What Will the iPhone 5C Cost?
At a special event on Tuesday morning, Apple is expected to unveil two new iPhones — the first, a marquee device; the second a mid-tier one intended to be sold at a lower price that appeals to budget-conscious consumers and those in important emerging markets like China.
So, what’s the price of that second, lower-priced iPhone going to be? We won’t know for sure until Tuesday, but it’s not likely to be cheap. Analysts expect Apple to price the so-called iPhone 5C somewhere between $400 and $500, potentially establishing a new mainstream price band between the smartphone market’s high end and its low end. Their rationale? $400 to $500 appears to be a pricing sweet spot for smartphone buyers in China — a market of particular interest to Apple these days.
Extrapolating from data culled from a recent survey of 2,000 Chinese mobile phone owners, Morgan Stanley analyst Katy Huberty found that Chinese customers believe $486 to be an “acceptable” price range for the iPhone 5C. And she predicted in an August note to clients that if Apple were to launch the iPhone 5C in Greater China at that price point, or one near it, the company would drastically spike iPhone sales in the region, potentially raising its market share by as much as 13 points. Throw that widely rumored distribution deal with China Mobile — the world’s largest wireless carrier — into the mix, and the market share gains are larger still.
If that’s the case, why not drop the iPhone 5C’s price lower still to drive further market share gains? Because doing so might sacrifice product quality and profit margins. And because, historically, Apple has done quite well for itself using mid-tier products with lots of aspirational appeal to draw budget-conscious consumers into a higher price range. It did it with the iPod nano, and again with the iPad mini. Both devices were initially dismissed as too pricey to attract the budget-conscious consumers for which they were intended. But both proved wildly popular.
Apple will almost certainly take a similar tack with the iPhone 5C. It knows from experience that if it gives consumers enough reasons to purchase an aspirational product at a premium price, plenty will do so.