium brand. And this is a unique position for the company, one that it would want to hold on to for long. There is no other smartphone brand that plays only premium, so much so that its average selling price is well over $700 now.
Apple iPhone XR has a starting price of $749 and in India it is launching at Rs 76,900.
On the flip side, the problem with selling more expensive phones is that users will end up keeping the devices for longer. And refresh cycles might extend longer than with other phones. But Woods says Apple has insulated against this too by increasing the lifetime value from the customer.
“This is where Apple wins again, because on the services side they are getting money from Apple Music and the App Store while being able to sell people products like the Apple Watch that is once again locking you into the Apple ecosystem,” the analyst adds.
Disclaimer: The writer is in California at the invite of Apple India