Have you noticed what Apple is doing to the cell phone handset market? Besides the obvious innovating and making products, the market is snapping up. My daughter called to let me know that the touch screen on her Droid was failing and to inquire as to whether she could get an iPhone 5 which, at the time, was due to launch within a couple of days. My initial response was, “Sure honey, you can order whatever phone you want to buy!”
Curious, I pulled up the pricing on the iPhone 5 while she was on the phone and found the following:
iPhone 5 – $199
iPhone 4S – $100
iPhone 4 – $0
We discussed what I found and it was a no-brainer for her to take one of our available upgrade credits and purchase the iPhone 4, which is the same one I use.
Apple’s pricing approach is going to devastate the competition. Conventional wisdom is that you should retire old technology and models so that you can focus your support efforts on newer technologies. This also has the benefit of driving new customers to your newest models and increasing sales volumes on those models, which help with economies of scale and market penetration for the new models. However, by keeping its old models available, at least for a while, Apple has absolutely killed demand for feature phones.
Why would anyone purchase a feature phone when they can get an iPhone for free? Unless they just don’t want to pay for a data plan, there isn’t much to recommend for plain phones anymore.
It will be interesting to see what impact this has on cell phone sales over the next several months.