The iPhone was introduced to the public on January 9, 2007, but before going public, Apple had created a buzz among consumers who were eager to buy when available.
Once Apple announced the price of the iPhone, interest dropped to a low average. Just ten weeks after the launch, the price was lowered, and sales soared.
On November 9, 2007, Apple launched the iPhone to the European market (initially in Germany, France, and the United Kingdom) with considerable success initially but even more after the prices were lowered for consumers.
What were some of the reasons that prompted Apple to cut the price of its iPhone?
To increase affordability:
· Open up to new market class.
· No longer early adopters but mainstream market.
· Protect future revenue.
· Holiday Season, the aggressive takeover of the market.
· Make room for 2nd generation products.
As Apple’s market entry technique generated high demands for the iPhone, Apple was faced with two options regarding the unit’s price. Apple could leave the device’s price unchanged and continue to grow steadily, or Apple could reduce the cost and aggressively capture a more significant portion of the target market.
The increase of affordability moved the iPhone from the early adopters to the mainstream consumers, which in turn increased the demand and revenue for Apple. The cellular industry is a competitive market where the competition responds quickly to technological advancements; therefore, Apple, through the price reduction, established the avenue for a second generation of the iPhone.
Opening the market and pushing the initial product through the initial product life cycle protects the future of the brand and future revenue.
Do you think it made the right decision in cutting the price of the iPhone so soon after launch? Give the theory and data to support your answers.
*For all the reasons identified in paragraph 2.
What were the reasons for the weak performance of the iPhone in the European markets?
*Lack of 3G Network
There are three reasons behind the weak performance of the iPhone in the European market: laws, pricing, and lack of a 3G network.
Following European law, companies could not create partnerships requiring customers to buy from one company rather than another. With partnerships already in the works with T-Mobile in Germany, Orange in France, and Telefónica O2 Europe Plc in the UK, Apple could not implement its revenue-sharing global strategy.
Moreover, customers in Europe were accustomed to using any phone with the network of their choice (Faheem 2008).
Apple’s launch in European markets seemed promising. With a premium price of US$566 in the UK, US$587 in Germany, and US$415 in France, the phone appealed to consumers. However, sales fell short as time passed. According to Schnecker (2008), the three markets sold a combined estimated 350,000 iPhones in Q4 2007. By Q1 2008, sales volume dropped to 300,000 units (compared to 2 million iPhones sold in the United States in 2007). Apple’s biggest challenge lies in the fact Europeans are accustomed to purchasing heavily subsidized phones, even going so far as receiving some high-end models for free. The iPhone, on the other hand, was not subsidized.
Lack of 3G Network
Although 3G network technology is new for US customers, Europe has had access to 3G for quite some time. When Apple introduced the iPhone to the European market, it lacked 5G capabilities, dissuading some consumers. Instead, Apple built its product around the network Edge for its initial introduction, due to 3G’s limitations in the United States, and also because the chips needed to access the faster network used too much battery power (Wingfield & Thomas 2007).