That Apple is a gold-plated brand is without question. We pay more for products that have a higher brand identity. That many of Apple’s products are actually affordable to discerning buyers indicates a 21st century version of bait and switch.
The $750 iPhone Price Tag
It’s no secret that later this year Apple plans to launch an iPhone with a larger screen. You can bank on it. Apple plans to bank on it using a new form of bait and switch.
Word on the streets says Apple wants to charge $100 more for the next iPhone. Forget the fact that Apple’s margins are already soaking up 85-percent of the smartphone industry profits.
Hey, it’s not 100-percent so there’s still room for Apple to grow, right?
Why would Apple charge $100 more for the next iPhone? After all, critics claim the iPhone is already overpriced. So, why?
Because Apple can. An iPhone with a larger screen needs to be differentiated in price, too. Otherwise, Apple would be forced to lower the price on the 4-inch iPhone and we all know a price cut is something that runs against the grain at Apple. Or, does it?
Apple’s Bait And Switch
Here’s what I think is going on and will continue. Apple knows the company’s brand is the premium brand of the smartphone and tablet industry. Apple commands the highest prices, has the best and most lucrative ecosystem, and the company’s products bring in the highest margins.
So how can Apple bait and switch?
To compete against Apple, every other smartphone and tablet maker, those with lesser brands, have to cut prices, which cuts margins, which reduces profits to unsustainable levels. As long as Apple’s prices are the highest in the land, that’s how competitors will play the game.
What actually happened, though?
The iPhone 5s arguably is the most expensive smartphone, and a top tier brand, so why is it selling for hundreds less than retail? Not in the Apple Stores, of course, but discounters and carriers have dropped prices enough to stimulate sales and put the big squeeze on Samsung, whose Galaxy device sales have been lackluster of late.
By raising the price of an iPhone by $100 or maybe $200 for a larger screen iPhone, Apple has even more margin to discount later. Up front, Apple’s brand is worth more. Hundreds of dollars more. While Apple won’t play in the plastic world of most smartphone and tablet makers, it can put the squeeze on all of them because a growing number of smartphone and tablet users would prefer to buy a top brand product vs. a plastic knockoff, and be willing to pay an extra $100 or $200 for the privilege.
Apple can increase the retail price to get more revenue and profits from the customers base, and yet maintain the highest margins even when discounting the iPhone to take on new customers switching from cheaper plastic brands.
Apple is baiting customers with the brand and a higher price tag, then switching prices and taking lower margins after the product launches and supply meets up with demand.
It’s devious. It’s successful. It’s 21st century bait and switch, Apple style.