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Apple's effort at a "low cost" iPhone fails and ends up just being cheap...

by on07 October 2013 1268 times

There is an old saying; “buy cheap, sell dear” which means you need to come up with the product that you can put together for almost no money and sell it like it is your most treasured product. This philosophy has been a staple of business for many years and it is one that companies still try to use even today. The problem is that now there are web sites that can tell you exactly how much that new gadget you want to buy costs to make. This has made building a “cheap” product and selling it for a ton of money something that many consumers are aware of and will avoid.

 

At least for most products that is. One company seemed to be immune to this phenomenon until very recently. Apple has always been able to weather the storm that more and more companies face from consumers wanting the most from their money. If you look back at most of Apple’s popular devices they have been popular and good sellers despite missing many common features and having much higher price tags. Still Apple has always come out on top and managed to maintain a very solid margin on their products.

However the launch of the iPhone 5S and 5C seems to be out of the ordinary for Apple. The iPhone 5C has already been reduced in price down to less than $50 at many outlets. This move is out of the ordinary for Apple who does not like to reduce the price of their products until the next generation is already out of the gate. Sure the iPhone 5S is hard to get and in most places is out of stock, but the 5C is not. Why would Apple pull the price back so soon and by so much? One theory is that they made too many and are reducing the price to cut inventory before they get stuck with more than they need. This would fit into most business models, but would be a first for Apple.

Another theory (and one that actually makes a little more sense for Apple) is that Apple expected people to simply buy the iPhone 5C at any price because it was an iPhone. They did not bank on the fact that there were other phones that had a better performance profile that were cheaper. These phones also had a much better look than the plastic iPhone 5C so Apple’s “low cost” endeavor simply did not pay off for them in the manner they thought it would. Apple might have an edge when it comes to the upper end of the market range where price is not what motivates the purchase, but when it comes to someone looking for the best bang for the buck they are going to lose out to Android phone makers until they cut back on their margins. The bad part is that by doing that Apple will also be reducing the perceived market value of their products. It is a no win situation for them really.

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Last modified on 07 October 2013
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