Julian Yap

How Apple buffers the dip in sales when a new model iPhone is announced

Tim Cook during today’s “earnings call”:http://www.morningstar.com/earnings/34582720-apple-inc-q1-2012.aspx:

I would also attribute the performance [of iPhone sales] to the delayed purchases from the prior quarter as we’ve discussed in the October call as people were anticipating a new iPhone being announced. I think we made the correct decision to go with a broad range of iPhone. This turned out to be a benefit as we thought it would.

Prior to the announcement of the iPhone 4S Apple would only have one available model of iPhone out at a time. The iPhone 4S changed this cycle where they kept the prior iPhone 4 model and the iPhone 3GS (through AT&T). This led to a dip in sales for Apple in the lead up to the announcement, otherwise referred to as “delayed purchases”. In this case Apple had become a victim of its own success.

I remember a quote from Steve Jobs during the stolen iPhone 4 days where he mentioned that officially stating the “stolen iPhone 4”:http://thewirecutter.com/2011/10/steve-jobs-was-always-kind-to-me-or-regrets-of-an-asshole/ was Apple’s was tantamount to “shooting his toes off” as it would lead to a dip in sales for the current model.

Having a slight diversification of available models (and how Apple does it with prior generations and cheaper price points) allows you to spread your risk when announcing a new model. Sales will not slow as much because the buyer will have piece of mind that the model that they buy today will not be obsolete and taken off of shelves the moment the new model is released. That feeling of buyers remorse and importantly the need to wait for the next model is reduced.

The other obvious benefit is that you can now target slightly different consumers with those models and lower price points.

The down side? In the short term the hype machine and pandemonium might be less when a new model is announced. I don’t see any real downside but it does take a couple of generations for a product to reach a state of hardware maturity such that they can deem a particular model “good enough” that it can remain as an item to continue selling.

Apple has figured out that the benefits far outweigh the negatives which is why they will surely employ this tactic when the new iPad 3 is announced.

24 JANUARY 2012 @ 11:16PM


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