Apple’s strategy with the newly unveiled iPhone 4S is all about selling more phones. Rather than putting an innovative but more expensive device in the hands of a smaller audience, it has opted to target the mid-tier consumer and widen its customer base.
The move is being seen as Apple’s attempt to grow its market share in the face of the Android onslaught spearheaded by Samsung, HTC and others.
Apple’s is ranging the iPhone 3GS free on a two-year contract, while the iPhone 4 model will be cut to just the 8GG version, priced at $99. The iPhone 4S 16GB will cost $199, the 32GB $299 and the 64Gb will cost $399.
Francisco Jeronimo, research manager, European mobile devices at analyst IDC, said: ‘Despite the upgrades and the new iPhone 4S released, the announcement is all about price positioning. The new prices announced to the new iPhone 4S and previous iPhone versions allow Apple to compete in the price segments where Android is fiercely growing, the mid-range.
‘Apple will attract first-time smartphone users and users from mid-price Symbian devices looking for an upgrade, but will it attract current iPhone users to replace their current iPhones? Definitely not!
Ovum chief analyst Jan Dawson said: 'In some ways, the more interesting announcement was the continuation of the iPhone 3GS, which is now available for free on contract with many carriers, and which now represents Apple’s low-cost strategy for emerging markets and smartphone laggards. Rather than making a new lower-functionality, lower cost device for such markets, Apple simply continues to sell a more than two-year old device which was market-leading at the time it launched.
'For a company which prides itself on the quality of its products, this strategy has always made more sense than producing a new, sub-standard device for such markets. The strategy should also keep iPhone shipment numbers growing as ever more first-time iPhone users join the back of the ranks.'
Jeronimo believes Apple's pricing strategy will provide an opportunity for Samsung and HTC’s premium handsets to increase their market share as iPhone 4 users look for an alternative.
‘The Samsung Galaxy S II has been a major hit around the world and a serious competitor to the iPhone. HTC has also been increasing market share in the high-end segment,’ said Jeronimo. ‘Without a significant hardware differentiation there's no strong incentive for a massive replacement, as users can just upgrade their iPhone 4's with the new iOS 5.’
Jeronimo pointed out that Apple will be ‘better positioned to compete in the mid-range segments and increase its presence in the emerging markets, where price is still a major factor on the purchasing decision’.
He went on to say that Nokia and Research in Motion should be the most threatened phone makers. ‘If price was an inhibitor for consumers to move from their Symbian or BlackBerry based devices to the iPhone, now they have the change. Today Apple entered the mass market game, hopefully not leaving the innovation and coolness to their competitors.’