Early iPhone 11 Sales Confirm the Obvious: Price Matters

In a saturated market, with technological differences a decreasingly important differentiator, Apple has learned the hard way that its brand umbrella can only provide so much additional advantage, meaning that, at a certain level, price is an important factor, even for them. JL


Jeremy Horwitz reports in Venture Beat:

Pricing tweaks are helping Apple reverse the sales slide that began a year ago, as the iPhone XR debuted at $749. The iPhone 11 instead starts at $699, getting closer to the price points that were popular with buyers of the non-Plus-sized iPhone 6, 6s, 7, and 8. Early sales are stronger than expected — a good sign as the company fights to maintain market share against increasingly powerful Android rivals.

If there’s been any major complaint about iPhones over the past two years, it was pricing, which crept up in the U.S. and conspicuously hurt sales in some international markets. But now that Apple has dropped prices on the iPhone 11, a key analyst says that early sales are stronger than expected — a good sign as the company fights to maintain market share against increasingly powerful Android rivals.
According to TF Securities’ Ming-Chi Kuo (via MacRumors), who tracks both direct supply chain data and indirect demand indicators such as Apple Store shipping estimates, initial sales of iPhone 11 models look good enough for TF to raise shipment forecasts from a prior 65-70 million unit estimate to 70-75 million units. New colors, including light green and purple for the iPhone 11 and dark green for the iPhone 11 Pro, appear to be seeing particularly strong demand, though glass production challenges are reportedly constraining availability of the green Pro model.

Kuo suggests that pricing tweaks are helping Apple reverse the sales slide that began a year ago, as the iPhone XR debuted at $749. The iPhone 11 instead starts at $699, getting closer to the price points that were popular with buyers of the non-Plus-sized iPhone 6, 6s, 7, and 8 models, while trade-in programs and zero-interest payment plans help to reduce pain on customers’ pocketbooks.
It’s important to understand that Apple’s pricing strategy is global, and lacks for region-specific discounting. As such, the U.S. price serves as the baseline for international pricing, with distribution fees, taxes, and currency exchange rates adding additional expenses in foreign markets. So even if U.S. customers might be willing to spend $749 for the iPhone 11, the same amount compounded by various local expenses might scare away customers in huge developing markets such as China and India.
Despite the foreign exchange multipliers, demand for the $699 iPhone 11 appears to be strong in China, while early U.S. customers are apparently gravitating towards the $999 and up iPhone 11 Pro models. Bear in mind, however, that the numbers can be skewed by day one interest from early adopters and die-hard Apple fans, who help the company sell out of initial stocks of virtually anything it releases before more consistent trends settle in.
One topic Kuo doesn’t address is the impact of carrier promotions on sales, and they’re important, given that carriers continue to sell most of the smartphones distributed around the world. U.S. carriers are variously offering 50% off, buy one iPhone/get one free, or up to $500 off promotions — serious incentives for the just-announced devices.
By comparison, months passed before significant discounts were offered on the iPhone XR and XS, leading Apple to miss late 2018 sales targets, flatlining sales of its most important products. The company appears to be belatedly but impressively making up for the error this year, more aggressively dropping the prices of legacy products to eliminate competitive price umbrellas. Consequently, some retailers are already offering discounts on just-announced iPads and certain Apple Watches, spurring demand ahead of what could be a very strong holiday season.