Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Will You Pay $100 Less for the Smaller iPhone?

The big story on Apple (NASDAQ: AAPL  ) over the weekend was the chatter about the consumer tech titan's pricing strategy when it updates its iPhone line in a few months. The rumor mill has been pretty consistent about Apple putting out two smartphones that will come in different sizes. The chatter has also been pretty steady about a smaller 4.7-inch iPhone 6 hitting the market in the fall with a larger smartphone checking in between 5.2 inches and 5.5 inches a few months later.

There doesn't seem to be a reason to stray from Apple's pricing strategy with the first device. The subsidized starting price of $199 is likely to stick. Naturally the larger device will cost a little more to make assuming it has similar features, and it should if Apple learned anything from the softer selling iPhone 5c. Apple has every right to pass on those costs, especially if it doesn't want to dry up sales of the smaller smartphone. 

The chatter over the weekend was all about Apple charging $100 more for the larger iPhone 6 and how many consumers won't flinch.

"Our June consumer survey points to continued growth in the willingness of iPhone users to pay $100 more for a bigger screened iPhone, with now a full one-third of survey respondents willing to pay a $100 premium," Raymond James analyst Tavis McCourt writes in a recent note to clients. 

Now there's nothing wrong with a third of iPhone loyalists open to paying a bit more for a bigger screen. The balance will flock to the smaller device, and a lot of former iPhone owners wooed by the larger screens of Samsung, HTC, and other Android handsets will consider returning to iOS with the supersized iPhone. 

But what if Apple has something a little more daring up its sleeve? What if when the larger iPhone hits the market after the holidays -- a few months after the original iPhone 6 debuts -- Apple makes the brazen move of sticking to the $199 price? What if the smaller yet full-featured device is the one that gets a price reduction at that point? What if the perfectly capable and bar-raising smaller iPhone 6 takes on the role of the scaled back and plastic candy-shelled iPhone 5c?

Apple doesn't have to do it. The slow yet steady growth for the iPhone won't end with a higher price tag, and since the larger screen will cost Apple far less than $100, the supersized iPhone should be its most profitable phone ever. But at a time when Mac sales have stalled, iPod sales continue in free fall, and iPad sales are declining, the iPhone could do so much more if Apple made a bigger push for the masses by giving them the larger phone that they want on one end and the lower price point on a full-featured phone on the other.

Of course Apple will probably never actually do this. It defends its margins religiously. It chooses prestige over market share. But one can argue that it also learns from its mistakes. The iPhone 5c wasn't a complete blunder, but it wasn't the mass-market phone that Apple investors were hoping because the features were dialed back relative to what comparable Android phones can offer. But the push the larger screen finally gives Apple the opportunity to offer an entry-level phone without skimping on the features because it has pricing flexibility with the larger device. Pushing the starting price of the subsidized large iPhone to $299 makes sense, but leaving it at $199 and making the smaller iPhone $100 less would be the move that truly turns heads and wrestles back market share.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 16, 2014, at 11:47 AM, jdmeck wrote:

    Yes. I don't want a larger phone and will not ever buy a larger phone.

  • Report this Comment On June 16, 2014, at 12:53 PM, Chiam wrote:

    Hey Rick did you miss the whole move in Apple as you are always bashing it? Get back to me!

  • Report this Comment On June 16, 2014, at 1:22 PM, Oldfool103 wrote:

    If ever there was to be a controlled test on preferred screen sizes for the iPhone, this should be it. While I don't expect to see Apple releasing anything like the numbers of models of anything a la Samsung's approach, between the candy coloured year old model and two sizes of the i6, along with the two iPads--possibly to be joined by a larger 12" size somewhere in the future--we can await the eventual emergence of the Apple iPhad to complete the Samsungization of the once spare Apple. It will, no doubt, increase their market share in Asia; but likely it will also drive down margins and make the AppleStore look derivative. It will be hard to talk about innovation, even with the advent of the Health platform and the great OS, when it just looks like a mirror image of Samsung.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2995533, ~/Articles/ArticleHandler.aspx, 9/3/2015 3:01:28 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Rick Munarriz

Rick has been writing for Motley Fool since 1995 where he's a Consumer and Tech Stocks Specialist. Yes, that's a long time. He's been an analyst for Motley Fool Rule Breakers and a portfolio lead analyst for Motley Fool Supernova since each newsletter service's inception. He earned his BBA and MBA from the University of Miami, and he now lives a block from his alma mater.

Today's Market

updated 5 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:00 PM
AAPL $112.34 Up +4.62 +4.29%
Apple CAPS Rating: ****