One of the things many analysts and consumers alike wonder is that why is Apple releasing a budget iPhone? Of course one of the first answers that would come to mind is that Apple wants to do better in the emerging markets. Perhaps markets that are very big and have lots of potential, such as India and China where low-cost phones are being looked upon heavily. So why is a company that boasts about its profit margins releasing a phone that not only brings down its profit margins, but also posses a threat to its big brother, the premium iPhone?
In a new report by AllThingsD, Apple is having a hard time attracting first time buyers. In a study done by Consumer Intelligence Research Partners, “Almost 50 percent of previous owners buy an iPhone, while under one-third of first-time owners buy an iPhone.”
The reason why first-time buyers are hesitant to go with an iPhone, or rather in general with any smartphone is because they tend to hold their devices for the longest period of time. These consumers aren’t like you or me, who tend to change their device every time something new comes out, rather they plan to keep it for years.
First-time buyers are also very price sensitive. They tend to go for the lower priced phones because that is what they are willing to spend. With Apple releasing a budget iPhone, there is a higher chance of Apple becoming successful in attracting first-time buyers so that they can be engulfed into the ecosystem. When they have had a taste of the Apple ecosystem, then they have a higher chance of becoming loyal customers. Apple has one of the highest customer loyalty percentage around.
In order to compete well with other smartphone makers like Samsung and LG, who already have plenty of low-cost phone in markets all over the world, Apple must create a new budget iPhone that will compete against them. While having the premium iPhone is nice, not everyone is able to afford it when it costs over $600 out-of-contract. Even so with a 2-year contract, the devices are still quite expensive costing a minimum $200 commitment. LG tends to do fairly better than anyone else in the big names when it comes to selling low-cost smartphones.
With Apple just about to release the budget iPhone in the near future, do you think Apple has a chance to do well in prepaid and other markets?