The Success of Apple’s Premium Devices
Regardless of one’s opinions surrounding Apple, it is undeniable that the company has perfected the art of selling expensive devices. In fact, Apple played a significant role in normalizing the $1000+ smartphone price point, paving the way for the significant increase in average smartphone prices observed in recent years. While this business model has proven successful for the company, there is a concerning lack of meaningful entry-level options available for Apple products. This article will explore the economic and consumer-related implications of this trend.
Some Rudimentary Economics
Some argue that Apple intentionally limits the competitiveness and features of its entry-level products to further drive sales of its premium options. However, this argument does not hold up under scrutiny. The smartphone market is not solely defined by the $1000+ segment, and money can be made outside of it. Additionally, considering the high quality of Apple’s higher-end products, there is no need to make their entry-level options worse. Apple could still boost the competitiveness of its lower-end models without negatively impacting the sales of its premium devices. Furthermore, Apple could significantly expand its market share by diversifying its product portfolio.
The Consumer’s Point of View
Currently, Apple only offers three smartphones below $700: the iPhone 13, the iPhone 13 mini, and the iPhone SE 3. Out of these options, the mini is the only one that serves a clear purpose. However, the iPhone 13 is essentially a cheaper version of the iPhone 14, and despite its $700 price tag, it comes with a 60Hz display – a feature that is near-universal in most smartphones in this price range. Apple’s choice to limit certain features exclusively to high-end devices for differentiation purposes is a hindrance to potential consumers. It makes the less-expensive options seem inferior or incomplete by comparison, and this could be a significant factor for consumers when deciding whether to invest in a cheaper product or splurge on a high-end purchase.
The Features that Apple deems ‘Pro’
Apple’s distinctive product lineup includes premium, more premium, and the most premium products. However, this can lead to consumer confusion regarding product features and what qualifies as ‘Pro’. For example, ANC is considered a ‘Pro’ feature, which only comes with the AirPods Pro 2 and the AirPods Max. This approach puts consumers in the position of paying more for certain hardware features they may view as necessary or desirable. Proper differentiation can still be maintained while also offering a closer price parity between devices, so long as performance remains the defining factor.
Conclusions: Entry-level but not cheap
Apple does not sell cheap products by default, making it difficult for the company to offer a solid entry-level lineup. If the iPhone SE 3 was more affordable, consumers could more readily accept its decade-old design. As a result, there is a need for Apple to address this imbalance by diversifying its product offerings and providing meaningful entry-level options. Luxury features should be separated from necessary features, and consumers should not be charged extra for functionality that should be integrated by default. By balancing its product portfolio with more affordable yet still impressive devices, Apple can expand its market share and continue to thrive.
