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Apple's new strategy for fighting off Android, retaining customers

Steven Max Patterson | Oct. 7, 2015
Apple is using its huge cash hoard to keep customers from defecting to Android with iaaS – iPhone as a Service.

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In all but two tests, the iPhone 6s Plus was faster. More importantly, the performance differences in three tests were less than the visual reaction time, and two more were near the visual reaction time. Only three apps ran perceptively faster. Essentially, the speed and performance differences between the iPhone 6 and iPhone 6s lines are barely perceptible, meaning customers would need other incentives than performance to upgrade.

The iPhones-as-a-Service model solves two problems for Apple.

First, the annual upgrades will be frictionless for the customer and effortless for Apple.

Second, Android poses a significant threat to Apple since it reached perpetually parity with iOS with Android 4.1. Apple has a stronger brand and Android a lower price. But the one-year upgrade plan creates a significant obstacle to those who would defect from iPhone to Android. Customers on the annual upgrade plan who want an Android will have to forgo their guaranteed annual upgrade and continue to pay for and use an older iPhone until the 24-month installment contract is paid in full.

Retaining iPhone customers also creates more chances to cross-sell MacBooks, iPads, Apple Watches, apps, and iTunes content. And the iPhones traded in after one year of use could be refurbished and sold as certified used iPhones to compete with lower-cost Android smartphones.

T-Mobile and Sprint are riding Apple's coat tails with similar-sounding plans designed to steal customers from large competitors AT&T and Verizon. The difference is AT&T and Verizon are standing on the sidelines without a plan like iPhone as a Service keeping customers from defecting.

 

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