Are Discounts Making the iPhone Lose Its Luster?
It’s been seven months since Apple released its two latest iPhone models, the iPhone 5c and iPhone 5s. The iPhone 5s is positioned as a high-end product, with an aluminum exterior and a speedy A7 processor chip that makes it cost $100 more than the 5c. But thanks to discounts like the one RadioShack (NYSE:RSH) is currently running, which gets you an iPhone 5s for $100 with a two-year contract, it seems that the iPhone 5s may be losing some of its top-of-the-line luster. That’s the conclusion Marcus Wohlsen reaches in his column in Wired, anyway.
Wohlsen argues that over time, the iPhone is becoming less special to customers — or as he puts it, “The 5s has gone from ‘status symbol’ to ‘standard issue.’” He suggests that Apple must either add an extraordinary new feature in the next version to bolster the iPhone’s reputation, or come to terms with its place in the smartphone ecosystem and “start getting its hands dirty in the sales bin along with everyone else.”
As for Apple lowering the prices on their iPhones, that’s not likely to happen soon if history is any indication. Apple (NASDAQ:AAPL) uses a number of methods to encourage retailers to respect their suggested retail pricing, including offering money for marketing and providing low margins between the price stores pay for the products and the price it wants customers to pay. In other words, if retailers cut the price too much, it won’t make money on the sale. Apple is also very interested in maintaining their high profit margins, which make the company continue to perform well even if the iPhone doesn’t have the global market share that Android does.
Wohlsen also suggests that Apple could come up with a revolutionary new feature to incorporate into their next iPhone, but even that doesn’t seem to be necessary, according to the sales numbers. Most commenters, including Wohlsen, fail to single out a feature they’d love to see in the next iPhone other than a bigger screen. As luck would have it, Apple is heavily rumored to be preparing a larger 4.7-inch iPhone (and possibly a 5.5-inch one also) to release later this year.
Furthermore, the RadioShack sale is not unique. Walmart (NYSE:WMT) discounted both the iPhone 5c and 5s in December and again in March. As for whether a few scattered sales will make the iPhone lose its luster, there’s little evidence of that happening. To date, each iPhone launch has been more successful than the last.
In the unlikely event that discounts result in people viewing the iPhone as “just another phone,” that’s out of Apple’s hands anyway. What Apple can do is to try to keep making their phones better than the competition. If that means adding an incredible new feature, customers would rejoice. But if it means making the phone incrementally better year after year, that seems to be working, too.
As The New York Times‘sFarhadManjoo put it in a recent article, “If you’re looking for the best phone on the market right now, I’d recommend going with the iPhone 5S.” Surely that counts for something.