If ever Apple had a misunderstood product it’s the colorful polycarbonate iPhone 5C. Prior to its launch, Apple’s pundits and critics expected it to be a cheap phone to compete with plastic Android-based smartphones. After the launch, pundits and critics pointed out that the $100 more expensive iPhone 5S was outselling the 5C by two to three to one. Some even called the iPhone 5C a failed product.
That’s what happens when analysis in the form of link-baiting headlines is only skin deep. The iPhone 5C is a resounding success. While it’s true that only Apple knows the mix and actual sales of 5S vs. 5C, pundits and critics have overlooked what the iPhone 5C means to Apple.
The iPhone 5C is to Apple what the iPhone 4S was to Apple when the iPhone 5 launched. The iPhone 4S was reduced in price to sell to the more price sensitive buyer (just as the iPhone 4 was reduced in price when the iPhone 4S launched). That was Apple’s strategy for years. The new iPhone model would be sold at full retail, while last year’s model was sold at a discount. The only problem was that gross margins on last year’s iPhone model were slashed to achieve the lower price point.
The iPhone 5C changed all that. Essentially, the 5C model is an iPhone 5, but manufactured with a polycarbonate shell and a redesigned frame. In short, Apple makes more money on the iPhone 5C than they would have by simply discounting the iPhone 5 in the wake of the iPhone 5S.
iPhone 5C still appeals to the price sensitive buyer, yet it isn’t a cheap phone, and not even a cheaper phone. It’s merely last year’s iPhone 5 but with a variety of colors and a lower cost of manufacture. With carrier and retailer discounts, the iPhone 5C competes well with any mid-range Android-based smartphone, yet carries most of the caché of the iPhone brand.
The iPhone 5C is perfectly priced and positioned to migrate shoppers to the more expensive iPhone 5S line, while attracting price sensitive buyers away from mid-range smartphone competitors.
I know what you’re thinking. ‘Kate, what about all those reports of Apple cutting iPhone 5C production because iPhone 5S outsells the iPhone 5C by two or three to one?‘
Only Apple knows the exact sales mix between the iPhone 5S and iPhone 5C. What you don’t hear (and did not hear a year ago) from those same pundits and critics is how much the iPhone 5 outsold the iPhone 4S model. If it was two or three or four or five to one, then it was a success for Apple.
As to the iPhone 5C, it’s merely a greater success because Apple makes more profit on the 5C than on a discounted iPhone 5, or discounted iPhone 4S.