Jul 18, 2013

Would a cheaper iPhone hurt Apple’s brand image?

Over dinner some friends and I were having a discussion about whether Apple should introduce a cheaper iPhone and increase its market share. One person made the argument that by releasing a cheaper, compromised product, Apple would risk damaging its brand image, and while it may sale more units, the resultant loss of cache would cost Apple more in the long run than the increased volume of sales would offset. Do people think she is right about that?

I doubt it, as the lower cost iPhone will probably still have great build quality. But the specs will just trail the top of the line model. Apple is smart and knows how to do this. They'll gain more market share, but they'll be careful not to make a poor quality phone.

 Remember the Cadillac Cimmeron?  It’s probably best that you don’t. It was a rebadged Chevy Cavalier that Cadillac sold in the early 80s. I don’t think anyone around at the time would argue that it did anything BUT damage Cadillac’s image. Now that example is slightly different than a budget iPhone because it was not an original product but a rebranding, but a subpar product with your name on it is never good if you are trying to position yourself as a premium brand. If this hypothetical cheaper iPhone was still a desirable product, sort of a “premium inexpensive” product, that maintained most of the quality and important features but had a smaller lower res display and plastic body, it might be ok. If it was a sluggish, poorly performing piece of hardware, then it might be the perfect companion while you are rolling in that Cimmeron. 

Yes, I believe your friend is correct. Apple's entire market strategy is to position its products and services as superior to the competition. Releasing a cheaper phone would have one of two negative impacts:

1) If the phone is of lower quality, Apple's brand and mystique will suffer. There's no doubt about that.

2) If Apple releases a high-quality iPhone at a lower price, it will lose much or all of its margin on each device. Nearly everything Apple does involves making a profit (unlike Google). It's not in the business of giving away smartphones.

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