Quick. Can you name a manufacturer that has a smartphone priced lower than iPhone. All of them is a good answer. Apple owns the premium end of nearly every product category. Mac, iPhone, iPad, Watch, Apple TV, Beats headphones, HomePod, AirPod.
Apple’s high end strategy is time honored and helps the company reap the most fruit. iPhone accounts for about half the smartphone industry’s entire revenue and around 85-percent of the profits. Mac accounts for half the PC industry’s profits. Obviously, occupying the premium segment for every product has been a good strategy for Apple.
What about the low end? Well, we all know that Apple doesn’t play ball down in the low price, low margin, non-profitable segments of anywhere, right? It’s been that way forever.
Or, has it?
iPad for 2018 starts at $329 ($299 for schools). That’s for the best tablet line you can buy. Amazon has less expensive tablets, and so do a few competitors, but the choice of which tablet to buy is a no brainer and that explains why iPad remains the world’s best selling tablet.
Apple has a low end strategy. It’s just not a cheap, low price, low margin strategy.
Let’s take a look at the iPhone line. At the high end, Apple owns it with iPhone X priced as high as $1,149 for the 256GB model. It has the latest and greatest and it runs iOS 11.x. At the other end of the scale is the diminutive and capable $349 iPhone SE (32GB version; 128GB is $100 more). That’s $800 less than the most expensive iPhone. iPhone SE also runs iOS 11.x and nearly all the same applications that run on other iPhones.
Apple has a low end strategy. Relative to cheaper and plastic Android devices, iPhone SE is priced a bit higher, yet remains a very good iPhone.
What about the Mac?
Apple does not bother to play against cheap Windows notebooks or Chromebooks; many of which are less than $300. The nearest Mac is the mini and that starts at $499– sans keyboard, mouse, and display. Most of the Macs Apple sells are notebooks, and the least expensive is the very long-in-the-tooth MacBook Air at $999.
That’s not a bargain. For the Mac, Apple does not have a low end strategy. Yet. Since the Mac sells at near record levels every quarter and accounts for half the PC industry’s profits, Apple can be forgiven for not taking money off the table.
Apple Watch owns the premium space for smartwatches, and Apple owns not only most of that segment’s sales and profits, it also ventures into the low end space. Watch Series 1 starts at $249 but often shows up on sale for $50 to $100 less, which makes it competitive against any other smartwatch or exercise and fitness device.
Yes, it takes little time or effort to buy Watch Series3 with GPS and cellular, with stainless steel case and a Milanese loop watchband for $749, but Apple has a low end strategy with Watch, too.
I’m not into Beats headphones so I can’t really comment on their pricing strategy, but headphones can be almost a dime a dozen with decent versions under $100. No low end strategy there. But I do love AirPods and finding a good pair for a similar price tag and similar features isn’t easy– even on Amazon. There may not be a low end headphone or earbud strategy at Apple, but the company’s products are competitive and sell very well.
Obviously, Apple is all about the high end; the premium space where revenue, gross margins, and high profits live. But Apple has begun to broaden the product line and became competitive with low end and mid-range competitors– while still managing to take a lion’s share of revenue and profits.
Very few companies can do that and do it well.