iPhone 5S, 5C and all that

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That Apple has launched a new pair of iPhones yesterday is now old news. As far as the launch goes, I am of the opinion it was much less a launch of new phone models and more of a launch of the new iOS7. There are a number of articles in the media on the launch and a point that I have frequently come across is the disappointment that people have with the cost of the iPhone5C. Apple was widely expected to launch a cheaper version of the iPhone to win back the market share it lost to a slew of Korean and Chinese Android powered phones. There were many who thought that iPhone would now be as affordable as these phones.

 But the launch came with a bit of a rude shock for them. At US$550 for the 5C (that's around Rs. 35,000 here in India though the actual price in Indian stores hasn't been announced as yet), it is just 100 dollars cheaper than the other new phone, the premium 5S and in no way as cheap as many Android phones. I have read blogs and articles that have bemoaned why this was a bad idea and if the launch would in any way stop Apple's stock from sliding down.

 Not just that, there are a number of indignant bloggers asking why the iPhone5 has been discontinued while the 4S is still around.

 Though I have my reservations whether yesterday's launch did actually project Apple as the innovative company it has come to be known as, I believe both these decisions made good business sense. 

 Ever since the launch of the Macintosh in 1984, Apple is a brand that has stood for quality. Quality that came at a premium. Much like its desktop and laptop computers - where even the cheapest model never competed in the market on price - the iPhone too had to maintain its image of quality at a premium. If, as many believed, Apple had released the 5C at prices that competed with Android phones from China and Korea head-on, Apple would never have been able to maintain the image that its phones are far better in quality. Quality, as the luxury car market has shown us, comes at a price and going too low in price would have effectively cost Apple its image as a manufacturer of quality phones.

 If the 5C fails to excite the market, as I believe it will, the reason would be because most of the customers who are willing to buy the 5C at around Rs. 35,000/- wouldn't mind shelling out another 6,000 for the 5S. And if this launch fails to improve Apple's market share and therefore its stock price, what should Apple do?

 The answer probably lies in going away from the iPhone brand. Any model launched under the iPhone brand will have to maintain the image of high quality at a premium price so that it does not impact any other models in the iPhone series. Apple could launch  a separate brand say "iX" at affordable prices with a promise of quality with affordability. It could be projected as a lifestyle brand. A launch of such a brand would not impact iPhone in any way, Except, of course, that any launch of such a mass-market product would need to be accompanied by a massive budget. Something Apple may avoid risking at this point in time.

 The other question that people have asked is why the iPhone5 has been discontinued when the 4S is still around. Simple, most people upgrade their phone more for the boost it gives to their personal image than for the phone's increased functionality. The iPhone5S will physically look like the iPhone5 (except for the gold model). Because of that, if buying the 5 at a lower price gave the same snob value as 5S, then many customers would be satisfied with buying the iPhone5 instead of the 5S and the guys who actually bought the 5S would not derive any additional snob value. Obviously then, the iPhone5 had to die.

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