Apple pricing: shift in strategy

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antoniosk

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#245343 30-Jan-2019 11:00

This was an interesting note:

"Following its earnings report, Tim Cook today announced that Apple will be lowering iPhone prices in some markets outside of the United States, to bring prices more in line to what they were before recent currency fluctuations hit (via Reuters).

Cook says Apple is rethinking how it prices iPhones. It will no longer track the US dollar price exactly and instead set iPhone prices in local currency for each market.

He says the regions where iPhone sales were the weakest in their latest results were areas where currency fluctuations hit hardest. The company will be adjusting prices in some areas to bring them closer to what they were ago, in local currency prices."

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Obviously this is a veiled signal to the Chinese and Indian markets where they kit really hits the mark for overpriced, but it's an interesting development. Multi-currency pricing is _really_ complicated, and when the exchanges are jumping around like frogs in a sock, a slow adjustment strategy can be painful - for revenue, and for the customers.

The takeaway for NZ will be one of little movement if it all, well signaled and telegraphed before any change. The carriers provide the bulk of phones to this country, and the retailers (JBHifi etc) provide a significant quantity of other products direct to retail. You don't want to piss off your channels, and since they rely so much on indirect...

It would be nice to see a return to 2013 pricing... when a macbook pro was $1799 and not $2399... but that's just wistfulness...

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#2170101 30-Jan-2019 11:51

I was discussing this with a friend today - I remember Apple being more expensive than everyone else, but still in the realms of doable...top-of-the-line iPhone: $1700 as an example. Now it's closer to $2800 (yes, I know it's not quite horses-for-courses, but you get what I mean).

There's a premium that people pay now, which simply can't be sustainable - but Apple seem to have jumped on the wrong reason as to why they are seeing slower growth in their sales outside of the US...it's not going to be currency fluctuations at all - it's the extreme pricing that's seeing people hang onto their gear longer and contemplate moving to a different platform.

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wellygary

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#2170103 30-Jan-2019 11:55

Apple are well aware that if they create arbitrage opportunities there will be grey marketers waiting with bated breath.....

I suspect this is code for we will be launching more country specific models, that while having lower price points, will be lacking features to deter them cannibalising their "high end" markets....

SaltyNZ

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2degrees

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#2170106 30-Jan-2019 12:07

wellygary:
Apple are well aware that if they create arbitrage opportunities there will be grey marketers waiting with bated breath.....

I suspect this is code for we will be launching more country specific models, that while having lower price points, will be lacking features to deter them cannibalising their "high end" markets....

But deliberately hobbling their phones with “country-specific” features isn’t exactly going to deter grey marketers. At least not unless the hobbling comes with a *significant* price drop. But on the flip side, such hobbled devices would fracture the experience and create a lot of support issues which is currently a major advantage of Apple.

I guess it’s happening anyway to some extent with multiple models of iPod, iPhone and iPad with different hardware and different sizes all still on the market. I still keep using my iPhone SE because I don’t want a bigger phone, but on the other hand I have the second-largest iPad model.

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Nate001

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#2170115 30-Jan-2019 12:21

One of the main effects of over priced products is people will start to look for alternatives that they previously would not have considered. Once you consider the alternatives you ask yourself why you didn't do it earlier and never look back.

This has happened to people I know, various people have moved from ios to cheaper alternatives such as Hauwei and Xiaomi and are still very happy. Yes there are certain things they said they missed but they couldn't justify the extra few hundred for them.

I think Apple severely misjudged how much people are willing to pay. I would expect to see a real price drop in most of their markets in the next 6-12 months.

tehgerbil

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#2170124 30-Jan-2019 12:31

For those who are out of the loop on iPhone pricing, I was too and was astounded to see this:

iPhone 6 - $499 release: 2014

iPhone 6S - $549 Release: 2015

iPhone 8 - $1099 Release: 2018

iPhone XR - $1379 Release 2018

So if you don't want 4 year old hardware, you need to fork out over a grand for a base model??

And for comparison Samsung S9 is $899..

alasta

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#2170128 30-Jan-2019 12:36

Nate001:

One of the main effects of over priced products is people will start to look for alternatives that they previously would not have considered. Once you consider the alternatives you ask yourself why you didn't do it earlier and never look back.

This is exactly my situation. For people with IT skills it's probably quite easy to move between platforms, but I don't have the capability to easily migrate my media, home automation, apps, documents, calendar, etc. I am unlikely to ever switch but, if I ever do, I won't be going back for at least ten years.

I think Apple severely misjudged how much people are willing to pay. I would expect to see a real price drop in most of their markets in the next 6-12 months.

I agree. Premium watch makers can charge thousands of dollars for their product because it's top quality precision engineered equipment. Apple and their followers would like to believe that iPhones are similar but in reality they are just an unreliable mass produced product that is slapped together by exploited Chinese workers. People won't pay a massive premium for that no matter how well you dress it up.

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#2170133 30-Jan-2019 12:46

Come on MacBook Pro prices... I'm holding my breath for a sharp drop!

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howdystranger

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#2170247 30-Jan-2019 14:58

I agree that they have misjudged prices and what consumers may be willing to pay. When looking for a new phone a few months ago I was seriously considering getting an iPhone until the new models came out and they were ridiculously expensive. Opted instead for a <$1000 phone.

dafman

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#2170346 30-Jan-2019 19:15

They misjudged consumers pricing tolerance with their excessive greed (it's not like Apple really needed to increase pricing for revenue shortfall reasons).

Now, how do they extract themselves from their self-made hole without fessing up they stuffed up? Initial salvo, blame currency fluctuation. Next?

mattwnz

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#2170350 30-Jan-2019 19:22

How well are the new models selling in NZ? I mainly see people with older models. I personally wouldn't spend that much on a new phone, so I usually buy them a few generations old. The problem IMO with any of them is that the batteries don't last the life of the phone. My current iphone is about 7 months old, and the battery is at 89% capacity in the battery health section, and has already experience an unexpected shutdown due to the battery not being able to deliver peak power. So it enabled performance management, which apparently slows it down unless disabled. So it looks like it may need a repair within it's first year to get it replaced. When spending this sort of money I think they need to work on battery life, or at least make them cheap to replace the batteries.

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#2170358 30-Jan-2019 19:29

I can't speak for actual sales figures, but every year I always pore over the specs and decide whether it's a worthwhile upgrade. But both this year and last year I took one look at the price and didn't bother investigating further. I know I'm not the only one!