Apple’s new mantra could be quantity without a huge compromise on quality. It’s targeting to sell more smartphones in 2020 than it did in 2019, which is what every company would want it to. Some experts believe the ultimate objective of Apple is to push its services like Apple Music and Apple TV. The fact is Apple makes more money through its digital services than through the hardware pieces. With a billion devices in the hand of the users and another 200 million being targeted to be sold, it would ramp up revenues for the company. By pricing the new iPhone SE2 with many improvements over the predecessors, Apple will hope it can end up selling more phones. This approach may not be very wrong and in highly price-sensitive markets like India where Apple may completely rewrite the story in smartphone sales in this calendar year.
Targeting Young Customers a Priority
Apple appears to want to target the younger population that aspires to own an iPhone with its superior technology but cannot afford it due to the high prices of the devices. To buy the lowest-priced iPhone, you have to shell out at least around $650-$700. This set of smartphone buyers are currently buying Android phones that retail for around $250- $300. It is this section that Apple would want to attract over to its side, by selling the iPhone SE2 (or iPhone 9) at $399. There are specific markets like India and China where the potential is huge but the price is the only criterion for capturing the market. If Apple can manage to assemble the iPhone SE2 in India and sell it locally, it may be able to lower the price even further giving it a huge price advantage.
In many ways, the same may apply to the market in China as well. Hopefully, by March/April, the present virus crisis would have been overcome.
It’s the Margin That Dictates the Strategy
Experts in the know point out that Apple enjoys an overall profit margin of 34.2%. If you were to calculate the same for the low-priced models alone, this would be as much as 53%. So, it makes sense to sell more low-priced models that can sell larger quantities and rake in more profits. If you consider the services that Apple offers for subscription, the margin there is 64.4%. So, sell more phones at $399 and make all of them or at least a large part of them subscribe to Apple Music and Apple TV and the Cupertino giant will be laughing its way to the bank.
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