iPhone 4: Is Apple risking brand dilution?

Anirban Dutta*

9th January 2014 marks the 7th anniversary of the revolutionary iPhone launched by none other than Apple. The iPhone was Apple’s attempt to revolutionize the telephone after its success of the iPod. The device was also a result of a proposed touch tablet called Safari pad (which was shelved), after Steve Jobs realized the potential of implementing features of touch on a phone. The result – the device became an instant success and has since been selling millions across the world. Upgraded versions have come out with improvements in the screen-size, operating systems, security features, robust material and more importantly reduction in weight.

Since 2007, Apple has upgraded the iPhone every year. iPhone 5 was launched in 2012 after Steve Jobs’ death. Come September 2013, Apple launched 2 variants of the iPhone – the 5s and 5c. Now this was the first time that the company launched 2 variants of the same phone. iPhone 5c has been launched at a lower price than 5s as it uses the older A6 processor of iPhone 5 and does not have a few features which 5s has. The introduction of iPhone 5c stopped the production of the earlier iPhone 5, which was again a first, as it was for the first time that the production of a previous model was terminated. Come January 2014, and Apple has decided to re-launch the old iPhone 4 in India at a hefty price-tag of Rs.23,000. What exactly is Apple trying to do here?

The Indian smart-phone market has grown by leaps and bounds over the last 6 years. According to a latest report by IDC (International Data Corporation), the smart-phone market in India has grown by 229% to 12.8 million smart-phones in quarter 3 of 2013. This is in comparison to 3.8 million sold exactly one year earlier.  Android powered phones which range from Rs.3,000 – Rs.65,000 have over 90% market share, closely followed by Windows phones, which have around 5-6% market share. India is now the third largest market for smart-phones after the US and China. But India has never been a favourite on Apple’s list. At a time when major American IT and technology companies were endlessly tapping Indian potential by outsourcing development and support work to the country, Apple under Steve Jobs was not impressed. This could be a reason why Apple is probably one of the only major Technology companies to not have a development centre in India. Although India was bound to have a great market potential, it was never on Apple’s RADAR because Steve Jobs never believed in running after market share. He believed in inventing something which would create a new market or just do an extraordinary job of impressing the public. The same probably cannot be said about Tim Cook, Apple’s present CEO. Although earlier dismissing India as a potential market by blaming the distribution costs and sighting explanations that better business could be done elsewhere, recent growth in sales of iPhones in India by 400% compared to the year 2012 certainly seems to have caught his eye. Exchange offers with discounts of Rs.8000 were being offered to users who would exchange their old smart-phones for the iPhone 4. He has placed a bigger faith on China by signing a deal with China Mobile through which he aims to increase sales volumes in China. But coming back to India, Apple has now decided to launch the 3-year old iPhone 4 in India at Rs. 23,000. This decision was taken after Apple’s market share in India fell to around 2%.

Will this strategy work for Apple? To me it looks doubtful. For one, considering the mediocre hardware and configuration of a three year old product, the Indian market already has much better phones at lower prices. Google Nexus 4 which is priced around the same range is a much better option in terms of everything when compared to iPhone 4. Nokia’s Lumia models have also done very well and then we also have Samsung, which currently has the lion’s share of the Indian market. Added to the above factors, Apple’s latest iOS 7 has been suffering from performance issues. The OS fails to work efficiently on iPhone 4 and 5 because the hardware features of these phones don’t really support the OS. These factors would make Apple’s targets (related to India) much more difficult to achieve.

Such strategies of increasing sales volumes clearly differentiate Tim Cook’s management style from Steve Jobs’. Market share was never really a key focus and the earlier versions of the operating systems had minimum glitches. Now whether these performance issues are after-effects of the company trying to bring out a new phone every year and going after market share is something which is difficult to tell; but personally I feel both are related. “I would rather gamble on our vision, than make a me too product”; “How does somebody know what they want if they haven’t even seen it” – were two major principles based on which Steve Jobs launched his products and innovations. At this point in time it clearly seems that the “gamble” has moved on from “vision”. A company which was once known as being a magnet of attraction for consumers now seems to be heading towards more desperate attempts to sell more.

Although many believe that these measures are diluting the brand, Apple-loyalists still love their products. More and more people are creating Apple eco-systems in their homes. Hard-core fans and loyalists are always ready to pay any price for an Apple product. Considering these factors, i’d say all is not lost for the company. Apple is a highly respected and loved brand in North America and as well as India. And if a few people are ready to pay any amount for an Apple product, I believe it’s better to target these few than go after a different segment just to increase sales.  A Wall Street Journal report of October last year stated that Apple has a cash pile of US$148 billion. This proves that revenue isn’t too much of a concern for the company. Overall, re-launching the iPhone 4 in India at a lower price is more likely to dilute the brand rather than increase sales and could very well result in a fall-out of hard-core loyalists.

*Views are personal.