My assumption going into this, sixth iteration, of the iPhone was that we would see the expansion of the iPhone into two distinctly positioned products: a low-end C and a high-end S. The assumption was based on what what we saw with the iPad: the regular iPad and the mini iPad.
By using the iPad as a template, my exercise in August was to forecast what the pricing1 might turn out to be for such a split-personality product.
I expected the 5C would replace the “low end” n-2 variant2 and the 5S would continue as the core product. This is reflected in the original graph as devised in mid-August:
The surprise was that the 5C was not “low end” in any way other than having a plastic case. It has a minor spec increase over the 5 but is otherwise a 5 feature set in a plastic skin. It also is priced as if it was the continuation of the 5, with a modest reduction in ASP.
In addition, the continuation of the 4S and 4 (in China at least) means that the old strategy continues more-or-less unchanged.
Knowing the line-up and pricing all that remains to understand is the positioning, or how the products are defined relative to each other.
This is where there might be a shift happening. Under the old model the n-1 variant was meant to be a modest volume contributor to the portfolio, being essentially a cognitive illusion which encouraged buyers to stick with iPhone n at the expense of competitors. However, the new n-1 product (the 5C) has a distinct positioning that makes it seem fresh and not a lesser, stale version of the flagship. It is designed to appeal as a legitimate upgrade for iPhone 4/4S users. It is, in other words, not meant as an illusion, and not focusing attention on the flagship3. Rather, it is meant to be a genuine, core product.
As a result, I expect the mix of iPhones to be more evenly split between the C and S variants. I expect the C to even become the most popular version in the mid-term. My expectations are shown in the following graphs. Continue reading “C is for Cognitive Illusion”