Apple has long been known as a high-end brand that caters to the younger, wealthier consumer. However, market shifts and changes in the industry have them rethinking their business model. They are now focusing on mid-market consumers to maintain market share.
Apple’s marketing efforts have long been legendary throughout the world. In the past, their target demographic was young, hip urbanites who had plenty of discretionary income. Owning an Apple brand was a self-expression of belonging and achievement.
Apple’s drive for efficiency, expedited access to information and advanced capabilities goes as far back as the iPod release and continues today. As a result, Apple has grabbed over 14 percent of the global smartphone market share.
However, fast-moving Chinese companies, along with market leader Samsung, are now taking command of global smartphone sales with their lower-cost products. This new fierce competition has Apple considering a jump into the fray of mid-market offerings.
Global Market Shifts
U.S. consumers may believe that they’re the most technologically advanced in the world—However, they are sorely mistaken. More than 44 percent of global users will own smartphones in 2017— And that number is even greater in countries like South Korea, which leads the world in smartphone ownership, with a whopping 88 percent of the population owning a smart device.
In fact, the U.S. is barely in the top five when you consider usage, with Australia, the UAE and Israel ranking higher, and Spain, the U.K, Canada, Chile and Malaysia following a few percentage points behind. This, in part, is fueled by the prevalence of lower-cost Android phones that offer much of the same functionality and design points as an Apple phone, but at a more affordable price.
Apple’s Marketing Prowess
Part of the reason that Apple has maintained their market dominance, even with their expensive price points, is due to their exceptional marketing prowess. Apple product releases are major events that the media and consumers flock to in mass. Their usability testing focus helps Apple understand their customers at a deep level, fulfilling not only their physical needs (a smartphone), but their aspirational needs (acceptance and a chance to be the “cool kids”). Apple’s strict focus on customer needs, combined with the highest quality in product design and packaging has created an attractive, premium brand.
The Shift in Cellular Provider Models
Another factor that is increasing Apple’s focus on the mid-market is the monumental shift in the cellular industry. Providers such as Verizon and Sprint no longer subsidize the cost of handsets. What this means is that consumers who may have paid on a monthly basis for phones without realizing it was part of a 2-year contract, are now being forced to shell out upwards of $650 for a new Apple phone every year or so. This will limit the range of consumers who can make this type of purchase, further narrowing Apple’s target market range.
Shifting to Mid-Market
Apple has already expanded into the mid-market with their various levels of Macs, such as the less-expensive MacBook Air at around $999 versus the MacBook Pro at several thousand dollars. They also continue to offer older model phones when new models are introduced, to provide customers with an entry-level option. The recent introduction of the iPhone SE seems to be taking off, and the iPad Mini offers a lower-cost option for the tablet crowd without sacrificing much in functionality.
Apple’s services business is the size of a Fortune 100 company, with a 30 percent revenue from each sale on the iTunes and App stores, plus Apple Pay, storage payments for iCloud, and their new Apple Music offering. Services continue to outpace product sales by a significant margin, and this may be one reason Apple is looking to broaden their scope of offerings to appeal to a larger market.
Currently, Apple targets younger consumers to lock them into the services infrastructure early on. They know that as this population ages, and moves upwards in their careers, making a change to a new service will be hurdle.
While targeting the budget market is not likely for Apple, other smartphone and tablet manufacturers should continue to watch their back as Apple extends their reach into the mid-market with offerings that appeal to a broader base of consumers.