The Apple Event held yesterday was low-key (‘underwhelming’ as many called it) with announcements along expected lines. The lack of energy was palpable in the presentation. But it is unfair to expect Apple to reveal a breakthrough product every year and deliver it in a high-energy, goose-flesh inducing presentation. That’s the price Apple is paying for setting the bar high. The iPhone SE was expected to be an India-specific phone with respect to its pricing. Post the event, I saw some tweets saying that for Apple to win in India, they need phones priced at Rs. 12000-15000. Even in the past, business gurus and VCs have extolled Apple to launch a cheaper phone in India. Their premise is that India is a unique market and hence needs to be addressed differently in terms of product offering and price. The oft-repeated rationale is that we are value for money market with value being equated to low price. Herewith some thoughts on this and the Apple Way:
Value for money does not mean cheap: in my view, value for money is the conviction that the money is spent well, irrespective of the quantum. Sometimes, it could be about a premium, expensive product too. Every category has players catering to different tiers and mindsets – a person holidaying at a 5-star hotel will see it as great value if it meets or exceeds the expectations he has for that premium pricing. That doesn’t he is getting poor value for money as compared to a 3-star hotel. Ditto with cars, travel and gadgets. Apple has an appeal among an audience who feel it is money well spent when paying top dollar for their products. It does not mean they are wrong or getting taken for a ride.
Apple plays by its own rules not the competitors: don’t expect Apple to automatically jump into a category just because the volumes are good. In my view Apple believes in two things (a) going to great lengths in delivering a great product. This could mean premium hardware, components, design – everything to ensure a great product experience (b) chase margins, not volumes. Apple will not launch a product unless they are confident about delivering a margin – set by themselves and not by the market.
In this context, Apple will never compete in the mass market in India. What’s more they consciously peg their product pricing a notch above premium end of the competition brands. In this context, given their product specification and margin goals, they are most likely to price the iPhone SE in the Rs.35000 range. I am not getting into the details of that pricing strategy vis-a-vis competing brands in terms of specifications, but my hunch is that there will be a lot of takers for the iPhone SE even at the Rs.35000 range.
As an aside, I believe all our purchase decisions are emotion-led. We rationalise our brand decisions later by equating them with features & specifications. The emotional brain is likely to be attracted towards a brand for a combination of reasons: the packaging, advertising etc., – a lot of intangibles are at play. Once the decision is made, we rationalise it by attributing reasons – price, technical specifications, ‘getting more for lesser price’ etc. If everyone went only by what the rational brain says only the cheapest brand in every category would sell. I believe that is likely to happen with iPhone SE too- those emotionally sold to the iPhone will find it attractive. Those who are not emotionally bonded with the Apple brand will rationalise it with specifications, pricing etc. Having said that despite the announcement of Rs.39000 as the price point for iPhone SE, the pricing will settle down to around Rs.35000 and thus widening its appeal.
The bottom line, for Apple winning in any market is not about market share dominance – it is about a dominant share of the premium end. It will be no different in India.
Hello Mr.Bhat, nice one! I completely agree with you on the positioning of value for money. Would like to know your take on Apple’s strategic decision of reducing the screen size when everyone is going the other way.