Apple’s Premium Pricing Strategy Creates a Gap in a Major Market
Apple is currently a relatively minor player in the smartphone market in India. The company holds a top-three position in the country’s small premium segment.
During the second quarter of 2018, Apple’s smartphone average selling price was $724, well above its core competitors. Samsung, for example, had an average selling price of $241 (see Quarterly Market Analysis: Mobile Phones, Worldwide, 2Q18). That’s a big difference and the price Samsung pays to cut across all pricing tiers.
With its latest round of smartphones, it’s likely that Apple will expand the iPhone’s average selling price further. It continues to set the high water mark in the smartphone business, an approach that, to date, has paid off.
But Apple’s pricing strategy means that the iPhone remains a luxury product in many markets including India, the world’s largest growing market for smartphones. Here Apple is an aspirational brand, out of most consumers’ reach. This is also true for its low-end device, the iPhone SE. The majority of volume in India continues to come from Samsung, Xiaomi, Oppo, Vivo and several local players, catering to consumers with more-affordable Android phones.
Although Apple now builds some of its iPhone SE and 6s models targeted at Indian customers in Bengaluru to take advantage of tax incentives from the federal government, which can add up to almost 20 percent of the cost of the device, the company is still not hitting the prices of rival, low-cost phones.
As a result of Apple’s limited market share, developers of apps for the Indian market choose Android first, and sometimes Android only. For instance, Indian digital payments company Paytm doesn’t offer an app for iPhones because iOS users represent such a small slice of the market that it doesn’t justify the cost.
Sales of hardware isn’t the only challenge. In services, Apple also faces obstacles. For example, some Indian iPhone users have noted that Siri can’t process their requests in local languages, that they can’t access Apple Pay and Apple Maps can’t give them turn-by-turn directions or identify points of interest. Maps is due to receive a revamp in 2020, but that’s essentially a lifetime in online services.
Android dominates the Indian market, and this has undoubtedly helped Google outperform Siri in understanding the country’s languages and accents. In this market, Apple is confronted with many of the same hurdles as in China: efficient smartphone makers, value-for-money brands and viral marketing. Given that Apple’s current strategy is focused on premium devices, it’s going to be tough for it to reverse this trend in India.
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