A common misconception is that if a company doesn't sell more devices every year, then it is bound to make a profit. So, for example, sales of iPhone are decreasing every year – but does this mean that the production of smartphones is becoming less and less profitable for Apple?
No no and one more time no. While many consider iPhone X a failure simply because $ 1,000 is too expensive for a smartphone, this reasoning is infinitely far from the truth. In fact, Apple it is not at all necessary to increase the number of sold iPhone by decreasing their prices, just to reach another sales record.
If you focus solely on the small drop in the number of devices sold, you might not see the bigger picture. In fact Apple seeks to sell other devices and services – Apple Watch, AirPods, iCloud, HomePod, Apple Music, etc. – to attract users to an ecosystem that only works with iPhone. And the strategy Apple turns out to be more long-term than just selling as many smartphones as possible. The main goal is to keep buyers in the ecosystem.
Statistics could be different
There are a myriad of tactics that Apple could use to keep sales in the last quarter. A commonplace example is the release of fewer models. One of the most convenient things about iPhone has always been that you know which model to get. One model comes out in two sizes, and the potential buyer decides whether to buy or not. However, last year Apple released three smartphones at once, making the choice harder than ever.
iPhone 8 and 8 Plus are awesome smartphones. They are equipped with the same processor Apple A11 Bionic as iPhone X, and the 8 Plus even shared a camera with the older model. At the same time Apple missed the opportunity to “impose” a new futuristic iPhone on users as the only available option.
Of course Apple had their own reasons for doing just that – and they're easy to spot. So, for example, the release of 8 and 8 Plus allowed us to occupy two price categories at once instead of one, to reduce the potential deficit of OLED – displays for iPhone X and to prevent a large drop in sales due to a two-month waiting for release iPhone X. However, if iPhone X were the only option, then most of the 350 million users iPhone who were ready to upgrade would rather all would have chosen it, and not an old model or device from another manufacturer.
Another obvious way to increase sales of iPhone X is to sell it for less. Yes, there are many arguments that spending $ 1,000 on a smartphone in 2018 is not such a crazy idea, but for many it is above the psychological threshold for the cost of an iPhone.
It's not safe to say if Apple will drop prices for iPhone X this year (unlikely) or release a newer, cheaper version (almost certainly). One thing's for sure, though: It doesn't really matter how many iPhones a company sells in a quarter.
More supply – less demand
The smartphone market is now oversaturated with models from different manufacturers in different price categories. A good smartphone can even be bought for $ 150-200 (take a closer look at the Motorola G series if you are on a tight budget). If you are for Android, you can always get the OnePlus 5T for $ 500 He's really cool.
Such market saturation is invariably followed by a decline in sales. In the fourth quarter of 2017, smartphone sales worldwide decreased by 6.3%. Everyone who needs a smartphone has almost certainly bought one for themselves. And given that smartphones are getting better and better every year, users are starting to keep the same iPhones for several years, rather than being updated annually. After all, the battery can always be replaced. And, in light of recent events, this can be done very inexpensively.
The ecosystem is important
From the point above, it follows that chasing sales is really not the best strategy now. A good user hook, as we said, is a developed ecosystem – and no company here even comes close to Apple. And this is an important point, because Apple easily makes up for the lack of profit from sales itself iPhone by selling accessories and additional services. Tim Cook said during his fiscal 2018 sales report that “For us, it's not about numbers, it's about customer satisfaction. And that number among buyers iPhone X is amazing. ”
And this is a typical example of a halo effect. Satisfied users iPhone X will almost certainly buy something else for their smartphone, despite the higher price, simply because they expect the same satisfaction from other products Apple. Simply put, the user gets used to the idea that everything she does Apple she does well, which means that it is worth paying a little more for this quality.
Thus, purchase iPhone is followed by purchase of AirPods and Apple Watch. And, of course, a subscription is made to Apple Music and additional space in iCloud. I say this with such confidence because it worked for me too. The cost of a subscription to Apple Music is debited from my card every month – but for me this service is so convenient that the idea of switching to something else does not arise and, ashamed to admit, I don’t even want to spend time looking for alternative solutions . Also in my wishlist are Apple Watch and I know for sure that sooner or later they will migrate from there to my wrist. That's about how you start to pay for things that were somehow necessary in your life. and did not think.
Thus, by selling me one and only iPhone 7 and budget MacBook Air, Apple you can be sure that I will become a buyer again – because this is how the ecosystem works, when it's debugged and user friendly.
Category “Other”
Tim Cook noted that sales of Apple Watch 3 were double the second generation sales a year ago. Although he did not give exact numbers, it still sounds impressive.
It's hard to imagine that Apple Watch would sell as well if users weren't happy with their iPhone. After all, an iPhone is required to use a smartwatch from Apple. And if someone is not satisfied with the iPhone, then why buy yourself a watch and tightly tie yourself to the ecosystem?
The same goes for AirPods, Apple TV, Beats headphones, and anything else that falls into the Other category on the site Apple. By the way, sales of goods in this category grew by 36% over the past year. In 2017, she earned $ 5.5 billion on accessories Apple alone, while profits from services (iCloud and Apple Music) increased by 18% over the same period.
Outcome
Apple will continue to sell a lot iPhone. Perhaps not as much as before, but users will continue to update their smartphones. Some Android – users can go to iPhone. If needed, there are a number of ways to further improve your sales.
But the future is not limited to iPhones. It is behind the general product family Apple. By continuing to develop a robust and trustworthy ecosystem, the company will continue to retain users.
Samsung is now trying to do the same and bundle Galaxy smartphones, Gear VR headset, Gear 360 camera, Gear smartwatch and Gear IconX wireless headphones into a single ecosystem. Google is pulling up with Pixel smartphones and Pixel Buds headphones. However, these companies are still far from the level of user satisfaction that they want to invest in other elements of the system.