Apple’s iPhone “is the best priced product in the world” says Simon-Kucher

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Apple unveiled its latest iPhone models on Wednesday 12 September, announcing a trio of new successors to last year’s iPhone X and its most expensive handset yet. Simon-Kucher & Partners, the world’s leading firm of pricing specialists, says the iPhone has proved to be “the best priced product in the world”, with 87% of the global smartphone market’s profits despite only having 20% of the market by volume of sales.

Mark Billige, Board Member & Managing Partner UK, says: “With the iPhone, Apple achieved the distinctive position of creating a mass market luxury product, allowing both huge sales and large profit margins on each unit.

“Apple has about a fifth of the global smartphone market, but earns 87% of the profits generated from smartphone sales.  By contrast, the various Android phones, such as Samsung, have 80% of the market yet are battling over a measly 13% of the profits.  It is hard to think of another product that has been so dominant and profitable for the past decade.

“Apple’s approach is to continually increase the iPhone’s price with each new model, while offering older models at only a modest discount. The first model cost £269 ($499 in USA) in 2007, which astounded rivals. Last year its iPhone X launched at £999 ($999 in USA), twice that amount: a 270% price increase in 10 years in the UK (and 100% in the USA). Yesterday’s announcement has seen a continuation of this strategy with the introduction of the iPhone XS Max, priced at £1,099 ($1,099 in USA). 

“By continuing to work with the price, Apple has been able to maintain strong revenues, producing strong profit margins that prevent it having to follow the other common approaches for increasing profits - discounting to increase the sales volume or cutting input costs by reducing the quality of technology in its product. Through their rounds of innovation Apple have not only been able to push their headline price up, but also create a depth of offerings at different price points.

“Above and beyond the products themselves, one of the most impressive facets of Apple is its discipline in maintaining its brand positioning and not trying to appeal to all consumer. Many companies fail this challenge, ending up somewhere in the middle on both price and quality. We anticipated Apple would push through the $1,000 barrier on their top-end model, and expect they will continue to use price in the future to signal that iPhones are more desirable than ever. It is this belief amongst consumers, together with product’s quality and the locked-in nature of the Apple ecosystem, which keeps Apple at the top of the smartphone tree.”

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Apple Inc. is not a client of Simon-Kucher & Partners now or previously.