Recently it has been reported that, while the iPhone 5s is selling extremely well to existing Apple customers, around half of iPhone 5c buyers are switching from Apple’s competitors running Android.
While this may not be surprising to those of us that follow Apple news, it seems like it may be starting to become clear what the real purpose of the iPhone 5c is and why the timing was right to launch the c-line of products this year.
Cheaper to produce, but not a cheap phone
Before the iPhone 5c was announced, it was rumored that the device would be a budget play – a downwards movement in order to grab some more mobile market share.
Many predicted low, sub-$400 pricing which would have been competitive with many lower- and middle-market Android and Windows Phone devices.
It was wrong to assume that Apple would be interested in the race to the bottom. Apple has always kept healthy margins on products, the premium price tags often reflecting that.
Post-iPhone 5c launch, Apple CEO Tim Cook told Businessweek:
There’s always a large junk part of the market. We’re not in the junk business.
There’s a segment of the market that really wants a product that does a lot for them, and I want to compete like crazy for those customers. I’m not going to lose sleep over that other market, because it’s just not who we are.
And that’s where the iPhone 5c fits in for a number of reasons. Firstly, it’s a great device – not some cheap plastic phone. That’s clear to anyone that has held one – it feels every bit as premium as you’d expect an Apple device to feel. Internally, it’s as good as an iPhone 5 and has all the benefits associated with the Apple ecosystem.
Secondly, it’s easier and cheaper to produce for Apple. The iPhone 5’s aluminum chassis is a feat of engineering. To discount that product, as Apple has done with previous generation iPhones in years past, while maintaining production at scale alongside the iPhone 5s would have been an expensive operation.
Further, the demand for “new” phones tends to be greater than the demand for “old” phones. Psychologically, it just feels better to the customer to be purchasing the newly launched iPhone 5c rather than last year’s iPhone 5 (regardless of the fact that the internal hardware is almost identical).
Apple is not competing directly with cheap Android phones like the Moto G or the Nexus 5, or the hordes of other phones from other manufacturers that flood the lower end of the Android market, but they might attract a few defectors who wanted an iPhone previously but cost was a factor.
Getting people into the Apple ecosystem
The iPhone 5c serves a valuable purpose for Apple – it gets people into the Apple ecosystem. Over the past few years, Apple has had devices that have, directly or indirectly, served as gateway devices to further Apple products or services. The iPod touch filled this role well for a long while, the iPad, and the iPad mini in particular, has continued this as iPod touch sales have slowly declined. Apple is not one to rest on their laurels, instead searching for that next gateway device. Enter the iPhone 5c.
Its colorful exterior, lower price and performance power make for a very attractive prospect for first time Apple customers who are looking to enter into the Apple world. These customers are then able to experience, and become tied into, the Apple ecosystem through the ease of the purchasing on the iTunes and App Stores or the utility of iCloud, for example.
Further hardware purchases based off of their experience with the 5c are a huge bonus, one that Apple wouldn’t risk with a cheapo iPhone model.
Sales throughout the year
We see it every year in Apple’s quarterly earnings calls – a huge increase in sales around device launches and the holiday period, followed by dramatically lower sales at any other time of year as people wait to see what Apple has up its sleeves for the next generation.
We all know the iPhone 5s is for the techies, the people who have to have the latest and greatest. Those early adopters are the ones that will queue up on launch day to be among the first to get their hands on the new flagship iPhone.
I know from attending my local Apple Store here in the UK that there were almost no people there on the iPhone launch day that were wanting an iPhone 5c. And that’s fine.
The iPhone 5c is the phone that Apple can sell throughout the year. The 5c is for the non-techies who are waiting for their upgrades on their contracts who might opt for the device over another Android phone. The average user, if you will. It’s the mainstream market, those who want a smartphone but do not have any particular allegiance to any brand that Apple hopes to capture with the allure of the iPhone 5c.
And I’m not counting out the chance of more color variations to spice up the iPhone 5c line in future months as an extra sales boost.
The future of the c-line of iPhones
The really interesting part comes when speculating what’s next for the iPhones sold under the ‘c’ branding. Apart from just the naming convention, it’s hard to guess what Apple’s next move is with regards to a ‘c’ launch alongside the rumored iPhone 6.
We could see further divergence, perhaps a larger screen on the iPhone 6 and the 4-inch screen remaining for the c-line of iPhones. Further hardware differentiation like Touch ID, improved cameras and processors. Who knows?
Regardless, Apple calls the iPhone 5s the “Most forward thinking iPhone” but I feel the iPhone 5c may look a little further forward than people give it credit for.
Reports of orders of the 5c being cut are not bad news for Apple and they certainly don’t mean the iPhone 5c is failing. They just indicate that the 5c is a longer play. And I’m sure they are more than happy to continue selling millions of iPhone 5s models for now.
What do you think about Apple’s plans for the c-line of iPhones? Do you think they were right to ditch the iPhone 5 for the iPhone 5c this year?
As always, let us know in the comments or on Twitter: @TodaysiPhone.