Apple’s Plus plan pays off
Features limited to the iPhone 7 Plus helped boost sales of the larger smartphone, but they were not the only reasons why a higher percentage of customers went big last year, analysts said.
“The nature of the market is also shifting,” said Ben Bajarin of Creative Strategies, in a recent interview. As consumers encounter large-screen smartphones with more frequency — especially ones owned by friends — there’s a bandwagon effect, he explained.
Although the shift to bigger screens has been strongest in China and other Asian markets, the iPhone 7 Plus accounted for a larger proportion of new iPhones sold in the U.S. as well, said Bajarin, citing his firm’s research.
Apple does not separate iPhone sales by market, or even say exactly what percentage of total sales was of the 7 Plus, but CEO Tim Cook did claim that the number was the highest yet for its 5.5-in. model. “We saw especially strong demand for iPhone 7 Plus, which was a higher portion of the new product mix than we’ve ever seen with Plus models in the past,” Cook said during the December quarter’s earning call on Jan. 31.
Even before Apple disclosed iPhone sales — for the December quarter, the Cupertino, Calif. company booked 78.3 million — analysts expected that the average selling price, or ASP, would be up over the same period the year before, in part because of the widespread belief that the iPhone 7 Plus had done better than its 2015 and 2014 forerunners.
That was, in fact, the case: The December quarter’s iPhone ASP was $694.57, a record.
Some credited the iPhone 7 Plus’s performance to the features Apple offered only in the large-screen model, notably Portrait Mode. Bajarin agreed that Plus-only features could be selling points. But they were no guarantee. Those specific to the iPhone 6 Plus and 6S Plus, for example, weren’t enough to make those models as successful as the 7 Plus.
More telling than differences between iPhone models, he said, was the consumer perception of the total package. “The evidence we see from China is that when something [is seen to be] the pinnacle at that moment, that’s when China moves toward that product,” Bajarin said. “So there is some value in keeping interesting and expensive technology as a differentiator.”
Among the features that the supply chain rumor mill has posited for this year’s iPhone, several might appear only in the most expensive model, such as a curved OLED (organic light-emitting diode) display and wireless charging.
Not every analyst concurred with the concept of burnishing the Plus model with extra features if that came at the expense of the smaller-sized models.
“It’s more important that Apple makes [each new generation of the] iPhone durable and powerful,” said Ezra Gottheil, an analyst with Technology Business Research. “That’s recognizing the reality of the market, and justifying what is an increasing price delta.”
Gottheil’s take was based on smartphones’ lengthening life spans as consumers hold onto their devices for longer periods. “The smartphone market is shifting into a lifecycle like the PC market,” Gottheil said. “Ideally, Apple wants to stay somewhat ahead of the technological curve so that its customers feel they can live with the phone for as long as they want.”