DailyTech - iPhone Sales Triple After Price Cut

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Gadgets iPhone Sales Triple After Price Cut
Jason Mick (Blog) - September 12, 2007 9:30 AM

36 comment(s) - last by rklaver.. on Sep 14 at 11:38 AM

A retail analyst estimates that the iPhone's sales have increased an astronomical 200% after the cut.

Piper Jaffray's Gene Munster is the man to talk to when it comes to iPhone sales. Munster, a retail analyst, conducted what is considered the definitive survey of iPhone sales prior to the price cut.

He surveyed Apple stores (AAPC) over a 50 hour period to estimate that approximately 9,000 iPhones were being sold a day.

When the price decrease came about, followed swiftly by Apple's announcement that one million iPhones had been sold, Munster was naturally curious to see how the price decrease had affected price.

Combining his estimate, with Apple's sales figures for last quarter, he determined that Apple would have had to sell 136,000 iPhones, approximately, between September 5 and September 9.

This means that by his estimates, Apple was selling over 27,000 iPhones a day after the price cut, a three-fold, 200 percent increase over previous sales.

DailyTech covered Apple's announcement of the price cut last week. The price cut dropped the price of the 8GB model by 33 percent, from $599 to $399. The soon-to-be-discontinued 4GB model is priced at $299.

Many Apple faithful cried foul and were very disgruntled over the price decrease, as they had paid a much higher price for their early support of the iPhone. Apple attempted to soothe their anger by offering the early adopters a $100 credit. It also offered to fully refund the $200 price difference to anyone who purchased the phone within 14 days of September 5.

Despite the complaints, the new price cut is looking like a smart move by Apple, as the new low price appears to be driving iPhone sales into a frenzy.

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Cost or Unlock?

By mdogs444 on 9/12/2007 9:50:52 AM , Rating: 1

Does besides me think that the price drop was only part of the reason for the sales surge? Seems to be pretty ironic that the unlocking was announced not long ago and was bound to be available to the public.

My guess is probably 66% price drop, 33% unlocking made public.

RE: Cost or Unlock?

By FITCamaro on 9/12/2007 9:58:52 AM , Rating: 4

Well even with the unlock, here in the US you still can't use the phone on a network with good data speeds as Verizon and Sprint both use CDMA networks, not GSM. And they have the best data speeds. AT&T/Cingular's sucks and T-Mobiles isn't any better.

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RE: Cost or Unlock?

By mdogs444 on 9/12/2007 10:17:58 AM , Rating: 2

I have Verizon and would never switch. I dont know much about GSM, CDMA, etc. But I'm sure theres alot of people out there who have T-Mobile or some other carrier who would support the SIM card on the phone and allow them to use it.

Just saying as an opinion that it could be part of the increased sales figures.

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RE: Cost or Unlock?

By porkpie on 9/12/07, Rating: 0

RE: Cost or Unlock?

By mdogs444 on 9/12/2007 10:47:02 AM , Rating: 3

No you dont. You can buy just the phone from an Apple store. Only have to buy the contract if purchased at an AT&T store.

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RE: Cost or Unlock?

By rklaver on 9/12/2007 12:02:51 PM , Rating: 5

So since Verizon/Sprint use CDMA, what do you guys do if you go overseas?

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RE: Cost or Unlock?

By SocrPlyr on 9/12/07, Rating: 0

RE: Cost or Unlock?

By Oregonian2 on 9/12/2007 1:57:24 PM , Rating: 2

When buying a GSM phone (to visit Europe with) I got a "test" SIM card from a local T-mobile store. They told me that Europeans were in their store all the time buying the pay-as-you-go SIM card (as I was for testing purposes) so that they could do exactly what I was doing and buying a SIM card in our visited country so I only pay local rates rather than the MUCH MUCH higher roaming rates (even compared to travel oriented plans -- local rates are MUCH lower). So it's a very popular thing to do in both directions. It being a nicer phone than our Verizon phones, we switched to AT&T for normal use too.

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RE: Cost or Unlock?

By Oregonian2 on 9/12/2007 2:01:34 PM , Rating: 2

P.S. - Biggest single cell phone use in Europe (for us) was to call Taxi's to take us to or from our destinations. Very convenient. What did people do previously? Stand around a lot wasting time, I think.

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RE: Cost or Unlock?

By oab on 9/13/2007 12:47:17 AM , Rating: 2

They used the device called the "pay phone". It involves putting a metal disk into this little slot in it, and then pressing small buttons on the front in a correct order until a call is made and you stop pressing buttons. You know how many metal disks to insert because there are number on the back of them, and there is a printed chart on the box. You then take the banana-shaped object you put up to your ear and use that to talk. The cord-side goes down, as that is where the microphone is. Unlike modern telephones where the antenna sticks up.

Or they used their hotel's taxi line, or taxi line at whatever attraction they were at, because taxis installed them gratis for the owners of the establishment.

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RE: Cost or Unlock?

By ziggo on 9/12/2007 9:42:53 PM , Rating: 2

When I went to nigeria (for work, trust me, it wasnt fun) last summer I did the same thing. International roaming was very overpriced, and as it turns out, wont even work there. Buying local minutes on a prepaid simcard was very convienient. Would have been alot harder to do my job without it, particulary because there are no land lines anywhere, even the middle class homes have individual cell relays for personal use. Doesnt look very nice, but they dont have much choice, people keep stealing the phone lines.

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RE: Cost or Unlock?

By FITCamaro on 9/12/2007 2:51:34 PM , Rating: 2

Well if I went overseas I'd be on vacation so I really wouldn't care that no one could reach me.

And its not like you just take your GSM phone overseas and it works. You have to buy a new SIM card for the phone to work and then often times you pay quite high rates for the service while you're there.

I don't know about Verizon but I know with Sprint you have the option to rent a phone for use in Europe if you want. You have to buy the SIM card from them which you keep and rent the phone. So the next time you do it, you just have to rent the phone.

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RE: Cost or Unlock?

By tcunning on 9/12/2007 6:52:13 PM , Rating: 2

I have Verizon and recently rented a phone through them from Vodaphone for a trip to the UK. It was inconvenient but less expensive than I thought it would be. Few USA GSM phones would work in Europe anyway since carriers here use a slightly different version of the spec (dumb), and it also depends on the SIM card you have. Even T-Mobile USA offers rental phones for international travel!

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RE: Cost or Unlock?

By oab on 9/13/2007 12:54:28 AM , Rating: 2

Rental phones? Bah! I went into the company-owned store that I have my phone with (Rogers), and they said when I asked them about international use "just get it unlocked by that guy near the food court and buy a SIM card there" (the store was in a mall).

Which is what I did and it worked perfect.

The reason Europeans use different frequencies then in NA, is because the frequencies that their phones used was already occupied by something else, so GSM phones here were given a different frequency. It would have been the same, but it was already used by something else.

Oh, and almost all phones now are quad or tri-band (at least, anything that isn't $0 on contract, which aren't worth buying anyway), so why wouldn't you just get one of those?

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RE: Cost or Unlock?

By rklaver on 9/14/2007 11:38:52 AM , Rating: 2

So you mean to tell me you purchased a sim card for international use instead of using the boxy thing that you put round discs in that you mentioned above?

Thank you for providing a constructive answer to my question since your obviously not a CDMA user. </sarcasm>

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RE: Cost or Unlock?

By retrospooty on 9/12/2007 10:34:52 AM , Rating: 2

It was probably mostly the price cut. What isn't mentioned is that sales slumped dramatically after the first few weeks... the price cut was due to the dramatic drop off in sales. This makes sense considering the high initial price. Fanboys and tech junkies with cash to burn all jumped on it, normal people said "way too much money for what you get" and waited.

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Price cut is betrayal?

By oTAL on 9/12/2007 10:35:02 AM , Rating: 2

I think this large price cut 2 months after a release affected Apple's image with its most loyal followers - those standing in line at release. If they had dropped the price by $100 now and then did it again in mid-November it would have protected the *gasp* feelings of their followers and achieved a similar result - increased sales.

While this backlash may not have a negative impact on the iPhone itself, I think it will affect future launches. Will the fan that felt betrayed this time around, stand in line for the next launch?

As for me... I wouldn't buy it at the new price... make a good SDK with developer support, include GPS and 3G and I'll consider it. Oh, and stop trying to nickel and dime your customers and allow any song on the phone to be set as a ring tone.

RE: Price cut is betrayal?

By dagamer34 on 9/12/2007 11:21:49 AM , Rating: 1

Apparently you are uninformed as to why Apple must sell ringtones. It's not for Apple's benefit. Ringtones are sold separately because they are considered separate licenses from the songs themselves due to DMCA changes last year.

I think you just want a Jesus phone right now. Wait a few years and you'll get it.

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RE: Price cut is betrayal?

By Oregonian2 on 9/12/2007 2:09:12 PM , Rating: 2

Hmmmm... with other cell phones one can just use an MP3 for a ringtone, you aren't required to buy a special ringtone from Apple (or the carrier). Motorola's inexpensive consumer cell phone software has a portion that allows one to edit MP3's to pick a portion of the music (much the same as Apple's new $1 service) but you can do it to your heart's content with zero per-ringtone fee. How do those other cell phone manufacturers do it if Apple can't? Maybe because Apple requires starting with copy protected AAC music as the starting point?

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RE: Price cut is betrayal?

By FITCamaro on 9/12/2007 2:52:54 PM , Rating: 3

What the hell is a Jesus phone?

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RE: Price cut is betrayal?

By mikeyD95125 on 9/12/2007 8:32:39 PM , Rating: 2

Yes explain this. A phone with unlimited functionality?

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RE: Price cut is betrayal?

By kelmon on 9/12/2007 1:11:13 PM , Rating: 3

quote:
While this backlash may not have a negative impact on the iPhone itself, I think it will affect future launches. Will the fan that felt betrayed this time around, stand in line for the next launch?

Anyone prepared to stand in line for something didn't run out of stock for a few days clearly have a few screws loose so I'm going to suggest that they will do this again. It should, however, be noted that I don't recall anyone actually queuing for other Apple product launches so I really doubt that all this will have any medium- to long-term impact on Apple, particularly when they gave people $100 back when they didn't need to.

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RE: Price cut is betrayal?

By michaelheath on 9/12/2007 8:47:08 PM , Rating: 2

Having sold products from Apple for nearly 7 years (not at an Apple store, and my sales are not based on commission), which is a span of time that encompasses many major product launches including the first iPod and the many generations of iPods that followed it, Mac OS X, Intel Mac's, several unique desktop and laptop designs, etc., I have a rather unique vantage point on the rise of Apple over the past several years.

This probably, for the most part, just a PR stunt. I'm not 100% sold on the idea that this was all choreographed from the ground up, but, if sales have really tripled, either this was the biggest 'oops' that paid off, or this was staged.

What sells a great product better than adding a little PR notoriety? They just screwed 500,000 customers in the back, lowered the price down closer to the margin of manufacturing (which means that the initial profit margin was pretty big), made the phone more accessible to those who were sitting on the fence about buying one, and appeased the consumers who aren't used to having the technological rug pulled out from underneath them by offering them $100 more to spend on Apple products (which should boost their sales figures as people splurge and buy that new Nano or whatever).

People I know who have iPhones kind of knew that they were buying something that was bound to drop in price or be ultimately replaced. It seems most customers in line on the iPhone release were more concerned about being first rather than being frugal. It happens all the time.

Anyway, anyone who's smart is waiting until next year to buy the 3G models (kind of like how I won't buy an AppleTV until the models that record TV come out...)

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Hmm, I wonder.

By plinden on 9/12/2007 10:35:20 AM , Rating: 2

From this website - http://www.bloomberg.com/apps/news?pid=20601087&si... regarding initial iPhone sales:

quote:
Piper Jaffray's Gene Munster pegged sales at about 500,000, more than twice his original 200,000 estimate.

So, he overestimated sales by 2x before. What makes anyone think this is accurate?

RE: Hmm, I wonder.

By JasonMick

(blog) on 9/12/2007 10:48:28 AM , Rating: 2

The article you quoted did not mention what research he was basing his estimates on. I am suspicious of estimates, typically, but Munster's 9,000 phones a day # came from a 50 hour survey of all the Apple stores around the country.

I doubt his original estimates had been based on that much research, so it is understandable if they are more flawed.

Of course, sales are wildly variable with seasonal changes, but by taking a full account of sales over a two day period, you can get a rough estimate of what the currently monthly rate of sales is, in a non-holiday season.

I think anyone would agree that the price decrease has increased sales...the only question is how much.

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RE: Hmm, I wonder.

By Oregonian2 on 9/12/2007 2:11:52 PM , Rating: 2

And I wonder if that 50 hours was on Monday/Tuesday or on a weekend. :-)

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RE: Hmm, I wonder.

By kelmon on 9/12/2007 1:16:13 PM , Rating: 2

There's definitely a few analysts who get quoted around Apple news and most of them I don't trust. Gene Munster is one and American Technology Research's Shaw Wu is another. I'm very much an Apple fan but I swear that some of these researchers are just fishing numbers and rumors out of the air. I do expect the iPhone to do really well but I just don't trust the numbers being bandied around by these guys.

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Possibly

By TomZ on 9/12/2007 9:42:20 AM , Rating: 3

quote:
Despite the complaints, the new price cut is looking like a smart move by Apple, as the new low price appears to be driving iPhone sales into a frenzy.

Or it's possible there is just a small sales spike due to the price cut. In other words, pent up demand by consumers who wanted an iPhone but didn't want to pay the original high price.

I think it's more reasonable to wait a few weeks and look at sales figures again to see what is going on. That said, I have no doubt that decreasing the price will increase the quantity sold. It's basic economics.

When they come to Japan...

By drunkenmastermind on 9/12/2007 10:35:19 AM , Rating: 3

I would like to buy one, 3G version onegaishimasu.

good for Apple

By Moishe on 9/12/2007 9:47:58 AM , Rating: 2

One marketing strategy is to initially price an object high so as to set it's status as an exclusive must-have with a high cool factor. Once the status is set you can drop the price and all of the others who couldn't stomach the price will jump on the new relatively cheap price.

Psychologically $400 would be "expensive" if the iPhone hadn't already started at $600. Considering the starting price though, $400 looks reasonable. :)

Price decrease had effected price

By PrinceGaz on 9/12/2007 10:32:19 AM , Rating: 2

quote:
When the price decrease came about, followed swiftly by Apple's announcement that one million iPhones had been sold, Munster was naturally curious to see how the price decrease had effected price.

I imagine the effect of the price decrease on price, was that the price had decreased :)