Apple (AAPL) held its 10th anniversary iPhone press event on 9/12. As expected, the tech giant released new iterations of their decade-old smartphone as well as the new iPhone X. Whereas the media has focused on innovation and technology, the event also tells another story: how the company uses the perception of innovation as a strategy for dealing with inflation.
Yes, inflation. This is despite the fact the consumer tech market generally – and accurately – is characterized as deflationary: new generations of improved and innovative devices are released at a rapid pace and sold at unchanging or even falling prices. In other words, we get better and cheaper computers and other tech gadgets. But even though price deflation accurately describes this industry, it is not unaffected by inflationary pressures on prices due to the Fed’s quantitative easing.
Consequently, Apple needed to find a way to jack up prices for their devices to maintain profitability. But with the consumer tech market being extremely competitive, even a market leader cannot simply raise prices without potentially losing market share. Being Apple, they find a solution in marketing.
The Marketing
The iPhone set a standard ten years ago both in terms of the look-and-feel of the smartphone and the pricing. Throughout the past decade, the dollar price of premium smartphones, including the annually updated iPhone, has remained basically the same. With only very few exceptions, premium smartphones sell at a standard $700-800.
The price tag of the new “iPhone X,” starting at $999, signals that it is different. It also has a different design than previous generations of the device, doing away with the “home” button and with a front made up of an almost-bezel-less screen. While much of the technology (including face-recognition login, wireless charging, and the almost-bezel-less screen) is old news to users of Android and Windows phones, it is new to iPhone users. And by skipping ahead to 10 and using Roman numerals, it is clear that Apple wants us to think of this device as something much more than an incremental update. As Apple prefers to call it, iPhone X is “the future of the smartphone.”
Leave A Comment