The iPhone 5c conundrum

Having just got caught up listening to John Gruber's The Talk Show, I was intrigued with his and M.G. Siegler's discussion surrounding the iPhone 5c. 

Before the iPhone 5c launched, everyone was clamoring for Apple to release a "cheap" iPhone in order to conquer emerging markets and nudge out cheaper Android alternatives. Unsurprisingly, it turned out Apple was not interested in a downwards movement to grab market share. (As Tim Cook said: "We're not in the junk business".)

At launch, iPhone 5c was not a cheap phone. At only $100 less that the iPhone 5s, it was top end of the mid-range at best. Even at "free-on-contract" now, it's quite expensive when you look at the cost over the length of the plan. 

Here in 2015, I'm not the only one interested in the iPhone 5c, its purpose and its future. In response to the same episode of The Talk Show, Jack March put forward his reasoning for the iPhone 5c's existence:

I almost feel like the 5C was meant to fail, in fact, every time it was purchased was a failure for Apple. The phone was created to encourage people to buy the phone that gave Apple the bigger margins.

The biggest victory for Apple would’ve been to sell zero iPhone 5c’s, only made as a trap to get people to buy the more expensive model, and that’s a genius business strategy.

Jack theorizes that having a plastic 5c next to the premium-looking iPhone 5s was a strategy to boost 5s sales, his hypothesis resting on the fact that an unchanged iPhone 5 would have looked too similar, giving consumers less reason to get the $100 more expensive 5s. Perhaps there's some logic in Jack's argument — there was little visual information (bar that gold model) to differentiate the 5s from the 5 — but developing an entirely new product in the hopes that it doesn't sell seems ludicrous.

Kevin Wild at The Hungry and Foolish added his thoughts to Jack's:

I can't pinpoint exactly why Apple released the 5C, but I can say they were successful in selling them. As obvious as it would seem to most tech analysts to pony up the extra ~$100 to get the 5S, a lot of people went for the 5C instead.

Why?

1. It was cheaper (but not cheap).
2. It looked different.
3. A lot of people felt like they didn't 'need' the extras the 5S came with.

I'd like to explore the iPhone 5c and reflect on some old thoughts in light of the recent dialog surrounding the product. When the iPhone 5c debuted, I wrote an editorial for Today's iPhone entitled 'Why the iPhone 5c is a long play, and a wise one'. At the time, I surmised thus:

Apple calls the iPhone 5s the “Most forward thinking iPhone” but I feel the iPhone 5c may look a little further forward than people give it credit for.

I made a number of assertions before arriving at this conclusion that I'd like to discuss, many of which I think still stand up in today's context. Firstly, Apple's decision to go cheaper, but not cheap: 

And that’s where the iPhone 5c fits in for a number of reasons. Firstly, it’s a great device – not some cheap plastic phone. That’s clear to anyone that has held one – it feels every bit as premium as you’d expect an Apple device to feel. Internally, it’s as good as an iPhone 5 and has all the benefits associated with the Apple ecosystem.

Secondly, it’s easier and cheaper to produce for Apple. The iPhone 5’s aluminum chassis is a feat of engineering. To discount that product, as Apple has done with previous generation iPhones in years past, while maintaining production at scale alongside the iPhone 5s would have been an expensive operation.

At the time, the iPhone 5c reportedly cost Apple $173-183 to produce with $7 of that being attributed to assembly. Comparatively, the iPhone 5s cost considerably more (due to newer internal components) but assembly was also more, costing $8. The year before, Apple's iPhone 5 cost $8 to assemble, too. Perhaps I was right about the new phone being easier to produce when the metal chassis is taken away. An added bonus is that the new plastic shell helped, visually, to establish that psychological differentiation between it and Apple's more premium 5s offering.

John and M.G. discussed the prospect of iPhone 5c being created to show off iOS 7, particularly its colorful new UI elements. I spoke a little of the psychology of newness in my editorial back in 2013:

Further, the demand for “new” phones tends to be greater than the demand for “old” phones. Psychologically, it just feels better to the customer to be purchasing the newly launched iPhone 5c rather than last year’s iPhone 5 (regardless of the fact that the internal hardware is almost identical).

Does that hold up? I think so. While I was mainly referring to Apple suddenly having two 'new' phones and that being a potential boon to sales, the iPhone "for the colorful' coinciding with a bright new user interface is not by accident. 

One crux of my 'long play' argument was the future benefits of the iPhone 5c, namely future purchases as a result of ecosystem lock-in: 

The iPhone 5c serves a valuable purpose for Apple – it gets people into the Apple ecosystem.
Its colorful exterior, lower price and performance power make for a very attractive prospect for first time Apple customers who are looking to enter into the Apple world. These customers are then able to experience, and become tied into, the Apple ecosystem through the ease of the purchasing on the iTunes and App Stores or the utility of iCloud, for example.

I feel like iPhone 5c became a great gateway device to the Apple ecosystem, a role once served by the iPod touch. Speaking from experience, albeit anecdotal, the iPhone 5c was incredibly popular here in the UK suggesting that a lot of people wanted it. I know more than a few people who bought an iPhone 5c as their first iPhone. As John Gruber notes, iPhone 5c is "exactly where Apple wants it" now that Apple does not have to give away a premium-looking iPhone 5 for free with a contract to these customers.

I also looked ahead to iPhone 5c's sales throughout the year:

We all know the iPhone 5s is for the techies, the people who have to have the latest and greatest. Those early adopters are the ones that will queue up on launch day to be among the first to get their hands on the new flagship iPhone.

I know from attending my local Apple Store here in the UK that there were almost no people there on the iPhone launch day that were wanting an iPhone 5c. And that’s fine.

The iPhone 5c is the phone that Apple can sell throughout the year. The 5c is for the non-techies who are waiting for their upgrades on their contracts who might opt for the device over another Android phone. The average user, if you will. It’s the mainstream market, those who want a smartphone but do not have any particular allegiance to any brand that Apple hopes to capture with the allure of the iPhone 5c.

And I’m not counting out the chance of more color variations to spice up the iPhone 5c line in future months as an extra sales boost.

Although those new colors never materialized, I'd like to see how sales figures for the iPhone 5s and iPhone 5c fluctuated throughout the first year to see if these theories hold up. I'd bet the iPhone 5c sales held steady for a long time. 

Looking ahead to the future of the c-line of iPhone, John and M.G. could not pin down a reasonable plan for the plastic-clad device. To me, the logical step would be to put the iPhone 5s internals in the iPhone 5c plastic shell, keeping an iPhone at the 4-inch screen size (to the chagrin of developers) and making Touch ID ubiquitous. The question remains whether Apple would then want Apple Pay to be available on the lowest-priced iPhone. Personally, I'd guess not as cramming NFC hardware into that small body would see battery life taking a hit and component costs rising. Perhaps this will be a differentiation factor between Apple's lowest-end iPhone offering and its others.

There are a lot of things at play when Apple is laying out its hardware plans for the years ahead. I don't necessarily disagree with John, M.G., Jack, or Kevin's assertions, much of which probably played into Apple's thinking when dreaming up the iPhone 5c. The really telling moment will be in the fall when Apple either introduces a new iPhone 'c' or if the that product line quietly disappears.