The Strategist

5 reasons why new iPhone will be a success

07/31/2017 - 16:03

In September 2017, Apple will release not just its usual new iPhones, but the jubilee model, according to numerous analysts' reports. They say this model will differ in premium quality, including an OLED screen, a 3D image and a reticular eye scanner. Analysts also expect that the device’s price will correspond to the premium class - from $ 1 thousand to $ 1,400.

Such forecasts have caused protests from Apple's observers. If the device is priced $ 1,400, it will mean that it will be twice as much as the initial price of the iPhone 7, and almost twice as much as new Samsung Galaxy S8 costs. However, there is plenty of evidence that those who consider this price too high will eventually admit their mistake.

Launch of an expensive new iPhone will have a number of consequences for Apple's financial performance. In addition, a number of experts believe that this will positively affect the dominant position of Apple in the mobile device market.

Here are five reasons why Apple's pricing policy is considered reasonable.

Brand Support

A very expensive version of iPhone makes sense as an incentive for the entire brand.

The approach of slow and gradual addition of new features and step-by-step improvement of gadgets have made the iPhone a widespread and reliable device. The next iPhone has a potential to radically change the existing image. It has the distinctive features inherent in the whole brand, and influences the consumer perception of all products of the line.

As an example, you can take the Dodge Challenger SRT Demon with an engine of 840 horsepower. It is one of the fastest cars in the world. Not many will agree to buy it for $ 85 thousand, but it can draw attention to less powerful representatives of its line, cost of which starts from $ 27 thousand.

New Technologies

Many companies produce similar products to test new technologies, experts say. Many potential features of the jubilee iPhone are available in smartphones of the highest price category, such as the Galaxy S8. It is assumed that Apple is preparing new technologies like 3D sensors. If these technologies were built into an ordinary iPhone, this could have a negative impact on Apple's revenue. Nevertheless, Apple distributed its high-tech components to the entire product line, after their cost was reduced.

Limited Deliveries

The most advanced products cannot be produced in huge quantities. In the last quarter, Apple sold nine smartphones iPhone in a second.

Apple faced a shortage of smartphones iPhone 7 Plus, and before that - shortage of iPhone 6. Unsurprisingly, analysts predict that release of the anniversary iPhone can be delayed. The solution will be simple - to release more products.

If the new iPhone is aimed at a new segment, namely those who are willing to pay $ 1 thousand or more, then Apple can release as many smartphones as possible to balance supply and demand, and not worry about whether the increased price will not affect the company’s market share. And even if cost of a high-tech iPhone is "only" $ 1,000, Apple can make people pay more by offering them additional functions.

Average Price

If the phone’s cost starts from $ 1,400, Apple will be able to promote one of the most important balance indicators - the average price of the new iPhone. This figure reached a record level of $ 695 in the quarter, which ended in December 2016. It became the main driver of Apple's profit growth. In the technology sector, prices tend to decline over time, but Apple breaks this trend, improving the set of functions in each subsequent phone. Since the cheaper iPhone 5C was released, the average price has been rising.

The Desire Product

And the last reason that expensive iPhone makes sense is quite nonplussing. The more expensive a gadget becomes, the more people will want to buy it. Wasteful consumption was first described in the book The Theory of the Leisure Class by economist Thorstein Veblen. He supposed that, contrary to any logic, products were sold better when their price grew.

When the iPhone came out in 2007, it was called "Veblen's product." The expensive jubilee smartphone can also become a Veblen product for the same reasons, experts believe. The new iPhone can stimulate the brand’s development, as it will be perceived as a sign of wealth.

This can be particularly useful for Apple in China. Recently, the company has faced a decline in sales in this country, but Chinese consumers have historically tended to acquire high-end products. A high-priced iPhone can serve as a sign of status. If Apple releases the new iPhone at a high price, then we should expect an unfavorable comparison with competitors such as Samsung Galaxy S8, which has a lot of new technologies at a price of only $ 750.