A Hint That Apple’s iPhone Pricing Strategy May Be Failing…. Production Of iPhone XR Reduced In Favor Of The iPhone 8

Last week I had a very interesting exchange on Twitter with author Sueanne Pacheco about the pricing strategy of iPhones after I posted my review of the iPhone XS.

By the way, you should buy her book Mrs. Langlois House which is a really great read. But I am digressing. At the time I pointed her towards this AppleInsider article which indicated that Apple was relying on higher selling prices to make money. Which pretty much confirmed what she was saying. As well as my feelings on this subject:

However, this strategy seems to be backfiring on Apple as VentureBeat is indicating that Apple is cutting back on iPhone XR production in favor of iPhone 8 production for this reason:

Just before Apple’s September launch of the iPhone XS, pundits recommended that potential customers wait until the iPhone XR arrived in October to pick a phone — a suggestion that could have boosted sales of the less expensive model. But a new Nikkei Asian Review report suggests the XR is instead seeing “disappointing demand,” leading Apple to scuttle plans to increase XR production. The surprising reason: Users are gravitating toward the more affordable iPhone 8 and iPhone 8 Plus.

And there is precedent to this:

Apple reportedly made last-minute rush orders for iPhone 7 devices after the iPhone 8 and iPhone X launched at higher price points, suggesting that some consumers aren’t as concerned with the latest technology as they are with more reasonable pricing. The size of that price-sensitive customer base could impair Apple’s ability to keep raising the average selling price of its devices, a strategy it appears to be testing with the more expensive iPhones, iPads, and Macs introduced this fall.

I should also note that Apple stock dropped on the news which took its market cap out of trillion dollar territory. Plus Apple when they reported their quarterly numbers announced that they would not be reporting on the number of iPhones and iPads that they sold anymore. Someone out there will say that Samsung doesn’t do that either, and that’s true. But you have to admit that the timing of that announcement relative to this news is curious.

Now when I reviewed the iPhone XS, I said that my main criticism was price. According to my wife, it costs more than my monthly mortgage payment. Even the XR is insanely expensive despite being the best value for iPhone users who want a new iDevice. Pricing phones at those lofty levels is a risk and you had to figure that this strategy would hit a brick wall at some point because it simply isn’t sustainable over the long term. But I don’t think that the brain trust at Apple Park envisioned that it would hit a brick wall this quickly. Now I get that they are a company that is out to make money. But with the iPhone XS, XS Max, and XR, they have created the impression that they are simply out to extract as much cash as they possibly can any way that they can. And based on this report, it’s starting to fail them. Thus I would suggest that they need to do a very quick rethink of their pricing strategy. As in right now.

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