4 takeaways from Apple’s scale back of the iPhone X

Smartphone manufacturer, Apple, has been riding a high for over 10 years, but recently experienced a major misstep with its flagship iPhone X. We outline what transpired, but more important highlight four lessons that can be learned from that experience.

 

Generally, Apple’s computing products are considered the crème de la crème of devices. Its product launches are widely watched, with consumers eagerly awaiting their availability for purchase. Last September, Apple announced the imminent release for three new smartphones, the iPhone 8 and 8 Plus, which were improvements on 7 and 7 Plus released in late-2016, and the iPhone X (10). The iPhone X not only commemorated the 10th anniversary of the iPhone, it was also heralded as the next generation of smartphone.  The smartphone of the future.

The iPhone X went on sale in the United States early November – in time for Thanksgiving and Christmas. But less than two months later, there were reports that Apple has slashed its order of the iPhone X, along with the corresponding sale forecast to investors. Although experts are highlighting is development as a serious misstep by the company, we, at ICT Pulse, view it as a learning experience and have identified four takeaways that can be applied to almost any business.

1.  Charging a premium must be backed up

In the United States, and according to the Apple website, the starting price for iPhone X was USD 999.00, USD300.00 more than the iPhone 8 and USD 200.00 than the iPhone 8 Plus. However, outside the introduction of FaceID, the security protocol based on scanning the owner’s face to unlock the phone, the slightly larger device size and some improvements to the camera, it could be argued that the devices (the iPhone 8, 8 Plus and X) were sufficiently comparable to each other that it did not justify the premium price for the iPhone X.

Further, beyond the hype and praise for the iPhone X preceding its release, there are now reports that the device has its challenges. For example, it is not as durable as the iPhone 8 and 8 Plus; its battery life (charge) was shorter than that for the iPhone 8 and 8 Plus and for similar phones by other manufactures (Source: Consumer Reports); and FaceID has been buggy and works inconsistently (Source: The Verge), to name a few. For what was marketed as the next generation of smartphones, at the very least, and at its price point, the iPhone X ought to have blown everything else – especially the iPhone 8 and 8 Plus – out of the water, which it did not do.

2.  Too much choice can dilute final selection

In releasing three new smartphones, in addition to the earlier models that are still available (the iPhone SE, 6s, 6s Plus, 7 and 7 Plus), it could be argued that with so much choice, and any of which would be considered a good buy, consumers would less focussed on the features. Factors more likely to influence their final decision would include price, their lifestyle and needs.

3.  Know your market, know your customer

Traditionally, Apple and its products were the darlings of techies, and fields that require considerable computing power, a solid operating system, and reliable performance, such as design and amination. As a result, their products have always been pricier for seemingly comparable devices from other manufacturers.

In the mid-2000, Apple products started to become more mainstream: the company could do no wrong, and its customer base increased exponentially. With its 2017—2018 product release, it could possibly be argued that:

  • the market segment that would purchase Apple products is near saturation
  • based on the price point, people may be more inclined to hold on to their devices for more than a year (at least two), especially since in recent years the annual product releases have only been incremental improvements on the previous ones
  • the diehard Apple lovers, who will upgrade whenever a new and better product is released, is now just a small segment of Apple’s customer base, and their behaviour does not reflect that of the larger pool.

4.  This year’s investment versus next year’s product

Finally, with smartphones, in particular, being upgraded annually, a fair question to ask would be: what would the 2018 version of the iPhone look like in comparison to the iPhone X?

Using precedent to guide, if the current features of the iPhone X with some minor upgrades become the iPhone 11 and 11 Plus (for example) this year, their likely price points would be in the standard USD 699.00—799.00 range. Hence consumers who either could not afford an iPhone X, or could not justify the spend whilst having a still decent phone may find come less than 12 months later, when they might be ready to upgrade, they may in fact end up with a device better than today’s iPhone X, yet saving themselves USD 300.00 in the process.

 

Image credits:  Mediamodifier (Pixabay)

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1 Comment

  • I think this is an interesting case. From a consumer perspective, yes probably one could agree with points put forward. However, viewed from a business strategy perspective, one could equally argue that Apple have pulled a rabbit out of the bag.

    They made $88bn in quarterly revenue and $20bn in quarterly net income, 13% and 17% respectively way above last year’s same quarter’s results. It’s the largest quarterly net profit by Apple or by any company ever ( as far as I know ).

    A key distinguishing factor, in terms of business strategy, lies in the fact that although they shipped slightly less iPhone handsets ( about 1% ) than in the same quarter last year, the overall revenue was up. And this mainly, due to a strategically selected price point for the flagship product. Contrast this with the rest of the smartphone industry which recorded more than 10% slump in both handset shipments and total revenue.

    The reported “sluggish” demand, I don’t think it is as directly “sales-related” as is being reported. There are a couple of issues that could explain it. Firstly, the on-going Securities and Exchange Commission investigation into a software update Apple released last year that reportedly “corrupted” performance of older phones. Secondly, the accounting aspect of stock inventory versus outstanding sales orders at the time of reporting. Therefore, reported at a different time point the story would be different.

    Yes the iPhone X features may not meet the expectations that accompanied the initial announcement. However, FaceID for example, with it’s current shortcomings is still a much secure ID feature than any other. The power to handle any resource-intensive apps, wireless charging are a few other features that collectively sets the product apart in the marketplace.

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