Coming soon from Apple: a lesson in adaptability… and some new phones
For some, September means Fashion Week, back to school or even starting to put those summer clothes away. For those in tech, however, it means one thing: an Apple launch is round the corner. In fact, late last week Apple sent out its official invitations to the event, which is taking place on the 12 September.
This year Apple shareholders have a keen eye on what’s to come. The iPhone accounts for over half of Apple's revenues, but in recent years it has become tougher to shift units in the same way as the iPhone’s early days.
The slump started as early as 2013. At this point consumers were upgrading phones every 20 months, but by 2017 this had increased to 29 months.
In its July earnings call, however, we saw signs of Apple beginning to turn the tide on what had been dubbed ‘peak iPhone’ – and this is owed to it finally tuning into some pretty significant shifts in consumer behaviour.
Take one look at the headlines and it’s clear that the retail sector has collided unceremoniously with the ‘experience economy’. Spend on entertainment was up 10% in 2017 according to Barclaycard, with retail growth at its lowest in four years.
Another a recent study also revealed that the average lifetime bucket list is worth around £428,246 – great news for those in the travel and leisure sectors, but a real thorn in the side of those wanting to sell a raft of new phones every 12 months.
So how has Apple circumvented this?
At its 2017 launch it seemed to have more on offer for more people, and it did so by allowing pricing to play a bigger role than product.
Commentators described the three handsets as ‘good, better and best’ – a real departure from its previous positioning where pricing was relatively steady and quality remained its constant.
This built on the strategy it began with the 5c – which gave it broader appeal in a market where the appetite for phones was clearly waning – but built on it by adding a new premium layer at the top.
This essentially enabled it to raise prices higher than it had before, meaning it had to sell less phones to its die-hard fans to make the same, or greater, profit from that cohort.
On the flipside, those who can’t afford – or simply don’t want to buy into – that premium range can instead choose a middle or lower end model.
With Apple then, consumers feel (perhaps falsely) that they have agency in their decision to be the product or not, and can then wear that decision with pride. Either of which serves Apple well.
With three handsets slated for this launch, we can likely expect them to stick to this largely successful strategy.
The drawback is Apple having to make some pretty significant design compromises, such as the use of LCD over pricier OLED screens, in order to develop these cheaper models. However, the brand clearly sees these compromises as worthwhile – and in fact claimed it expects these budget models to be its best sellers.
It seems then that Apple has learned some pretty huge lessons from its experience of the personal computing market in the 80s. Far from being the success story that some remember, the Mac was quickly outpaced by cheaper alternatives from Microsoft and IBM that were open-source, and therefore more adaptable to changing consumer needs.
This is the sweet spot that Apple now owns, particularly with its smartphones, where savvy business decisions are being made to keep consumers in the iPhone family. In short, despite being a company famed for innovation, Apple has found out that adaptability is king in a market where consumer behavior is constantly diversifying.
As digital detoxes and dumbphones hit the zeitgeist, Apple execs are sure to be keeping a keen eye, poised to tell their developers to make a greater variety of less intelligent phones for a potentially simpler time ahead. If it ever really comes.
Jane Asscher is chief executive and founding partner at 23red