iPhone X tech and marketing

In 2017, Apple launched the iPhone X with minimal bezels and face recognition and the iPhone 8 with some internal innovations but a similar design to the previous year. If they can do an innovative product like the X, why do they even bother to create the 8 with that big old frame?

There are technical reasons—with the iPhone X, they introduce new technologies that are hard to make on a large scale. There are also marketing and strategic factors. Apple segmented the market into two groups that have different reactions to innovations.

The iPhone 8 looks outdated in 2017

The iPhone X is very different than previous iPhones. Making large quantities is difficult. That is why it arrived late, and it is expensive.

The iPhone 8 in 2017 looks outdated. A phone that begins at $700 and has big bezels in 2017 seems out of place. Consumers have other options in that price range that look better and more up to date. The problem is that they do not have the iOS operating system, and they are not in the Apple ecosystem.

Apple needs the 8. It fills the gap in the market that the X cannot meet: it’s for the people who do not want to wait for the X, who need something less expensive, and are resistant to significant changes. It’s suitable for the ones that feel comfortable with quiet evolutions but hate revolutions.

This year will be the transition that Apple needs to be able to make all the components on a large scale in the future.

It's an unusual situation. Here, marketing and new technologies need to collaborate more than ever.

Expectancy of the consumer

Some factors make the existing technology cheaper: the components, the learning production process, and finally, the economies of scale when they can produce large quantities.

Then, the brand has a margin to introduce a new technology that is expensive to ideate and more importantly, to produce. This is how brands can innovate without changing prices and still satisfy the same target audience. That is the process of innovation.

Each year, Apple introduces a new iPhone with technical advances and a similar price. They are giving more to the customer, a better product for the same price. It also happens in other technological products: tablets, computers, and accessories.

That creates an expectancy in the consumer. The majority do not want to pay more for small improvements.

Phones are becoming mature markets. In those cases, it's harder and harder to make innovations. It's expensive for the brand. With the margin that the maturity of the existing technology gives, they cannot introduce the new one. They have to slow down the pace of innovation. But here comes Apple with another option, as they create a new segment.

A new segment for the iPhone X

There is a minority, a small segment of the population, that wants to pay more for a better product. It happens in all the markets.

In technology, that segment pays more to be the first, to have the newest. In nontechnological products, the exclusivity comes from brand and features. In technology it's also, time. The cheapest phones of today are as good as the premium phones of two years ago. So, there is a segment that is paying for time; they are paying to be in the future.

It also happens inside the Apple brand. They sell old models at a lower price. Below that, you have to go to Android.

In 2017, Apple is separating the regular consumers of new iPhones in two segments:

- iPhone 8 segment. The ones that want improvements but do not like risks. They are attached to what already works. For instance, they want the traditional fingerprint sensor and are ready to criticize or at least challenge, the new Face id. The same with the old LCD technology of the screen against the new OLED.

- iPhone X segment. Some people enjoy trying new things. They want to live in the future. There are also some people who seek for exclusivity and expect others recognize them as tech experts. That segment is willing to pay more to satisfy those needs.

There will be a scarcity of supply of the iPhone X in the first few months. This is not a problem; it is, in fact, a positive feature for that segment. It reinforces all the traits that I have outlined.

iPhone X, a risky product

All new technologies have advantages and disadvantages. Many people, especially the conservative segment, will compare what arrives with the incumbent. They will say: it's too soon to change, people still demand the old, the innovation needs more time to consolidate, etc.

In fact, they are right. However, to innovate, Apple at this point has to challenge that. As I said, to make a big leap in that mature market they need to force the status quo a bit.

The iPhone X will have flaws; some disadvantages respect the old models. The existence of the iPhone 8 will help to mitigate that. The segment who does not agree with the new bold moves has the other option.

iPhone X, is it for a minority?

New technologies, in general, are expensive. As I said different factors contribute to that:

- Research. The company needs a lot of time, energy, trials, and errors.

- Components. The suppliers have to build something unique. It represents time, research, and no economies of scale for that part.

- Learning process to make the product. It's easy to make small quantities and solve the problems that come on the way. Only with a lot of experience can the company standardize each step.

- Economies of scale. When the company can make a lot of units of a product, the cost per unit lowers. The previous points that I have commented limit the possibilities to manufacture new products in large quantities: research, components, and learning production processes.

That is why companies focus on the small segment who can pay more to have something that is revolutionary.

That is the general rule. With the Apple iPhone X, I am not sure if it will be the case. It has all the characteristics of a product for a small segment. But some elements that can make that an exception are as follows:

- Core followers. In other brands, the group that wants to pay more to have the last and most revolutionary product is small. In Apple, that segment is more significant. They are also the core followers, the ones that love the brand and are very loyal. Those are also opinion leaders, people who advise others who are less tech-savvy. They can drag a broader audience.

- Less price sensitive. Apple has a significant proportion of consumers with high income. It's also a public that prioritizes design, technology, and innovation. Price is relevant, of course, but it comes behind other aspects. If the iPhone X has the three components, the people that will be willing to pay more could be a minority in society but a majority of the Apple followers.

- The alternatives. The other options are too far away. The iPhone 8 can satisfy the needs of a general audience. For the Apple target, the iPhone 8 is very conservative. As I said, the big bezels in 2017 are too disappointing.

The iPhone X seems like a product for a minority of the general public. It could also be for a significant part of the Apple target audience.

Now Apple is huge. The brand that focuses on the high end, exclusive segment is many times also the leader. The iPhone X reinforces that trend. The iPhone X could change many rules in marketing.

We will have to see the numbers at the end of the period. What is sure it is that it is a very uncommon case in marketing.

Conclusion

The iPhone X tries to introduce new technologies early. Apple forces the innovation process to acquire knowledge, production skills, and volumes. The X is an advance of next year’s technology.

The iPhone X is also a marketing experiment. Apple splits the traditional audience into two groups: the ones that are eager to change and embrace new things and the ones that criticize every bold move.

The iPhone 8 is a cushion that helps Apple support all the criticism that the iPhone X will generate. It could be a minority, but they make a lot of noise.

This is a fascinating case of solving with marketing a complex technical and production problem.