Apple and Market Segmentation

Scott Francis
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 Benedict Evans writes that Apple has “effectively halved the price of a new iPhone, from $200 to $100. It already has 40-45% of contract smartphone sales – this move will take another big bite out of US Android sales.”

He goes on to write:

Hence, if you look at Apple’s Youtube channel, there are videos talking about the 5S fingerprint scanner and the 5S camera, but not the new 64 bit chip (though this enables both). The same applies to Apple’s (relentlessly hammered in) talking points:

  • “iPhone 5C – an advancement of iPhone 5 with an entirely new design that feels great in your hand, and colour that only Apple could do
  • iPhone 5S, the most advanced iPhone ever, with our most forward-thinking technologies.”

So the 5C is the new iPhone, and it’s  $100 cheaper, while if you want the supercool new tech you pay more for the 5S.

Another way to look at this – Apple has found a way to segment the “new phone buyer” on features other than “extra storage capacity”.

For years, Apple has differentiated price points based on something quite basic-  the amount of storage available on the iPhone.  These are high margin upgrades for Apple but at some point the market seems to demand a different approach.  This time, Apple has really segmented the market:  features like fingerprint or no fingerprint, two camera levels, and two kinds of physical cases… at different price points.