iPhone 11 : The Business Side Of Things | Why The 50$ Price Cut

Alright, so it is that time of the year where many eager technologically enthusiastic eyes look up with the hope to see what innovations Apple brings in. iPhone 11 and iPhone 11 Pro is what Apple introduced this year.

And I have a few interesting things to share with you guys about the iPhone 11 launch.

So apple announced its two phones iPhone 11 and iPhone 11 Pro.

And I think that these phones are a very interesting introduction that we need to give an an in-depth look into.

In this post I am going to talk about the iPhone 11. To put it precisely for what it is the $699 iPhone 11.

The “$699” iPhone 11.

If you are thinking, why is it not $749 ?, My guy, you aren’t the only one.

I have been seeing these questions across all tech forums and decided to address the queries once and for all.

I will be creating a separate post for iPhone 11 Pro but at this point of time looking at the little brother or to put it more precisely the little brother that has some serious price cut is something that demands attention.

So let’s look at the business side of this launch with the $699 iPhone 11 in perspective.

One thing that I will say about iPhone 11 Pro though is that it seems like the iPhone 11 Pro is kind of like stepping stone to the bigger iteration that Apple, it seems will be introducing in the next iPhone launch in 2020.

The Business Strategy Behind iPhone 11

The $699 iPhone 11 on the other hand I feel is one of the most interesting launches that Apple has given in the past three or four years.

Interesting, not in terms of specs because truth be told there is nothing too special as far as specs are concerned.

Don’t get me wrong it’s a great phone at this price bracket.

I know you have seen many people talking how these phone are not good enough. What is good is very relative and what you think as good or bad is not a general statement that one can just pass on everything.

But more or less from specs perspective it is like a refresh model with a secondary camera added in.

But what is interesting is the price cut that we have seen in this device.

Why I am calling this interesting is because this decision is giving us an insight as to what might be the business strategy behind this decision.

Is Apple Leaving Money On The Table ?.

Allow me to let me you know that this $50 dollar price, that Apple has decided to shave off in iPhone 11 is actually a business decision that is going to cost them billions.

Yup, let me reiterate billions.

So let me tell you how that is happening.

Have a look at this table.

iphone 11 iphone sales
Source : CNET


This table shows the top 10 smartphone models that are that was sold in the first half of 2019 in terms of shipped units.

And surprise surprise, you can clearly see the iPhone XR tops the chart with 26.9 million units sold worldwide.

The iPhone XR was sold at about 749$ at the time of its launch.

Now looking at the volume of the iPhone XR that was sold, we can do a simple math as to how much money will Apple lose if let’s say iPhone XR was sold for $10 less than its launch price.

So, if Apple decided to launch its iPhone XR at let’s say $739 dollars.

This will amount to apple having 270 million dollars less than whatever its revenue is right now.

Now get this.

iPhone 11 is launched at a price of $699 which is $50 less than its previous iteration.

Let’s use the same sales figure and literally do the math.

Multiplying the sales figure with $50 which comes to be around 1.3 billion dollars left on the table.

1.3 billion dollars.

What Possibly Could Be The Reason Behind The Decision

Yes of course these are not exact numbers. 

The data is for just 6 months and secondly, there are many different factors involved which will offset this calculation by a little bit, but I want you to understand the gravity of the situation.

Apple is willing to leave billions of dollars given the price drop that it has allowed on its device.

So why is this happening ?, and what is the precise reason behind this decision is something that everyone is wondering.

But you will be forgiven to think that since Apple is such a big company, it won’t be a big deal for them.

iphone 11 iphone market cap
Source : ycharts

But I want you to understand the complexity of decision making in big industries and companies is there because you have to factor in various different horizons the decision will impact.

Especially in an industry which is so sensitive that a few percentage up or down here and there can lead to to huge changes in economic engines such as stock prices and things like that.

But it doesn’t matter how big of a company you are.

When the revenue is getting affected in terms of billions there has to be a lot of thought or a lot of understanding that needs to go into making such a drastic drop in price.

So here is what I think the precise reasons might have been.

iPhone 11 Might Be Apple’s Step Into Adapting As Per The Market.

So here is how apple has handled its launch till now.

When flagships from other manufacturers are launched at competitive prices.

Apple used to come in like a boss and said, here is our $1000 flagship smartphone that has everything.

Go ahead buy it now.

But now with the rapid growth that smartphone industry has seen over the last decade, it seems the industry evolution has finally caught up-to apple.

Wherein apple has to incorporate significant changes to marketing strategies because people now have a lot of options to choose from.

With the underlying fact being that many of these flagships from other companies are actually capable of providing a similar if not exact same performance as apple devices.

Not to mention at relatively cheap prices.

With the rapid advancement of technology and hardware that is going into developing smartphones, there are a lot of flagship killers by different brands such as Samsung, Xiaomi, OnePlus that feature most features that Apple iPhones offer at a much lower price.

So finally, maybe Apple has a realized that if it wants to sell more units and cater to a wide range of audience.

It needs to tone down the price into one of it’s main products, i.e., iPhone 11 in this case to a range where people shopping mid range has an Apple option to choose from.

And so you may say, well mid range is subjective. And yes it is but you get the point that I am trying to make right.

With Increasing Options Increases Skepticism

So we are all aware of what has happened with apple in the past.

The increasing options in the market and things like apple’s apology over device slowdowns has created an aura where people somehow have a shift in view in how they see apple products from how they used to.

So with so many innovations across so many arenas happening continuously decisions like these shouldn’t come out as a surprise.

Ever Heard Of Apple Services ?.

So now let’s go and see what is happening in the background.

iPhones in general kind like the mascots of apple. True.

When somebody says iPhone, you think Apple.

But I want you to understand big businesses are not like a one trunk elephant.

They are like octopuses ever expanding its leg into newer or renewed arenas.

So I want to bring your attention to other limbs of apple that are growing rapidly, 13 % every year it seems.

And one of the reasons that I think Apple is taking such a big decision of living billions of dollars on the table is the fact that Apple is not just limited to iPhones now for its expansion.

Apple’s services revenue is growing exponentially.

Services such as apple music, Apple news, Apple Arcade,Apple TV, iCloud storage services amongst others.

Now can you think of an intelligent decision via which you can not only increase the revenue that is being generated by these apple services but also make the sales of your flagship devices shoot of the roof ?.

Lower the prices. Correct.

It’s as simple as that.

A Win Win Situation

And that is precisely what is happening with the incredible $50 price cut that we have seen in iPhone 11.

So in essence what is happening is, via this reduced price is Apple is making a funnel.

A funnel that reaches wider and more “apple device eager audience”.

And what is it that Apple can then serve to the people that have entered the apple ecosystem.

Apple Services.

So on one hand you can think like oh man what a brave step of leaving so much money on the table.

But if you go a little in depth as to how things are working in the big picture.

What you will find is a little price sacrifice here can in turn provide you much, much better revenue through the services business that is growing every year by 13%.

Win Win.

I will see you guys in the next one.

Take it easy.

Namaskaram :).

Electronics Engineer | Former Deputy Manager | Self-Taught Digital Marketer.Owner & Admin Of A Network Of Blogs and Global E-Commerce Stores

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