By Jaime Rivera | August 15, 2013 6:11 PM
There are certain market decisions that just make sense. If a product is too expensive, then you either lower its price to make it more affordable, or you launch a parallel product that can fit the needs of the less-demanding consumers. Still, there are companies that defy this mentality and have succeeded in their endeavor.
One of the most common examples is the automobile industry. On one hand, you have companies like Toyota, which build products for every market demographic. It makes sense to offer everything people need, so that everyone’s particular needs are satisfied. Entry-level and affordable cars, or SUVs, trucks, you name it, they sell it, and they’ve succeeded at it. On the other hand, we have companies like BMW, which are not out to cater to every market. They are interested in the higher-end of the market, and to retain that market awareness, they simply can’t risk building affordable vehicles. So how does Toyota compete with BMW? Well, they don’t, they launch the Lexus brand in order to do so.
Market awareness of a brand is important. If you sell cheap products and high-end products, people will always confuse your brand, no matter how well you try to differentiate it. I always struggle with companies like LG and Samsung, since they want to do everything. Samsung was lucky enough to create a separate Galaxy brand that excelled in raising their brand awareness, but when I see the Galaxy Ace, I cringe at the fact that everything can be a Galaxy phone now. Surely they’ve done a great job at avoiding this confusion through marketing, but that doesn’t change the fact that most of my friends, who make the average customer, can still not tell the difference between a Galaxy Duos and a Galaxy S III.
Apple has always been a different animal. They’ve never been out to sell cheap computers, and we all know that mentality has a price. BMW isn’t a the top when it comes to sales anywhere, but people do know that their brand relates to quality, and it even becomes an aspirational endeavor for anyone to own one of their vehicles. In that same arena, buying a Mac has always been aspirational since hey, it’s not cheap, it’s made of better materials, and its performance is guaranteed.
When the first iPhone and iPad were launched, they were both aspirational products. They weren’t cheap, nor expensive, but because of the branding push that Apple had leveraged with the iPod and Mac, people associated both these new products with quality. The end result paid off since their approval rating anywhere was huge, and I don’t even have to tell you that all you have to do is look around and you’ll see the market full of iPhones and iPads.
Apple’s budget strategy was never to build budget products. They always left older models as budget products, which gave legacy owners the piece of mind that their phone is not obsolete after the first year. Never had we seen Apple actually launch a budget product until they did with the iPad mini, and this is when things changed for the bad.
Some argue that the iPad mini is a smaller iPad and not a cheaper iPad. Apple actually marketed it that way, but I feel this was more of a mistake than of a good thing. See, if that were true, then the iPad mini would share all the specs of its larger sibling, and not kill our eyes with its lack of a Retina Display. As a result, many today complain about their choice to buy an iPad mini since it really isn’t a smaller iPad, it’s a cheaper one.
You’d think that this was a smart move since Apple was now offering products for every market demographic, like Toyota, but last-quarter’s results show otherwise. Apple now sells more tablets and to a broader market, but they sold less iPads this quarter than they did last year. It’s clear that the market no longer sees an iPad as the best tablet they can buy, specifically because of how the mini is trashing the brand, and if Apple does the same with the iPhone, I feel it’s a big mistake, and here’s why:
Nobody has ever succeeded with a mid-tier phone
Can anybody give me an example of a mid-tier phone that has ever sold more than a flagship? I know this is a funny question, but think about it. It makes sense for a flagship to provide a company with more revenue, but the cheaper phone should sell more units, right? Sadly the market doesn’t behave that way. The only mid-tier phone that has ever sold more than a flagship is actually the iPhone 4S this year, which we all know was not always a mid-tier phone.
The market is quickly growing in awareness. As a result, people know how frustrating it can be to buy an entry-level phone when the price difference is barely what their light-bill will be next month. I’m not saying that there isn’t a market for mid-tier phones, I’m saying that catering to every market is not always a smart move if what Apple wants is more sales.
This would trash the iPhone brand
I know that all of us power users fell that the iPhone is not a high-end phone, but remember that we barely make a small percentage of the market demographic. The rest of the market relates the iPhone to its brand, and let’s hand it to Apple here. They may not have the most powerful phone in the spec-sheet race, but what the iPhone does, it can do well and in some cases better than most.
Why would Apple want to trash this prestige with a more affordable iPhone? Why would they want to repeat the same story that they’re now going through with the iPad mini? People don’t relate Apple to budget products, and this will just confuse their branding push.
The bottom line
Steve Jobs was once approached in an event and asked why they don’t sell computers for a broader customer base. His answer was – “We don’t ship junk”. He’s right, they don’t. He also said “We want to build products that we’d be proud to recommend to our friends and family”, and in that sense, he’s also right. I’m sure the comments will flock with “the iPhone is junk” thoughts of people who’ve most likely never used one, since hey, it comes with the territory. Sadly for the haters, as we talked on the phone with Brandon yesterday, we always end-up returning to our iPhones for a reason. They don’t have air gesture, nor Air view, nor Smart Stay, but it’s not like if the people that have it actually use it anyway.
There is no reason for a cheaper iPhone to exist. Think about it for a minute. Wouldn’t you prefer to have the iPhone 5 as the budget model in the fall? This is the worse time ever to launch a budget phone, when the current flagship is still good enough.
Now, that doesn’t mean I’m right. These are my thoughts, so make sure you share yours in the comments down bellow. Do you feel an iPhone 5C is a mistake? Would you prefer it against the iPhone 5 as a budget option? Leave us a comment.