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iPhone X Declining Sales: Causes, Consequences and Solutions

Info: 4542 words (18 pages) Essay
Published: 23rd Sep 2019 in Business

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Table of Contents

1 Introduction

1.1 Scope

1.2 References

1.3 Criteria

2 iPhone X and Declining Sales

2.1 Reasons

2.2 Consequences

3 Solution

4 Benefits

1         Introduction

Apple, Inc. is a corporation that creates electronics, personal computers, servers, and computer software. Apple, Inc. invents products such as iMacs, MacBooks, iPads, Apple Watch, and iPhones. However, in this proposal, I am going to mainly focus on the iPhone product. The first iPhone was released on June 29th, 2007. The main reason why the iPhone was produced was because of the request Steve Jobs, former CEO of Apple, Inc., had made for touch screen devices. The first iPhone mixed a capacitive 3.5-inch multi-touch display with touch-optimized software in a simple package that was unlike anything else on the market. Over the last ten years, Apple has refined and modified many iPhones. Today, the latest iPhone on the market is the iPhone X. iPhone X was released by Apple Inc. on November 3rd, 2017 to mark the ten-year anniversary celebration of the product, iPhone. The iPhone X has the most up-to-date technological features compared to the other iPhones. After releasing iPhone X, Apple, Inc. sales were decreasing. The downturn in sales were due to the complexity and high price of the phone. The new iPhone has taken away some key features from the old iPhones which has led to dissatisfied customers. The Wall Street Journal posted an article stating that the iPhone sales have dropped. After finishing up reports for the 2018 Quarter 1, sales for iPhone have fallen 1% to 77.3 million units. Continuing onto 2018 Quarter 2 sales reports, the Statistics Portal reports iPhone sales to be 52.22 million units.

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Recently, Apple Inc. released a new iPhone under the series X called iPhone XR. It was released on October 19th, 2018. Apple Inc. anticipated to sell 100 million units of iPhone XR in a month from the release date and was only able to sell about 70 million units. This has affected Apple Inc.’s revenue significantly, i.e., it dropped by about 15%. There are several products released by Apple Inc., for example iPhone XS, iPhone XS Max, iWatch series 4, etc. whose sales are declining either due to the issues with the products or their prices.

1.1      Scope

The scope of this paper includes the following:

  • Criteria
  • iPhone X and Declining Sales
    • Reasons
    • Consequences
  • Solution
  • Benefits
  • Survey data

1.2      References

  • Apple iPhone unit sales worldwide 2007-2018 | Statistic. Retrieved May, 2018, from https://www.statista.com/statistics/263401/global-apple-iphone-sales-since-3rd-quarter-2007/
  • Gupta, A., & Prinzinger, J. (2013). Apple, Inc.:Where Is It Going From Here? Journal of Business Case Studies,9(3). Retrieved March 10, 2018, from https://www.cluteinstitute.com/ojs/index.php/JBCS/article/view/7797/7860.
  • Holland, P. (2018, April 19). Why the Pixel 2 might be the best iPhone upgrade. Retrieved from https://www.cnet.com/news/goodbye-iphone-hello-pixel-2-breaking-up-with-apple-is-easy/
  • IPHONE 6 PLUS HOUSING REPLACEMENT. (n.d.). Retrieved from http://www.toozeemobiles.com/iphone-6-plus/33-iphone-6-plus-housing-replacement.html
  • “IPhone X – Price, Colors & Deals.” Verizon Wireless, www.verizonwireless.com/smartphones/apple-iphone-x/.
  • Johnson, K., Li, Y., Phan, H., Singer, J., & Trinh, H. (2012). The Innovative Success that is Apple, Inc. Marshall Digital Scholar. Retrieved March 10, 2018, from http://mds.marshall.edu/cgi/viewcontent.cgi?article=1420&context=etd
  • Kim, E. (2017, January 09). This one chart shows why it’s so important for Apple to revive iPhone sales. Retrieved from http://www.businessinsider.com/apple-iphone-sales-as-percentage-of-total-revenue-chart-2017-1
  • Lazonick, W., Mazzuccato, M., & Tulum, Ö. (2013). Apple’s Changing Business Model: What Should the World’s Richest Company Do with All Those Profits? The Academic-Industry Research Network. Retrieved March 10, 2018, from http://www.theairnet.org/files/research/WorkingPapers/LazonickMazzucatoTulum_AppleBusinessModel_AIR-WP13.0701.pdf
  • Mickalowski, K., Mickelson, M., & Keltgen, J. (n.d.). Apple’s iPhone Launch: A Case Study in Effective Marketing. Retrieved March 10, 2018, from http://www.augie.edu/sites/default/files/u57/pdf/jaciel_subdocs/iPhone.pdf
  • Mickle, T. (2018, February 01). Apple Posts Record Results Even With Fewer iPhones Sold. Retrieved March 13, 2018, from https://www.wsj.com/articles/apple-posts-record-results-with-help-from-iphone-sales-1517521218
  • Mingis, A. M. (2017, September 12). The Evolution of Apple’s iPhone. Retrieved March 10, 2018, from https://www.computerworld.com/article/2604020/apple-ios/the-evolution-of-apples-iphone.html#slide13
  • Smith, C. (2017, December 27). A Christmas miracle: Google Pixel 2 activations surpassed iPhone X and Galaxy Note 8. Retrieved from http://bgr.com/2017/12/27/pixel-2-vs-iphone-x-christmas-sales/
  • Welch, C. (2014, September 09). IPhone 6 release date September 19th, prices start at $199 for 4.7-inch, $299 for 5.5-inch. Retrieved from https://www.theverge.com/2014/9/9/6121325/apple-iphone-6-release-date-pricing

1.3      Criteria

For Apple Inc. to be successful, they need to do the following:

  • Set affordable prices
  • Design products with the features that are most liked by the consumers
  • Marketing Mix – Product and Price

While setting the prices for new products, it must keep in mind that there is a vast population of middle-class in the world. These people would not want to buy Apple Inc. products when its competitors are selling their products for affordable prices, i.e. Samsung Group.

Similarly, when Apple Inc. releases new products, it must keep in mind what features are likeable and easy for consumers to use. If the devices are complicated to use, then consumers will not invest in those products.

Marketing Mix plays a critical role in promoting any new product. So, if the Marketing Mix is not strong then the promotion of the product would not be as efficient. With this being the case, it is possible that the company might not meet its desired goal of selling certain units or earning a certain amount of revenue.

2         iPhone X and Declining Sales

Apple, Inc. had released its iPhone X on November 3rd, 2017 to mark the ten-year anniversary celebration of the product, iPhone. The iPhone X has the most up-to-date technological features compared to the other iPhones.

The iPhone X is a 5.8- inch Super Retina screen with durable glass. The screen is bigger than a regular iPhone, but smaller comparing it to the plus size phone. Adding onto the screen, the iPhone X has an OLED screen. The OLED screen basically adds color and brightness to the display. The new iPhone also no longer has the home button that was common on the older models. Owners of the iPhone X navigate by swiping through the screen and using the new feature, Face ID. Face ID is a face recognition feature which owners will use to unlock into their phones. Along with the features, another feature is the camera quality. Like any recent iPhone Plus, the iPhone X has a portrait mode. However, the iPhone X also has portrait mode when using the front camera.

2.1      Reasons

Many are connecting the dots on the downfall of sales to the iPhone X. There are plenty of reasons why many are not buying the iPhone X. Some of the main ones are as following:

The first thing many customers think about when buying a product is the price. According to the Verizon Wireless website, the cost of an iPhone X is $999.99 rounding up to $1,000. On a normal basis, consumers find spending $1,000 costly. Hence, when it comes to buying a phone for $1,000, consumers will undoubtedly think twice before purchasing the product. Comparing this price to the other iPhones, the X is roughly $200 more. The price of the iPhone X is still higher than the new phone its competitor, Android, has recently released: Google Pixel 2 XL. Therefore, the iPhone X is currently the costliest phone in the market.

Another reason why customers are against buying the iPhone X is because the phone is solely made from glass. Apple has claimed the iPhone X glass screen to be the most durable. However, users have proven that the screen in fact does shatter. Therefore, for people who are more accident-prone, the iPhone X is not the best choice. Also, since there is a high chance of the phone shattering, many customers are afraid of buying the expensive device.

As mentioned earlier, a new feature added onto the iPhone X is the face recognition. Apple has replaced the Touch Identification (ID) with the Face ID. The Face ID serves as the basis for users to use their phone, make payments, and other security reasons. Though this is very innovative feature, there are still glitches that allow phone access to some that look similar to the owner. This leads to unguaranteed security. Also, the Touch ID has been around a long time making this change a lot harder to get used to. One side of taking of the Touch ID away is that it makes it harder for customers to check their phone easily.

Customers last concern about buying the iPhone X is the lack of the home button. Apple has changed how to navigate through the phone drastically. As understanding how to use and navigate the new iPhone X is difficult, customers have chosen alternative phone options.

After conducting a survey with a sample size of n=20, I saw the breakdown of what iPhones consumers own. Out of the 20 consumers, only twenty-five percent own an iPhone X. The other seventy-five percent of the sample own another version of an iPhone or a non-iPhone. This shows that there is a still high percentage of customers not willing to buy the iPhone X.

In a survey conducted, phone users were asked “Which iPhone do you own?” Given the options of iPhone X, iPhone 8/8 Plus, iPhone 7/7 Plus, or other.

In the survey, the surveyees were asked two questions: if you own an iPhone X, what are the pros and cons and if you do not own an iPhone X, why do you choose not to own one? Some of the responses of the cons for the iPhone X were takes time to learn, lags, and failures of face recognition. Consumers who do not own an iPhone X responded to the reason of not owning one by saying the phone is expensive, has unnecessary features, and is too soon to upgrade (See Appendix A for Survey Results).

In relation to the response from a surveyee of it is too soon to upgrade, Apple is known for its fast-paced innovation. In the span of 10 years, Apple has released 12 different iPhones. Each version being a little different than the older one. If we look at the first iPhone, which was called iPhone, was released on June 29, 2007. This iPhone included features such as a 3.5-inch diagonal screen and a 2 – megapixel camera (Montgomery & Mingis, 2017). Comparing this to the newest model, iPhone X, the features included in this iPhone is a super retina display, Face ID, and TrueDepth Camera System.  

Although some consumers recognized the pros to the iPhone X, the majority of the responses support the reasoning, mentioned earlier that many consumers are unwilling to buy the iPhone X. Therefore, to satisfy the customers and to improve sales Apple, Inc. should modify the future iPhone.

2.2      Consequences

If Apple does not make the necessary changes to the iPhone, then sales will continue to dwindle. A decrease in sales could then put Apple behind its competitors such as Android.

Apple was known to be “world’s most famous, and currently richest company” (Lazonick & Mazzuccato, 2013). Lazonick and Mazzuccato (2013) mention three things Apple is commonly known for. Out of those three things, one of the reason is Apple’s iOS products, especially the iPhone and iPad. In a case study by Gupta and Prinzinger (2013), they state how “the touch-screen, WiFi, and the 3G – compatible device” helped iPhone be the quickest smartphone to sell.  However, recently Apple could be facing serious competition from Android.

Android had released the Google Pixel 2 around October 2017 a month before the iPhone X released. With both phones being in the market at the same time has made consumers think twice before purchasing their new cell phone.

A graphical representation of devices activated during the holiday season. Retrieved from http://bgr.com/2017/12/27/pixel-2-vs-iphone-x-christmas-sales/

In the figure above, it is evident that the Google Pixel 2 and Google Pixel 2 XL had dominated all the other devices in the market during the Christmas weekend. But to our interest, we want to closely pay attention to the difference between the iPhones and the Pixels. Between the iPhone X and Google Pixel 2, Google Pixel 2 had roughly ten percent more activated phones than iPhone X. This supports the fact that Apple might be facing serious competition from Android.

3         Solution

Apple will be releasing its new iPhone soon. In the plans of designing the new iPhone, Apple should consider making changes based off the reasons behind the consumers not willing to buy the iPhone X.

It would be most beneficial for Apple to consider changes of these features while designing the new iPhone. Some of the suggestions I have for the new iPhone features are:

  • Home Button

Apple should bring back the Home Button. This would help users navigate through the phone. Also, having the home button will allow users to also use the Touch ID to unlock the phone.

  • Face Recognition

Apple can keep the face recognition if wanted. However, the face recognition security should be fixed to be more precise and accurate. This will help increase security and maintain privacy.

  • 5.8- inch Super Retina Display Screen

Consumers were eager to find out that there will be a phone that had a bigger than the iPhone screen size but smaller than the iPhone Plus screen size. The 5.8-inch screen was the perfect fit for many consumers; therefore, Apple should keep screen size.

  • Aluminum Rear

The iPhone X is solely made from glass. This includes the front and back of the phone. However, prior to this new iPhone, Apple used to create iPhones where only the front screen was made from glass. The rear of the phone was made from aluminum depicted in the figure below.

The picture above is the back of an old iPhone, iPhone 6. The back is made of aluminum with two plastic strips for antenna. Retrieved from http://www.toozeemobiles.com/iphone-6-plus/33-iphone-6-plus-housing-replacement.html

In addition to adding back old features and keeping some of the new features, Apple should consider the price of the phone. As mentioned earlier, many consumers are against buying the iPhone due to the high cost of the phone. Additionally, Apple should

4         Benefits

Revenue

The first benefit of implementing the solution is an increase in revenue.

Retrieved from http://www.businessinsider.com/apple-iphone-sales-as-percentage-of-total-revenue-chart-2017-1

In the above graphical representation, it can be seen that over the years, Apple’s total revenue comes majority from their iOS products, the iPhone. The iPhone accounted for the highest percentage of Apple’s total revenue in the beginning of 2015 which was 69%. During that time, the iPhone 6/6 Plus were in the market (Montgomery & Mingis, 2017). The price of the iPhone 6 was ranging from $199 to $399 depending on the gigabyte (Welch 2014). The iPhone 6 Plus was priced slightly higher, starting at $299 (Welch 2014).

Right now, the iPhone X costs $999. It can be argued that even though the iPhone X is a little pricey, it can still bring in a decent amount of revenue for each amount of iPhone X sold. However, if the price of the iPhone was lowered, sales would increase leading to an increase in revenue.

An example of how the above situation would play out:

If in the month of May, Apple sells 20 iPhone X’s with the price still being $999. Revenue would be calculated as follows:

20 * $999 = $19, 980

The total revenue of iPhone X’s at the price of $999 in the month of May would be $19.980.

However, if Apple decided to lower the price of the iPhone X to $649 causing more people to buy the iPhone X, then the example would be:

In the month of May, Apple sells 40 iPhone X’s, twice the amount when the iPhone X cost $999, with the price being $649. Revenue would be calculated as follows:

40 * $649 = $25,960

The total revenue of iPhone X’s at the price of $649 in the month of May would be $25,960.

The $649 iPhone X would make $5,980 more in revenue than the $999 iPhone. This supports the fact that the reducing the cost of the iPhone would increase sales leading to an increase in revenue.

Market

The second benefit is Apple will still be able to maintain its status of being the “world’s most famous, and currently richest company” (Lazonick & Mazzuccato, 2013).

Apple had launched its first iPhone in 2007. In the first year of the iPhone being in the market, Apple’s stock has been growing (Mickalowski, Mickelson, & Keltgen).

A graph of Apple’s stock growth from January 2007 to January 2008. Retrieved from http://www.augie.edu/sites/default/files/u57/pdf/jaciel_subdocs/iPhone.pdf

The reason behind the iPhone attraction in the beginning of its launch was because of the unique features. And it has been said that Apple has been working hard to differentiate from its competitors (Mickalowski et al.).

However, as stated earlier, Apple might be losing its customers to Android due to the Google Pixel 2. In an article posted written by Patrick Holland (2018), he mentions keys differences between the iPhone X and Google Pixel 2 which makes customers lean more towards buying the Google Pixel 2. The first reason is the difference in cost. The Google Pixel 2 starting price is $649 (Holland 2018). The second reason is the design of the Google Pixel 2 is consistent with how phones have looked over the recent years (Holland 2018).

With the suggested features and cost, Apple is likely to gain back lost customers gain back its customers and increase sales placing Apple back to being the world’s famous.

Value

The third benefit is the solution will help Apple stay aligned with its values.

In the scholarly paper written by Johnson, Li, Phan, Singer, and Trinh (2012), the authors list out Apple, Inc.’s values. One of the values listed was “We believe in the simple, not the complex” (Johnson et al., 2012).

If Apple decides to make the changes to the features suggested in the solution, then it will not only benefit the customers, but also the company itself.

In the survey I had conducted, the surveyees who own an iPhone X listed the cons of the phone. Few of them mentioned how the iPhone X requires time and patience to learn how to use the device. This response in fact proves the complexity of the phone.

With the customers being busy with their personal lives, it becomes hard for them to take time out of their schedule to learn how to use a phone. Many consumers prefer to buy a product that is to their convenience and is easy to navigate.

Therefore, if Apple took into consideration the solution of the features, it will help Apple stay aligned with their value of believing in the simple, and make customers more prone to buying the iPhone because of reduce in complexity.

Cost

The fourth benefit of implementing the solution is that there will be no additional cost required.

The features suggested for the new iPhone to help increase sales have already been featured in previous versions of iPhones or already being featured in the current iPhone in the market. Therefore, since Apple is not adding a new feature, costs of producing the new iPhone will remain the same.

Appendix – iPhone Survey Data

If you own an iPhone X, what are the pros and cons?

Response

Pros

Cons

Response 1

Smaller than 8 plus, Face ID, Front portrait

Very pricey, No Home Button – Takes time to learn

Response 2

Picture quality, New features

Takes time to get used to & Expensive

Response 3

Big screen, Faster Phone, Better Battery

Price

Response 4

Fast, Great Camera, Large Screen

Does not always recognize my face (my brother can open my phone) & Cost

Response 5

Photo quality

Takes time getting used to, Lags and Freezes

Response 6

If you do not own an iPhone X, why do you choose not to own one?

Response

Answer

Response 1

Cost

Response 2

Too Expensive

Response 3

Don’t like the features that are available on the X (seem unnecessary to me)

Response 4

Don’t like the Face ID

Response 5

I got my phone last year so when the new phone came out I didn’t think it was worth buying a new one.

Response 6

Cost too much

Response 7

A lot of money and there’s no home button (it’s confusing)

Response 8

The facial feature

Response 9

I like the size of the Plus

Response 10

I would get an iPhone X but I can’t afford it and I broke my iPhone 7

Response 11

Because it is too expensive

Response 12

Too poor

Response 13

It is too expensive and the new features are not a necessity for my day to day use

Response 14

Cost

 

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