The new iPhones and segmentation

by Ian Rosenwach on 9.10.2013

Today Apple announced the iPhone 5S and 5C.

What I’m going to hypothesize here is that these phones are made for different types of customers.  The 5S is for the loyalists; people that will happily pay up for the latest phone.  The 5C is different – the goal is to make the iPhone accessible to more people around the world.

Everything from the pricing to the feature design to the product marketing reinforces this segmentation. Just look at the websites for the 5S and 5C have different feels.  The 5S feels more like a luxury brand, think BMW or Mercedes.  The page for the 5C has a stark white background, likely to make the different colors pop more.   It’s like comparing a luxury car and a Volkswagen.

I think this conscious segmentation of customers by Apple is new, or at least more explicit, than it has been in the past.

Pricing

The interesting thing is that $199 gets you twice the capacity if you choose the 5C.  It will be interesting to see what the iPhone sales data says in terms of which way most consumers go.

iPhone 5S:

  • 16 GB $199
  • 32 GB $299
  • 64 GB $399

iPhone 5C:

  • 16 GB $99
  • 32 GB $199

iOS App Opportunities

One of the fun parts of new Apple announcements are the opportunities that the new features create for iOS developers.  The hardware boosts for the iPhone 5S came in the form of a better camera, stronger coprocessor in the M7, fingerprint identity, and power with the A7 chip.  The M7 processor will enable apps that use motion data (maps, health, fitness) to access that data in a more efficient manner.  The 5C is all about the colors, so there’s not as much of an opportunity for developers to utilize new features to find new app markets.

These are some categories of apps I can see growing based on today’s news.  In general they’re categories that require power, body sensors, and security:

  • Fitness and health: put the new sensors to work.  If the data app developers can get about your physical/motion state is as reliable and thorough as today’s popular fitness devices, this is big.
  • Gaming: put the new A7 chip to work.  I’m not a big gamer, but there was a reason a game developer was the first to present today.
  • Music: things like Garageband and other music editing/producing software take lots of power
  • Apps that require security: banking, others that haven’t gained popularity because of consumer security concerns?

Conclusion

I’m excited to see how this plays out!  The iPhone 5C could become more accessible to more consumers than ever before.  The iPhone 5S is the most powerful phone ever made.  It will be interesting to see how the price/power tradeoff is handled by Apple in the future.  Will this lead to more segmentation across their product portfolio?

That being said, the explicit segmentation of markets/customers/products gives me some cause for concern. The idealistic (naive?) part of me wants to think that Apple has been “above” customer segmentation.  They wanted to build the best product as possible, stay true to the vision, and price it accordingly.  No compromises.

There are lots of decisions that will trickle down from this product segmentation.  My hope is that this doesn’t result in a) ecosystem fragmentation and b) two classes of Apple customers.  Segmentation has the potential to result in different user experiences for iPhone users, leading to different demands in terms of apps, and more “ecosystem fragmentation”.

The good news is that the benefits of iOS7, the App Store, and all that comes with it applies equally to both phones. This means that the role Apple software and the App Store play in providing the single, consistent Apple experience increases the ante for iOS7. Let’s hope that the app ecosystem and OS continues to maintain it’s consistency and quality despite supporting different product segments.

P.S.  For more reading on this topic see this post by Benedict Evans.

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