Apple Goofed on iPhone 5C Projections, Demand Was “Different than we thought"
January 27, 2014 8:42 PM
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Apple CEO Tim Cook makes an rare admission to a "miscalculation" on product mix
Apple released its earnings report for fiscal Q1 2014 this afternoon
, the company “missed” analysts’ expectations for iPhones sales. Analysts were expecting that Apple would sell 55 million iPhones during the quarter, yet the Cupertino, California-based hardware/software giant only sold 51 million iPhones.
Part of the shortfall in the numbers could come from the fact that Apple misjudged demand for the budget iPhone 5C. During the company’s earnings call this afternoon, Apple CEO Tim Cook admitted, “It was the first time we ever ran that play, and demand percentage turned out to be different than we thought.”
In this case, many customers weren’t too impressed with the “new” iPhone 5C and had no problems forking over an extra $100 to step into a more advanced iPhone 5S. "The mix was stronger to the 5S, and it took us some amount of time to build the mix that customers were demanding.”
Apple’s strategy with the iPhone 5C
was slightly different than in years past. Before the iPhone 5C, Apple would traditionally introduce a brand new generation of iPhone at the $199 price point (on contract), and simply discount the previous generation model to $99 (on contract).
However, with the launch of the iPhone 5S, Apple took things a step further. Apple discontinued the previous generation iPhone 5 and introduced the iPhone 5C, which was essentially the iPhone 5 in a candy-coated plastic shell. Apple hoped that the colorful plastic shell would distract customers from the fact that this was just a warmed over iPhone 5.
In fact, Apple was so confident in its ability to “read” its customers that when the iPhone 5C and iPhone 5S were launched last year, it was the cheaper iPhone 5C that got the most prominent real estate on Apple’s website and the bulk of Apple’s attention in TV spots.
As for why he thinks customers are actually flocking to the iPhone 5S instead, Cook says it’s because of
. “It's a major feature that has excited people. And I think that, associated with the other things that are unique to the 5S, got the 5S to have a significant amount more attention and a higher mix of sales."
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RE: Tim Cook isn't the only one.
1/29/2014 4:43:46 PM
I think where Apple went wrong was in assuming that quality/functionality of the design was more important to consumers (though I think they were merely trying to cut costs). The lesson for Apple should be that customers shopping for an iPhone 5/5S are looking at its value as a fashion/status symbol, where plastic equates to cheap and metal is more desirable/glamorous/sexy.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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