Apple's neat trick: Why the iPhone 5c will outsell the 5s

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In January 2004, slightly more than two years after introducing the original iPod, Apple announced the iPod mini. The single product had become a product line, and over the years it would end up with four distinct branches. It’s been almost seven years since the iPhone came on the scene, and yet it wasn’t until Tuesday that it became a product line rather than a single product.

Apple’s been selling three different iPhone models at once for a few years now—last year’s model for $100 less than this year’s, with the two-years-gone model as a free phone with two-year contract. But the announcement of the iPhone 5c changes the iPhone buying calculus in a big way.

Until Tuesday, potential iPhone buyers had to choose between paying $199 or more for the current, up-to-date iPhone or saving a little bit of money by cheaping out and buying last year’s model. (Or really cheaping out and getting that model that was introduced when “California Gurls” was topping the charts.) Phones aren’t computers, and even computers don’t age as rapidly as they used to, but the threat of rapid obsolescence hovers over most technology purchases. Every time I’ve counseled someone about which iPhone they should buy, I’ve seen them get a lemon face when considering the option of buying last year’s model. Being a year behind in a cutting-edge tech area like smartphones seems like a lifetime.

So now here’s the iPhone 5c, and things are different. Yes, the iPhone 5c is a slightly upgraded iPhone 5 in a colorful candy shell. People who are focused on tech specs will complain that nothing’s changed, that this is simply Apple’s previous strategy obscured by pretty colors and a slight name change.

Those people miss the point. The iPhone 5c feels like a new iPhone. It looks unlike any previous iPhone model. (And up until now, you had to buy a case if you wanted your iPhone to be colorful.) In stores and in conversation, it will be considered a new iPhone—one lacking the higher price tag and high-end features of the iPhone 5s. People who buy it won’t feel like second-class citizens or buyers of a hand-me-down—they’ll have a cool new iPhone.

How people feel about products they buy is not always something that can be reduced to cold equations, a fact that drives many engineers and number-crunchers crazy. It’s not logical for almost everyone to prefer a low-priced phone with a large added subsidy in your monthly phone bill, but that system continues to be practiced in the United States because it works. People want a $199 iPhone, not a $700 model—even if their phone bill over two years will cost them far more than they would’ve spent up front. Emotion and fear and style and all sorts of messy things are wrapped up in how people choose products.

Image: Asymco
Horace Dediu's analysis of the iPhone product mix.

Which is a long way of saying, I think the iPhone 5c will be a hit. According to Horace Dediu’s must-read analysis, right now the iPhone 5 makes up roughly 70 percent of Apple’s iPhone sales, while the iPhone 4s is maybe 15 or 20 percent. But Dediu expects, and I agree, that the iPhone 5c will match or even beat the sales of the iPhone 5s.

Apple seems to agree. The focus of the company’s marketing seems to be the 5c model. That’s partially because, I suspect, Apple can make huge volumes of the iPhone 5c almost immediately (since its internals are based on the iPhone 5), while it will be a long, slow ramp-up in volume for the iPhone 5s. The iPhone 5s may be hard to come by, and you can’t even pre-order it. The 5c will be everywhere, in all five bright colors.

With some nice colors, a name change, and the price cut, the essential technology in the iPhone 5 may end up being Apple’s top-selling phone model for two years running. Neat trick.

(Those who wanted the iPhone 5c to solve the issue of Apple not having a lower-cost model to sell around the world in markets that don’t have phone subsidies will have to keep waiting. The iPhone 5c is a lot of things, but cheap isn’t one of them.)

Meanwhile, there’s the iPhone 5s, which no longer has to bear the burden of being the definitive iPhone. It’s now the top of the line, and can afford to be more expensive and stocked with fancy features and processing power. I’m not sure any smartphone could possibly bear the weight of the word, but the iPhone 5s is practically an iPhone Pro.

Apple’s executives on Tuesday kept emphasizing that the iPhone 5s is a forward-thinking product. It’s the test bed for Apple’s future mobile innovations. Sticking a 64-bit processor inside a smartphone and doubling its processing power is bold and feels like overkill today, but give it a year and we’ll inevitably be demanding even more speed from our mobile devices. (The advent of the A7 chip also makes me excited to see what the next generation of iPad will bring—that’s a device that, even more than the iPhone, could benefit from “desktop-class” performance.)

In many ways, the iPhone 5s is almost like a luxury car. It’s got elegant styling and fancy frills like a thumbprint reader. If those features prove successful, they’ll inevitably roll down into the rest of the product line in due time. But the iPhone 5s can afford to be a little less practical and a little more adventurous if it doesn’t have to bear the weight of the entire iPhone product line on its space-gray shoulders. And thanks to its bright polycarbonate little buddy, it no longer has to.

Like I said. Neat trick.

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