BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Can Apple Break The Luxury Glass Ceiling With A $1,000 iPhone?

Following
This article is more than 6 years old.

(This post has been updated since it was originally posted.)

Tuesday September 12 marked the 10th anniversary of the introduction of Apple’s first iPhone. The highly anticipated release of three new phones on the anniversary was expected to push the envelope on both features and price, with one of the new models priced at $1,000. At that price point, Apple’s introduces its first true “luxury” iPhone.

Until now Apple’s foray into the luxury market has been with its Smartwatch under licensing agreements, first with Gucci and currently with Hermès. Neither have been overwhelming successes since the point of difference for the luxury Smartwatch’s is primarily the band style, not functionality. It put style before substance.

With the new luxury Apple iPhone, called “iPhone X,” Apple is trying to lead with enhanced functionality, such as new camera features, some “augmented reality” apps that allow the user to place digital imagery into real-world pictures taken on the phone and facial recognition, though its style is burnished as well, with a 5.8 inch high-resolution screen and glass covering both the front and back of the phone, with additional waterproofing expected..

Before Apple announcement, Fast Company reported the luxury version will “change the way we interact with smartphones.”  And while Apple CEO Tim Cook proclaimed, “It is the biggest leap forward since the first iPhone,” numerous early reviewers are under-impressed.  Holger Mueller, principal analyst at Constellation Research, told the Wall Street Journal, “Almost all innovations have been shown by the competition, notably Samsung,” which earlier this month released its Samsung Note 8 just under $1,000 ceiling. 

The question is, will people pay $1,000 for an iPhone, any iPhone? It certainly won’t be the most expensive phone in the market. That distinction is held by London-based Vertu, which launched in 1998 by Nokia. Historically Vertu’s selling point has largely put style before substance, offering distinctive cases with sapphire screens, ostrich leather casing and titanium frames wrapped around what many feel is less than state-of-the-art functionality. With prices starting around $10,000, the company has been troubled. In its most recent financial report in 2014, the company reported a loss of £53 million on sales of £110 million, according to The Verge.

Nokia sold Vertu in 2012 to a private equity group, which sold it again in 2015. And in March 2017 London’s Telegraph reported it was sold a third time for £50 million to Baferton Ltd, a Cyprus-registered vehicle funded by Turkish exile Hakan Uzan, who faces legal battles with the Trump organization and Nokia itself.

Steve Jobs famously said, “People don't know what they want until you show it to them." Vertu proves they don’t want just fancy cases for their phones. They want greater functionality and that will be what will ultimately sell the new Apple luxury phone.

At least initially we can expect plenty of Apple junkies to get on board, but I think the real success of Apple’s breaking the $1,000 price point barrier will be realized by sales of its under $1,000 phones. By raising the price of its cutting-edge, most advanced phone, it elevates the perceived value of all the iPhone 7 and new iPhone 8 models under it.

It’s the strategy of “Luxflation.” By elevating, i.e. inflating, the luxury quotient of the top-of-the-line Apple phone, it elevates the perceived value of all the products that are priced under it. That will ultimately allow Apple to inflate the prices for all its products in the line. The new iPhone 8 Plus at $799 doesn’t seem so dear by comparison, and the basic iPhone 8 at $699 is an absolute bargain.

Looking back the initial 2016 iPhone 7 introduction was a disappointment as compared with 2014’s iPhone 6. Fortune reported that “Apple sold 215.4 million iPhones last year [2016], 7% fewer than in 2015.” Apple CEO Tim Cook blamed the weakness in iPhone 7 sales to rumors about the enhanced versions coming out today, according to the Express.

Others have postulated that the disappointing sales of iPhone 7 were caused by the fact that it wasn’t as revolutionary in terms of both functionality and styling as the iPhone 6 was. We’ll see whether the latest launch can energize buyers to trade up to one of the newer models. My guess is that last year's iPhone 7 will look a whole lot cooler now than it did before. If so, then the new luxury Apple phone at $1,000 will have been a success.

Follow me on Twitter or LinkedInCheck out my website or some of my other work here