Disclaimer : Contents in the blog are strictly based on my opinions and are not meant to offend anyone. You are most welcome to agree or disagree on any of the points. Also please ignore the grammar mistakes, if any.
On September 10,
2013 Apple launched their most colorful smartphone iPhone 5C. Within just six days
of the launch, two commercials were launched back to back (http://www.youtube.com/watch?v=p8IAkbWJNfY
& http://www.youtube.com/watch?v=D7KuXMHN_X4). These commercials showed 5C as a cool colorful product targeted at mass segment. This was what actually Steve Jobs wanted. He wanted the customers to perceive Apple as a cool stuff. As we all
know that when he came back in 1997, he introduced iMac in five colors, he
introduced iPad in various colors. It was the design of Apple products which
made them “COOL”. Also, he was never against the use of plastic (which is used in
manufacturing of 5C). For e.g. plastic was used in iMac G3, Apple TV, etc. Also
contrary to one of the popular beliefs, Steve’s mission was never to make Apple
a niche or a premium company. He wanted his company to be known for Innovation
and Design. But the truth is that today people buy an Apple product not because of its
coolness but because of its exclusivity and premiumness. Apple charges premium for the value they provide through innovation but this innovation is slowly
declining. Due to their strong branding as well as pricing strategies, they have
created the perception in the prospect’s mind that Apple means Premium and
Exclusive. But this perception among customers might not sustain for long if something is not done on the innovation part. Because it is actually the innovation and design which leads to heavy demand of the product. People actually wait in line and pay a premium to own an Apple product. It gives them a feeling of accomplishment.
Today not
everyone can afford an iPhone and this is what makes it exclusive. Now, suddenly Apple launches a new iPhone in the market which is not in sync with the company’s current
perception. iPhone 5C was targeted for mass segment but on the contrary it’s
starting price was somewhere around $99 (U.S.) compared to $199 (U.S.) of iPhone 5S. So, it shows that though Apple was targeting the mass segment but still tried to maintain its premiumness through pricing. This actually created confusion among the customers. Now just after the launch,
there was much hype on social networking sites. Some said that it’s a mistake
but some were saying that it’s a good strategy. Let’s have a look.
Why it was a bad
move. Hell it was. Apple is considered as a premium segment brand. People feel the
exclusivity by buying an iPhone. Now the customers feel cheated because they
have paid a high price to own a premium product and that brand is now targeted
towards a mass market at a comparatively lower price. Though people can boast
that they bought an iPhone 5C worth $99 (U.S.) but will they feel the exclusivity
as the product has already created a perception that it belongs to mass market.
This also kills the exclusivity factor for those who already own a premium segment iPhone. In the short term, Apple may reap the
profits but in the long run, this may heavily damage the brand’s image.
Why it was a good
move. In Microeconomics,
we have studied that according to the demand and supply in the market, an
equilibrium price is finalized. Now, there are always some customers who are
willing to pay extra for the product and there are some customers who are not
able to buy the product as they cannot afford it. It seems that Apple by
introducing super premium brand iPhone 5S and mass brand iPhone 5C wanted
to cater to both the upper as well as lower market segments. It can also be speculated
that iPhone 5C in turn helped enhancing the sales of iPhone 5S. Suppose, you
are planning to buy iPhone 5C worth $99 (U.S.) but you get to know that by
putting a little more pressure on your pocket ($100 extra) you will get a super
premium product i.e. iPhone 5S. Chances are very high that the customer will
opt for iPhone 5S. Also, for those who were previously not able to buy an
iPhone can now own the brand which gives them the feeling of social esteem.
What Apple could have done. In marketing it is said that you should target a particular market segment and then just cater to that segment. The moment you try to enter different market segments, it may dilute your brand image. But there comes a point when company needs to expand their business. In that case, it is advised to expand your market size. But this is not an easy task, so company choose to expand their product line to target different market segment. This issue can be handled with a little care. Apple could have used the same strategy which Honda did with Acura or Toyota did with Lexus. Both Acura and Lexus were meant for premium market segment and before that Honda and Toyota were not catering to premium segment as there were other dominant players like Mercedes-Benz, BMW, etc. So, they both didn't focus on their names but instead just focused on brands - "Acura" and "Lexus" and they actually made a real hit in the market. Similarly, Apple could have named iPhone 5C something else and then could have easily differentiated it from their rest of the product portfolio thereby not creating any confusion in the prospect's mind. But then, people may argue that it was the brand "iPhone" which they want to own, if Apple change the name then it may not be as impactful as iPhone 5C. My friends, I am not saying that this is the best alternative but yes this could have been one of the better alternatives.
Finally whatever
it was, either a cunning move or a blessing in disguise or a mistake, at the end Apple made a
smart move by closing down the production of iPhone 5C. May be Apple might have
foreseen the long term repercussions of continuing with iPhone 5C.
All well that ends well :)
Thank You
By
Rishabh Bhardwaj
PGDM 2013-15
IIM
