Ever since the conclusion of last Tuesday’s unveiling event hosted by Apple Inc. (NASDAQ:AAPL) — the one where the iPhone 8 and iPhone X officially debuted — I’ve been mentally chewing on the company’s strategy, unsure of what flavor I was tasting.
On the one hand, the iPhone X is an amazing device for a variety of reasons, largely leaving the iPhone 8 in the dust in terms of the wow factor.
On the other hand, the iPhone X’s starting price tag of $999 versus a considerably lower cost for an admittedly solid iPhone 8 makes it tough to justify a purchase of the pricier iteration … status symbol or not. And, if we had three hands, we’d have to also acknowledge how the iPhone X not being available until November, while the 8 being available right away, only muddies the waters regarding marketability.
And that’s when it hit me. Whether it was the ultimate intent or not, owners of AAPL stock should be celebrating rather than lamenting the multi-pronged overlap of a good smartphone with an even-better-but-pricier one.
Apple Stock: Luck, or Brilliance? It Doesn’t Matter.
People who work in the world of marketing would call it competitive positioning — convincing consumers your product is the best one to own relative to its peers at that price point, worth the higher cost relative to lesser products and a better overall value compared to more expensive alternatives.
To-date, Apple hasn’t had to work all that hard to convince consumers its products were buy-worthy at the price it said they were worth … one of the nuances of Apple’s charming of the public. However, the smartphone market has become increasingly competitive, with chatter about saturation and outright smartphone fatigue no longer being dismissed as laughable. If AAPL stock and the company as a whole is to thrive going forward, it’s going to need to proactively do some competitive positioning.
Problem: With essentially one new product at one price point (two versions of the same phone and two memory capacity choices are still essentially one product at one basic price level), Apple is effectively limiting itself to one sliver of the pie. With two phones about to launch back-to-back though, it has a relative value proposition for value-minded, aspirational consumers, and it has a vanity-driven option for consumers that aren’t cost-conscious.
The iPhone X isn’t just a way of Apple casting a wider net though. Its existence is in itself a marketing tool … for whatever iPhone launches in 2018 and/or 2019.
Calling a spade a spade, a retail price of $1,000 and up is ridiculous for any mobile phone; most consumers won’t pay it no matter how much they love the handheld device. Once the underlying technologies of the iPhone X become the new norm in future — and cheaper — versions of the iPhone though, the lingering gotta-have-it mentality will spur purchases of a similar, next-generation Apple device that may roll out at more affordable levels.
In other words, AAPL is already setting the stage for sales of smartphones over the course of the next couple of years. In the meantime, those buyers who do shell out four figures for what’s sure to be a fairly limited number of iPhone X’s will only rekindle Apple’s exclusiveness aura that has been fading for a while now.
Even if none of the aforementioned ideas were intentional though, the two-pronged unveiling on Tuesday has done AAPL stock yet another favor. It essentially obscured the announcement from Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) that the next-generation of Google’s Pixel phone, the Pixel 2, would be unveiled in early October.
In another scenario, that news might have had a chance to create a healthy buzz. The noise of the iPhone 8/iPhone X comparisons — ok, debates –– also drowned out any hope that consumers would take note of the fact that Xiaomi unveiled its alleged iPhone killer called Mi Mix 2 just a couple of days before Apple’s big event.
That’s not to say the Mi Mix 2 or the Pixel 2 were ever a significant threat to AAPL stock. But, to the extent they were, the company just ensured the conversation was forcing a choice between the iPhone 8 and the iPhone X rather than a deliberation between the iPhone 8 or the Pixel 2.
Bottom Line for AAPL Stock
Realistically speaking, it’s doubtful Apple’s management had any of these considerations in mind when planning the debut and launch of two distinct and differently priced smartphones back-to-back. The outcome is still the same though.
That is, AAPL gave the market plenty to chew on for the next several weeks, forcing rivals like Google and Samsung Electronics out of the spotlight altogether and playing its two new phones off of one another rather than comparing them to any other maker’s hardware.
That’s a victory in itself.
It won’t necessarily prevent Apple stock from sliding lower, which as I suggested a couple of weeks ago was likely to happen after Tuesday’s event no matter how exciting the unveiling was.
It simply doesn’t matter. AAPL just reclaimed a ton of ground in the war for relevancy and mindshare. That’ll drive the stock higher for the long haul … longer than any brewing pullback may last.
Well played Tim Cook, even if you didn’t actually mean to do it.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter.
