Ever since the unveiling, many have been balking at the $1,000 starting price tag for Apple's (AAPL +3.26%) forthcoming iPhone X. At a time when smartphone commoditization already has a firm grip on product pricing, Apple is making a big bet that its loyal customers will pay up even more. Adding a $150 storage upgrade to 256 GB brings the price all the way up to $1,150 -- more than entry-level Macs. Pre-orders begin this Friday.
It's a bold move to capitalize on Apple's notoriously strong pricing power. Will it pay off?
Image source: Apple.
Surveys say
There have been numerous surveys conducted to gauge iPhone purchase intent, including by Street analysts as well as Apple-centric sites. RBC Capital Markets conducted one earlier this month (n = 832), which showed that out of all respondents that were intending to buy an iPhone X, a whopping 57% were planning on going for the 256 GB model. 9to5Mac ran its own poll in response on the same day, with 44% of respondents expressing purchase intent for a 256 GB model (it's unclear how many respondents there were).
More recently, MacRumors conducted a survey on social media (n = 6,603), with 56% of respondents saying they would splurge for the 256 GB model (either silver or space gray). Of the three surveys, this one has the largest sample size.
Which iPhone X model do you plan to pre-order?
— MacRumors.com (@MacRumors) October 24, 2017
Social media surveys may have some pitfalls like selection bias (MacRumors followers are certainly skewed toward Apple enthusiasts), but collectively the data points still suggest considerable demand for the $1,150 model.
How consumers might be justifying the cost
Let's be clear: $1,150 is a lot to spend on a smartphone. We know that CEO Tim Cook has justified the $1,000 price tag in a few ways, noting how much new tech Apple is including in the device, but also essentially acknowledging the structural financing that goes into modern smartphone purchases.
The industry has removed as much friction as possible, and all carriers offer installment plans that spread out the cost (and the iPhone X's premium). For example, a $350 premium (which is the premium compared to the $650 that new iPhones used to start at) spread out over two years comes out to less than $15 per month. That's probably not going to break anybody's bank, and Apple knows it.
If you build iPhone X units, they will buy
The bigger issue that's been widely covered is production delays. When Apple said last year that it would stop disclosing launch weekend sales, the company's reasoning was this: "These initial sales will be governed by supply, not demand, and we have decided that it is no longer a representative metric for our investors and customers." The reported production bottlenecks and resulting disparity between supply and demand seem more significant than any previous iPhone launch.
More so than ever before, this launch's success or failure will absolutely be dictated by supply. Don't expect Apple to share any figures for the launch.
