Why Apple’s iPhone 5C pricing is fraught with peril

Apple iPhone 5C Pricing AnalysisImage Source: Sonny Dickson

If you enjoy watching high-wire acts, then you should be closely fixated on how Apple will price its budget iPhone 5C that will launch next week. Enders Analysis strategy consultant Benedict Evans runs down all the the pros and cons of possible prices for the iPhone 5C and concludes that there’s no easy way for Apple to strike a happy balance between sales volume and high margins. 

On the one hand, a $300 iPhone 5C would certainly be a hit sales-wise but it would certainly eat into Apple’s profitability and might not even sell well in the United States since customers can get older iPhones for free on contract. On the other hand, a $450 iPhone 5C would help Apple maintain healthy margins but it likely wouldn’t sell well in China where it’s going up against dirt-cheap Android phones from Xiaomi and other brands.

“The true unknown in this, of course, is that while we know that any $300 iPhone would sell very well, we don’t know how much better a new $400 or $450 iPhone would sell than the current ‘two year old’ $450 iPhone,” Evans concludes. “How much difference would the screen, colored plastic casing and ‘newness’ make?”

For a company that has previously done very well as a premium-only brand, this is very new — and potentially risky — territory.

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