Why Apple stumbled with the iPhone 5c

iphone 5c
For a company that seems to have a never-fail strategy, it’s interesting to look at the recent launch — and poor sales — of the iPhone 5c. As VentureBeat is now reporting, Apple is actually reducing its iPhone 5c order by 35%. That’s a lot of phones that aren’t going to end up in the channel and, ultimately into customer hands.

And yet, after years of being beat up, the 5c was supposed to be the “affordable iPhone for the rest of us”. But it wasn’t, as is clear by the poor sales of the device.

There are two main reasons for this I want to explore here: Apple’s attempt at entry level pricing ended up being too expensive and that the very concept of an entry-level device is a misfire on its brand identity. To be succinct, the company doesn’t have a $99 tablet or a $499 laptop, so why should it offer a low cost smart phone in the first place?

Let’s be honest. Apple has done a brilliant job going from the “other” player in the PC market to creating a fashion statement, a line of consumer electronics devices that represent the best the industry has to offer. Companies like Dell and Asus have tried to compete, but their attempts fail miserably. Remember the Adamo, anyone? I had one for a while and it was gorgeous, easily the most attractive and well designed Windows laptop I’ve ever owned. But dramatically overpriced for the PC marketplace, even if it was still 20% cheaper than an equivalent MacBook Pro unit. PC users didn’t want to pay a surcharge for design and style, it didn’t sell and now it’s off the market.

If you build a premium brand and there’s the association in the mind of the consumer that you sell style and superb products at a premium price, why would you ever sully that by offering up cheap products too?

I know the stock answers: because the market demanded it and because the overseas market finds the iPhone line too expensive already.

But the market demand was coming from industry pundits, not people who were walking out of the Verizon or AT&T store saying “Nope, really want an iPhone but can’t afford it.” and the overseas market? Well, it appears that the iPhone 5c isn’t a hit in China either.

Then again, were the company to have priced the iPhone 5c at a really rock-bottom price (free with a contract or $99 without) then we’d see some interesting churn in the marketplace. It’d be a show stopper. Except for another problem that then crops up: It would undercut other Apple products (including the iPod Touch and previous generation iPhones). Can’t have that, so the “bargain” price is not a bargain at all.

The AT&T online store shows the problem:

att store iphone prices

If it’s $99 for the iPhone 5c base configuration and only $199 for the least expensive iPhone 5s, the latest and greatest, why not pay the extra $100 and get the shiny new unit instead?  Now if it were $0 for the iPhone 5c and $199 for the 5s, well, that’d be a different story, wouldn’t it? And given this pricing, it’s no surprise that Apple also upped its future orders for the iPhone 5s by a whopping 75% to keep up with demand.

At its core, though, the failure of the iPhone 5c is about brand identity. People don’t want a cheap device with an expensive logo, they want the cachet that comes with owning a top-of-the-line Apple product. That’s why the company is so darn successful and why the iPhone 5c has ended up being a stumble for the usually savvy corporation.

People don’t want a cheap Apple, they want the real thing. However expensive it is.

5 comments on “Why Apple stumbled with the iPhone 5c

  1. “People don’t want a cheap device with an expensive logo.” Yes, they do. Look at all the fake designer handbags. But the cheap device has to be _really_ cheap, as you say elsewhere in the article.

  2. They might have chosen a few neutral colors, including black. Then they might actually sell some 5Cs to, you know–guys–half the population.

  3. “People don’t want a cheap Apple, they want the real thing. However expensive it is”, you are right Dave, on our site we believe two things from a product or service viz. “quality” and “utility” they have to be harmonized, otherwise a flawed product results. Achieving high quality with the best utility, firms needs three basic discoveries viz. best people, business, and synergy; which in turn converges into invention of sound aspirations, best processes and functional inventions. Apple laid down the best standard of smartphones, however once a standard is laid down everyone else follows suite such that you need to improve across all of the six stages mentioned to maintain competition.

    With the 5c model stumbling one or more of people, business (leadership, strategy, management and social impact), synergy, aspirations, process, and functional clusters must be out of harmony from the rest. From the 5c case, people and business (strategy) clusters need attention.

    Thank you very much for the nice post.

    Joel NN.

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