For years, pundits and analysts have been suggesting that

the only way for Apple to compete against cheap Android

phones, especially in China and throughout Asia, was to
produce a cheap iPhone

Well, Apple finally relented (sort of) when it released the
cheapish iPhone 5c to mainly compete in China & Far
Eastern markets where it is not the market leader (iPhone
ranked 7th in China Smartphone market as opposed to
leading in US market for example) and considering the
large market in China.

IPhone expected to raise its shares by 13% due to the iPhone 5c by
expecting to sell 20M handsets

The idea was to introduce a cheaper model since iPhone price is
above average market in China, and hence affecting the market
share, especially that China market has many Chinese brands that are
less common worldwide but have high market shares in China.

The Strategy was to penetrate the market with high volume sales due
to its lower price along with the reputations and appeal of the apple
brand


Country Profile: China
Population: 1,338,612,968 (July 2009 est.) Ranked 1
Major Age Bracket: 15- 64 years (72.1% of total population)
Mobile Phone Users: 634 million (2008) Ranked 1
Internet Users: 298 million (2008) Ranked 1
The above facts and figures of China are appealing for any company. A market with
majority as youths is certainly a great prospect for any business. But sadly, for Apple
this has not been the case








Apples pricing strategy for iPhone 5c was clear Market-penetration pricing and the
reasons of using this strategy are summarized in
Current (low) market share of Apple in china.
Type of Chinese market is highly price-sensitive.
Market size (mid-range market of China) the biggest economy of the world.

Determining demand
Price elasticity of demand was highly elastic due to
Huge number of substitutes
High Buyers awareness of substitutes
Perfect Buyers justification of price change

Analyzing competitors cost, price and offers
The most attractive points are prices and offerings.
Selecting the pricing method
Market oriented pricing
Perceived-value pricing due to
High Product quality
Buyers image of the product performance
High Suppliers reputations

Final prince for IPhone 5c is priced at 4,488 yuan (US$733) for the 16GB model,
meanwhile as per IHS Teardown Analysis: Estimated cost of iPhone 5c 16 GB is 173$





Apple officially announced iPhone 5C
price for unlocked version and made
one thing clear iPhone is not meant for
everyone, at least not for people who
dont have deep pockets.
In China, the iPhone 5c costs the buyer
about $733.
According to World Bank, Chinas gross
national income per capita in 2012 was
$9,210.
That means an iPhone 5c purchase in
China is equal to one full month of gross
pay!!!

Compared to the iPhone 5s, this chart shows the iPhone 5c has bombed in China

With such price strategy, Apple has lost the apparent advantage it could
get over arch rival Samsung. Instead, iPhone 5C price strategy is making
people more confused in accordance to iPhone 5S available with only
$100 difference.

Chinese Bought More iPhone 5s than iPhone 5c







A recent survey carried out by AlphaWise on 2,000 smartphone users in China shows
that the price sweet spot that balance between expensive and acceptable for the
iPhone 5 would be RMB 4,000, which is $649.
Thats RMB 1,288 ($209) less than the entry-level iPhone 5 at its official, unlocked
price in China and ($84) less than iPhone 5C.




Why $649 is still way too high especially in China?

For China and many other semi-emerging markets with a strong group of middle-
income consumers, $649 is still not quite budget enough.

If the iPhone 5C were to be priced at $649, thats still double the price of the flagship
Xiaomi phone, the Xiaomi Mi2S, which is RMB 1,699 ($275) for a plastic-cased but
fairly well made Android smartphone with a 1.7 GHz quad-core Qualcomm Krait 600
processor.

That balance of strong specs with a great price is the main reason that Xiaomi, which
has only been making phones for three years, is now outselling Apples iPhone in
China.

Apple must work out to reduce the price of 5c trough bundling promotion in
order to reach the target market.

Conduct more prices experiments before launching new product.

Conduct more Consumer surveys and market analyses.