Apple held its annual fall event on Tuesday, taking the lid off new products and services and aiming to generate excitement in the market ahead of the crucial holiday season.
As expected by many industry observers, the US tech giant unveiled a new series of iPhones, a new entry-level iPad and the Apple Watch Series 5. CEO Tim Cook also announced the launch dates for two subscription services — Apple Arcade and Apple TV+.
Apple Arcade, the firm’s gaming subscription offering that was announced earlier this year, will be launched on September 19, while Apple TV+, a new streaming TV service, will be rolled out in November.
What was noteworthy was the pricing and the marketing strategy: the company said it will charge just US$4.99 a month for the two subscription services, and also throw in free trials.
Apple Arcade will offer a one-month free trial, which would allow users unlimited access to a catalog of over 100 new, exclusive games playable across iPhone, iPad, iPod touch, Mac and Apple TV.
Even more interesting was the announcement in relation to Apple TV+: anyone who buys an iPhone, iPad or Mac will get a free year of streaming TV.
Going by the low pricing and free trial offers, one thing becomes clear: Apple has embraced, at least for now, a strategy of using service offerings to drive hardware sales.
In his presentation, Cook said the company is making the best correlation for its hardware, software and services. The three elements will no doubt play an important role in strengthening Apple’s leadership in the premium phone segment. The new iOS 13 and iPadOS will be the foundation of the whole Apple ecosystem.
The latest flagship iPhone 11 and iPhone 11 Pro series, which have a new A13 Bionic chip inside, can power the iPhone with faster processing time with lower battery consumption. That should allow iPhone users to enjoy their entertainment with all-day battery support.
As with the service offerings, Apple has adopted lower pricing points for the hardware devices, compared to the firm’s past practices.
The iPhone 11, which will come with two back cameras, will see prices start at US$699, down from the US$749 level seen in last year’s new phone launch.
Facing up to market realities, Apple is becoming more flexible in relation to pricing. Under the new game plan, services and hardware will support each other, helping buoy overall revenue.
Hardware prices are being tweaked to drive sales and pave way for more people to try the new subscription service offerings.
And it also works the other way round, as consumers wanting to avail of a free year of Apple TV+ will buy new Apple devices such as iPhones, iPads or Mac computers.
As Apple is confronted with a paradigm shift in the market, it is realizing that the old hardware-driven business model will no longer be sustainable. To maintain the momentum of iPhone sales, the firm has put in more focus on the entry-level product, the iPhone 11, rather than the new iPhone Pro series.
Apple has accepted the fact that smartphone prices cannot be raised continuously without significant additional features on the devices. As the company is yet to usher in a 5G offering, it is for adopting a low-price strategy for now to lower the entry barrier for its products and lure users from Android.
That said, the current pricing also leaves room for further reduction in the future by individual retailers to boost sales. Such a strategy is especially important in driving sales in China, where many users usually wait for online shopping festivals to strike bargain deals.
As Apple is lagging behind other key smartphone brands on the 5G product front, the iPhone 11 series could have proved somewhat difficult to sell in sufficient numbers if Apple had maintained its old strategy. But now, with the low price point on the iPhone 11, the company can expect sales to hold up well during the 5G vacuum period in the next twelve months.
Several surveys have noted that smartphone users have begun to hold onto their existing phones for much longer periods than before. With people sitting it out for three years or even longer, Apple needs to do all it can to encourage the existing iPhone users to abandon their old handsets and buy a new one to enjoy an enhanced experience.
That may be the reason why, for the first time, Apple has devoted quite a bit of time during its annual event to discuss its Trade-In service. The aim is to tell the iPhone users that upgrade to the latest models will not cost them too much, as the old devices can be handed in at a fair price and set off against the bill for the new phone.
Trade-in service has been quite popular in some markets, including Hong Kong, but not everywhere. Now, Apple plans to step up efforts to make the trade-in concept more popular to boost the replacement market. The initiative should help the firm drive some demand for iPhone upgrade before the 5G phone launch.
The 5G factor may prompt tech-savvy users to hold off on upgrades for now, but Apple can still hope to generate enough sales with the latest crop of devices. The company can push iPhone 11 to its loyal fan base through the low-price and service-bundle strategy to cement its market share.
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