Apple followed the right iPhone Strategy after all

Apple followed the right iPhone Strategy after all

As iPhone X prices on craigslist hit over $2k we can learn that Apple got it right this time.

When Apple’s iPhone X finally went on sale on October 27th at 12:01 am Pacific time, it took all of 38 minutes to sell every available phone. Just hours later, tens of thousands of phones were already on sale on eBay, craigslist, and other on-line sites.
How much were they selling for? Some buyers were bidding over $2,000, about double what Apple was charging.

In previous posts on ValueWalk, I had suggested that as long as Apple could not supply enough phones to meet the demand at its announced prices, it should charge a few hundred dollars more to buyers who were willing and able to pay a higher price to avoid waiting months for their phones. Following that strategy through the fall and winter, Apple might have pocketed billions of dollars in added profits.
But there would have been a downside to this pricing strategy. First, Apple had just breached the thousand-dollar price barrier. And second, the company would have abandoned its long-standing policy of first come, first served. Allowing relatively well-healed customers to jump the line would have cast Apple in an undemocratic light.
Another advantage of not charging extra for expedited delivery is that the company will get a huge amount of free publicity as anxious customers line up outside Apple stores for days before the phone goes on sale on November 3rd. This is publicity that money cannot buy.
There were virtually no lines last month when the iPhones 8 and 8S went on sale. Almost everyone was waiting for the iPhone X launch.
What If they don’t have enough phones in stock on November 3rd for customers who have waited on long lines? The company will be able to deliver those phones later in November, or in early December.
By not charging a large premium for early delivery of iPhone X’s, Apple is foregoing billions of dollars in profits. But the company has preserved its good name, which is worth a whole lot more.
Sometime next spring, when it will have finally been able to eliminate the long waiting times, Apple will remain the good guys, and the phone scalpers on e-Bay and Craigslist will remain the bad guys. In fact, by diverting attention away from Apple’s production woes, those greedy resellers have already handed the company a great public relations gift.
In the spring of 2018, those production delays and phone shortages will have become old news. By then, everyone will be enjoying their new phones and we’ll all be gearing up for the next iPhone model.
Full disclosure: I own Apple stock.

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About the Author
Steve Slavin has a PhD in economics from NYU, and taught for over thirty years at Brooklyn College, New York Institute of Technology, and New Jersey’s Union County College. He has written sixteen math and economics books including a widely used introductory economics textbook now in its eleventh edition (McGraw-Hill) and  The Great American Economy (Prometheus Books) which was published in August.

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