On Legacy iPhones and Cannibalization
By continuing to sell legacy iPhones after the debut of the device’s latest iteration, Apple, which has long catered to the higher end of the markets it plays in, is extending its reach to price-sensitive consumers. That’s a great way to spur iPhone adoption, but is it a source of cannibalization as well?
As I noted here earlier this week, Apple sold more iPhone 4 and iPhone 4S units during the launch of the iPhone 5 than it sold iPhone 4 and iPhone 3GS units during the launch of the iPhone 4S (as a percentage of total iPhone sales). To some, that suggests Apple might be losing a number of full-price iPhone sales to consumers who opt to purchase a cheaper legacy iPhone when given the option. And while there’s likely some truth to that, there is plenty of evidence that legacy models are winning Apple new iPhone customers.
Consumer Intelligence Research Partners (CIRP), the source of the data we reported on earlier this week, has circled back today with some new numbers that suggest older iPhone models have a lot of appeal with folks looking to upgrade to a smartphone from a feature phone or that nebulous pool of “Other Smartphones.” According to CIRP, 70 percent of iPhone 5 buyers they surveyed traded up from another iPhone. But just 25 percent of iPhone 4 and iPhone 4S buyers had previously owned an iPhone. The remaining 75 percent had previously owned a feature phone (39 percent), an Android phone (20 percent) or some “other” smartphone (16 percent).
“For those trading up from standard phones and non-Android smartphones, the less expensive 4 and 4S models were especially appealing — actually outselling the new iPhone 5,” CIRP co-founder Josh Lowitz told AllThingsD. “A surprise benefit of the evolutionary changes in the iPhone 5 is that the legacy 4 and 4S models are not being perceived as horribly out of date. … It looks like having a range of offerings, with some directed at price-conscious buyers, has opened up the iPhone market to a larger set of phone buyers.”
So while offering consumers legacy iPhones for lower prices might limit the number of full-priced iPhones Apple can sell, it’s pretty clear that it is also bringing customers that might not have otherwise purchased an iPhone into Apple’s ecosystem. And presumably a few will stay there — assuming the iPhone retains its current appeal or isn’t surpassed by another device and platform.
Better to have consumers buy legacy iPhones at cheaper prices than competing smartphones on rival platforms.