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Apple's small iPhone strategy aims to reclaim stuck customers

Gregg Keizer | March 22, 2016
Will expand portfolio with new 4-in. iPhone to boost sales during traditionally slow stretch.

Apple later today will take a step back in time and unveil a smaller iPhone in an effort to boost sales by expanding its portfolio, according to several analysts.

The new iPhone expected to be introduced by CEO Tim Cook and other executives will likely be a smaller device with a 4-in. display, a size Apple discarded in September 2014 when it rolled out the larger 4.7-in. iPhone 6 and the even bigger, 5.5-in. iPhone 6 Plus.

Although Apple continues to sell a 4-in. smartphone -- 2013's iPhone 5S -- it will introduce a new model in that size to reclaim a segment it abandoned when it went all in on larger screen devices.

"There are people out there who just want smaller devices," said Carolina Milanesi, chief of research for Kantar WorldPanel Comtech.

And that group may be enormous.

In January, Cook told Wall Street that more than half of those who had an iPhone prior to 2014's go-bigger 6 and 6 Plus had not yet upgraded to one of the larger models. Although Cook cited that as an opportunity for getting customers onto the flagship iPhone 6S and 6S Plus, it may have also exposed a weakness in the company's habit of selling a minimalist line.

By leaving the handier 4-in. screen size behind -- and thus smaller overall devices -- Apple may have written off some of its customers.

"There are people who do not want a bigger phone, who prefer a smaller size that they can carry more easily," agreed Bob O'Donnell, chief analyst at Technalysis Research. "It may never be a huge part of the line, but it certainly could be 5% to 10%."

With that in mind, Apple has decided to return to the 4-in. format -- the size used by the iPhone 5 line of 2012 and the 5S of 2013 -- in a bid for customers who have no truck with something that they perceive as too large.

"While larger phones have larger displays, smaller phones are easier to place in a pocket, purse and even interact with," said Patrick Moorhead, principal analyst at Moor Insights & Strategy.

Older iPhones, including recycled devices at significantly lower price points, have served the needs of those who want small. But it's in Apple interest to introduce a new model.

"With everything else they're doing," said Milanesi, "they can't afford to have people using older devices. They need to get them to move on." She cited services -- a part of its business that Apple has increasingly touted -- as the most important Apple motivation for pushing small in a new package that is, if not the technological equal of the flagship, comes with more power and feature support than the iPhone 5.

 

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