Last year Apple started an experiment. Knowing that its iPhone cash cow was losing sales, it worked out a way to keep its profits up by increasing its margins.
The tech press didn’t buy it. Mashable said that the “The iPhone X may go down in history as the ultimate example of a high-tech folly”.
After all the iPhone X’s key feature was its price tag. It offered very little for its $500 price hike.
However, people were dumb enough to fall for it. Apple saw sales fall throughout the world but managed to keep its profits up because very stupid people were happy to hand over their money anyway.
On Wednesday, Apple unveiled an $1,100 iPhone, and people shrugged. The price had been accepted, and Jobs Mob had enshrined the price of the smartphone at its new high level, and no one cared.
And that’s just the base price for the new iPhone XS Max, which could cost you as much as $1,500 fully loaded. The $1,000 XS—the successor to the original $1,000 model, the X—is now the midrange option among the three new iPhones Apple announced.
Apple’s phones were never cheap. Until 2016, the base price of Apple’s flagship iPhones topped out in the mid-$700s. The 16GB iPhone 6 Plus cost $750 in 2015, and that sure seemed like a lot at the time. The 32GB iPhone 7 Plus crept up to $770 in 2016, while the iPhone 7 took over the $750 price point.
The Tame Apple Press thinks all this a good thing. For some reason, gouging cash from customers is considered a good thing.
What is alarming is that they may be right, and if they are correct, then we might see some other smartphone makers follow suit.
After all, if Apple can get away with charging $1000 for a $500 smartphone why shouldn’t they?
Fortunately, what is protecting most users from this inflation is the action at the lower and mid-range end of the market and that has dragged the price down by reducing margins.
This has led to many being about to pick up a respectable phone which will do what users want for about $300. Sooner or later the common sense of these users will start to affect the others leaving only Apple holding out for its high price.
Apple’s cunning plan depends on its large number of users not looking elsewhere, and it will keep jacking up the price until they do.
It might take time, but Apple’s cunning plan can only work within its eco-system and for a limited time. Someone who is already using a cheaper Android phone is not going to jump ship. Apple users are eventually going to find spending that much on a smartphone is too pricey. The danger for Apple is that once such users start peering over the walled garden, they will not look back.
By that time Apple’s smartphone cash cow will be long dead, and it will have had to have come up with a new product to carry the Apple name at its user’s expense.