Last quarter, Apple reported that iPhone sales, which compromised 68% of their revenue for the quarter, had the slowest growth rate since its launch in 2007. This is despite having just released the iPhone 6s and 6s Plus in September which had a 30% higher sales at launch compared to the iPhone 6. Why is there still a slow down in sales? According to the product-life cycle, which demonstrates the process that most products follow in relation to sales over time, the iPhone is showing signs of entering the decline stage, but it will have to depend on what Apple does to make sure iPhones don't get there. So far, they've come up with a rewards program for stores and employees, a new release date in March, and an iPhone Upgrade Program. These strategies are only temporary and may not be enough to boost sales long term.
Product-Life Cycle
During the product-life cycle, products begin with an introduction stage, then growth, maturity, and end in either decline, reintroduction, or hyper-maturity depending on the product and marketing efforts.
- low sales
- negative profits
- informative advertising
- none to few competitors
- a basic product
- rapidly rising sales and profits
- persuasive advertising
- growing number of competitors
- products accompanied with product extensions, services, and warranties
- sales peak and stagnate
- profits are high but decrease annually
- advertising focuses on brand difference and loyalty
- competitors are stable
- products are diversified to include different models and attributes
Lastly, a product enters
- decline, where there are declining sales and profits, price cuts, and a weak product
- reintroduction, where changes are made to the product and sales increase again
- hyper-maturity, where sales stagnate (usually staple items with no substitutes)
Temporary Solutions
For now, Apple is introducing a rewards program for employees who sell the most iPhones. This is a short-term solution to boost sales for this quarter, where stores who sell the most iPhones in their region between February 21st and March 26th can win gear and a store-wide party and employees can win an all-expense paid trip to Cupertino, California. This solution makes it seem like the decline in iPhone sales is only a temporary problem needing only a temporary solution, but it doesn't seem to temporary at all.
iPhones have been out since 2007 with major changes occurring with the iPhone 5s with the fingerprint scanner and larger screen size and with the iPhone 6 with the even larger screen size. The variety of iPhones over the past 9 years have now conquered most mobile phone users, whether they have the latest model or the 4s. So why is there a possible decline in sales now?
There are 2 main reasons:
1) consumers are so satisfied with the iPhone they currently own that the new iPhone that comes each out September doesn't impulse consumers to upgrade and
2) the new features aren't as staggering to buy a new phone that is almost as similar as the one before, therefore causing price to be a major factor in purchasing decisions over having the latest model.
Both of these cannot be completely solved with having a release date in March, another solution that Apple has come up with, although it will spread iPhone sales throughout the year rather than focusing them towards the end of each year.
The iPhone Upgrade Program, which is supposed to make it easier for consumers to upgrade to a new iPhone each year after making 12 monthly payments, is a great solution to those who want to get a new iPhone each year. The caveat is that if you don't upgrade, you end up paying more for the iPhone since a 24-month installment loan is required. With the upgrade program it would be $777.84 for a 16gb iPhone 6s at $32.41/month for 24 months vs $649 full price (both before taxes and fees). Cost and ease become a factor when upgrading. So far, it doesn't seem to be favorable on either side.
New Solutions
Apple has always been regarded as an innovating company selling high-end products with excellent functionality. The iPhone has been their most popular product, but it's time Apple innovates the smartphone on a new level because the market is saturated in most regions and price is getting to be a crucial factor to customer. We always expect Apple to come up with great new things at each launch they have, but it isn't driving as many people to buy the item. This is because Apple is only making minor changes on the iPhone despite saying that, "The only thing that's changed is everything."
If Apple continues like this, it's likely that the iPhone will enter a decline because reintroduction is slowly becoming ineffective. For reintroduction to continue to boost sales effectively, Apple will need to come up with at least one amazing new feature each time there is a launch for the "boost effect" to last longer. This strategy worked for the release of the iPhone 6, which had a larger screen and thus producing a large increase in iPhones sold in the first quarter of 2015 compared to 2014. Instead of creating temporary solutions like the rewards program or March release date, it is time that Apple makes real, significant changes to the new iPhone to impulse buyers to get the latest iPhone model and not conform to the old one they have.
- reintroduction, where changes are made to the product and sales increase again
- hyper-maturity, where sales stagnate (usually staple items with no substitutes)
These characteristics show that the iPhone is in maturity right now and that Apple has been using reintroduction of new iPhone models to boost sales again every year. The only problem is that every year the "boost effect" of each iPhone lasts less and less time, thus producing the effects shown in the image below where the change in iPhones sold between the first quarter of each year diminishes and eventually stagnates.
Temporary Solutions
For now, Apple is introducing a rewards program for employees who sell the most iPhones. This is a short-term solution to boost sales for this quarter, where stores who sell the most iPhones in their region between February 21st and March 26th can win gear and a store-wide party and employees can win an all-expense paid trip to Cupertino, California. This solution makes it seem like the decline in iPhone sales is only a temporary problem needing only a temporary solution, but it doesn't seem to temporary at all.
iPhones have been out since 2007 with major changes occurring with the iPhone 5s with the fingerprint scanner and larger screen size and with the iPhone 6 with the even larger screen size. The variety of iPhones over the past 9 years have now conquered most mobile phone users, whether they have the latest model or the 4s. So why is there a possible decline in sales now?
There are 2 main reasons:
1) consumers are so satisfied with the iPhone they currently own that the new iPhone that comes each out September doesn't impulse consumers to upgrade and
2) the new features aren't as staggering to buy a new phone that is almost as similar as the one before, therefore causing price to be a major factor in purchasing decisions over having the latest model.
Both of these cannot be completely solved with having a release date in March, another solution that Apple has come up with, although it will spread iPhone sales throughout the year rather than focusing them towards the end of each year.
The iPhone Upgrade Program, which is supposed to make it easier for consumers to upgrade to a new iPhone each year after making 12 monthly payments, is a great solution to those who want to get a new iPhone each year. The caveat is that if you don't upgrade, you end up paying more for the iPhone since a 24-month installment loan is required. With the upgrade program it would be $777.84 for a 16gb iPhone 6s at $32.41/month for 24 months vs $649 full price (both before taxes and fees). Cost and ease become a factor when upgrading. So far, it doesn't seem to be favorable on either side.
New Solutions
Apple has always been regarded as an innovating company selling high-end products with excellent functionality. The iPhone has been their most popular product, but it's time Apple innovates the smartphone on a new level because the market is saturated in most regions and price is getting to be a crucial factor to customer. We always expect Apple to come up with great new things at each launch they have, but it isn't driving as many people to buy the item. This is because Apple is only making minor changes on the iPhone despite saying that, "The only thing that's changed is everything."
If Apple continues like this, it's likely that the iPhone will enter a decline because reintroduction is slowly becoming ineffective. For reintroduction to continue to boost sales effectively, Apple will need to come up with at least one amazing new feature each time there is a launch for the "boost effect" to last longer. This strategy worked for the release of the iPhone 6, which had a larger screen and thus producing a large increase in iPhones sold in the first quarter of 2015 compared to 2014. Instead of creating temporary solutions like the rewards program or March release date, it is time that Apple makes real, significant changes to the new iPhone to impulse buyers to get the latest iPhone model and not conform to the old one they have.
Interesting!!!
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