News broke recently about the launching of Apple’s new thousand dollars phones (approximately RM4,350), the iPhone 11 Pro and 11 Pro Max. This touched off a wave of speculation targeting the absurd price many fans of Apple willingly throw their money at in order to obtain a new phone, making us wonder how does Apple accomplish this.
The iPhone 11 is priced at $699 (RM3,040) while the Pro starts at $999 (RM4,350) and the Pro Max at $1099 (RM4,780), though is priced at $1,449 (RM6,300) if the 512GB option package is chosen.
But is this price really absurd or is a thousand dollars merely the new standard for modern day touchscreen phones? Luckily we have technologists at TechInsights to do the work for us, analysing Apple’s supply chain and determining the prices of individual components.
Through the video covered by NBC News, the full summation estimate of the processor, screen, camera and plethora of other parts, results in... $490.50 (RM2,133)!
This is less than half of what Apple asks for in stores!
So how does Apple entice us consumers to buy the new ‘overpriced’ iPhone Pro Max?
An elevated expense
Over the years, especially apparent in the history of Apple where CEO Tim Cooke took over, the company has built a reputation through its quality industrial design of its products, molding it's now current brand image which symbolises power and sheer luxury.
The reason people buy Apple’s high priced products isn't because they marginally excel in performance compared to its competitors, but because they are exorbitantly priced, first in setting the price bar high for future competitors in the tech market. Although many other smartphone companies also price their products highly, Apple is able to create satisfaction within its consumers, hence its enormous fanbase.
Basically, meaning that Apple attempts to market its products as a luxury item. One the first companies to start promoting their products to the high end market which gave them a large advantage in reputation. How it did so was partially due to its heavy price tag which immediately brought consumer and media attention to it.
When Apple’s first smartphone, the iPhone, launched in 2007, it was sold at $607. This in comparison to Samsung S (2010) which was sold at $400, a whole $200 dollars less, meaning that Apple’s prices were already high to begin with even compared with its competitors.
Sure, you may say that the reason for Samsung’s $400 phone is due to upgraded technology, which enables Samsung to price it’s phones at a lower price point. But even if technological advancements allowed building phones to be sold cheaper, the advanced successors of the iPhone came in more expensive price tags, all except for the iPhone 5C and SE which were prominently marketed as budget alternatives.
The ongoing tirade shifts towards Apple’s 2018 ‘flagship phone’, a term used to describe the best phone a company has produced and it’s subterranean competitor at that time; the OnePlus 6T. This model of OnePlus was a known ‘flagship killer’, having all the features of other flagships but at almost half the price of them. In comparison, the OnePlus 6T outperforms the iPhone X in almost every category, containing a Snapdragon 845 processor with a clock speed of 2.8GHz which surpasses the clock speed of 2.39GHz on Apple’s A11 bionic chip.
There is definitely technological advancement made which factors a decrease cost in individual components but there is an obvious price markup in Apple’s products.
Although the sales of Apple’s ipads and its various products are still high, its Iphone sales are at its culmination, inevitably leading to a sales decline in the coming years. If Apple can't sell more iPhones, it might have to sell fewer iPhones for more money. Charging a premium allows Apple to keep increasing its revenue, even if its biggest category, the iPhone, is declining.
But it's not only just the cost of the phone which builds the loyal diehard fan base of this transnational company.
Reasons for Geniuses
With good products comes good service. That's where the genius bar comes to play. The Genius Bar is a place dedicated to providing technical support within Apple stores to customers having problems with the product or application.
Before this, large companies such as Huawei and Samsung focused mainly on producing their devices and selling them to the mass consumer. Reliability and repair was a hassling service option, to the companies at least. There was no officially established service for phone or computer repair, instead the technical work was placed in the hands of unofficial repair businesses.
The Genius Bar works because of several characteristics. Firstly is it’s branded image. No other company can have a genius bar because Apple owns the brand, making it unique to Apple itself.
Secondly, the Genius Bar Staff is highly trained. Apple makes certain of this by implementing a rigorous training program. The training is made sure that staff follow the APPLE commandments, to Approach customers with a personalized warm welcome, Probe to understand the problem, Present a solution, Listen for issues and End with an invitation to return.
Not only are the Geniuses trained on every model and specification of Apple devices, they are also trained on seemingly simple things, like using positive phrasing which can make a major difference in customer interaction.
Thirdly, is the reduced wait times. Especially now where there are many alternatives to waiting in line, customers are more willing to pursue more convenient options.
Visitors to the Genius Bar start of with a conversation with the ‘person on point’ - a staff member which outlines the key services and process of the Genius Bar. For customers who rather not wait at all, an appointment can be made online, or for less technical intricacies, a simple dial of the phone to Apple Support can be made.
Fourthly, the Genius Bar enhances customer relations. Fifth and lastly it is able to transform a grumpy disgruntled customer into a happy satisfied one, improving the company reputation.
Conclusion
Electronic goods such as computers and phones are by design, made worthless every few years. You will be able to buy old phones for less than half the retail price of a few years ago. The decreasing retail value is due to technological advancements as time passes.
Actual luxury brands like Rolex or Chanel are able to retain their value some even sky rocketing in resale price within a year or two. They are held in high regard by collectors and enthusists alike.
In the end, Apple is just
nothing more than a consumer-electronics company, posing as a luxury-goods company.
Luxury goods are bought not just for the item itself, but the time and energy spent in creating it. Unlike typical store brands, luxury brands raise prices due to the use of quality materials within their products. So in a way Apple can be described as a luxury brand if we factor in the work that goes into Apple’s advertisements and decisions to create their products.
Nevertheless, the apparent over-pricing of it’s products is abundantly obvious, so much so that phones half the price can compete with Apple's most advanced innovations.
The emotional value of a brand or product has a particularly strong impact on the willingness-to-pay in the luxury goods industry. And this is something Apple has successfully accumulated in it’s hundred thousands strong legions of fans.
Sources:
https://www.highsnobiety.com/p/how-much-apple-iphone-cost-to-make/ https://www.nbcnews.com/now/video/how-much-does-it-cost-to-make-an-iphone-11-70289989901
https://www.thenational.ae/business/technology/android-phones-lose-trade-in-value-faster-than-iphones-says-report-1.988130https://www.statista.com/statistics/276306/global-apple-iphone-sales-since-fiscal-year-2007/
This was really insightful and the effort you put into your research shows! All the statistical aids and comparisons were well-placed and helpful. I guess I should be holding onto my current phone for another year or so hahaha
me, an apple user reading this:
Hey Limmy, This is one really insightful article on tech marketing! You really did change my perception on Apple, a company that I'll never see the same way again! Well, I learn something new everyday.
Super interesting!