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Published 02 September 2013 10:04, Updated 03 September 2013 02:34
Apple is hoping its iPhone trade-in scheme will help keep smartphone buyers loyal and less tempted to try products from rivals Samsung and HTC.
Apple is offering trade-ins for older models of iPhones in a move that should boost brand loyalty among customers.
The program, which is running in Apple’s retail stores in the United States, gives customers a credit on their old iPhone to be used towards the purchase of a new one.
It is not clear at this stage whether the program will be extended beyond the US.
The trade-in concept achieves several strategic objectives for Apple. Firstly, it reduces the number of phones in circulation, stimulating demand. Secondly, it allows Apple to resell, repurpose or recycle the phones which may have intrinsic value.
Crucially, it turns the iPhone’s huge installed base into a competitive advantage for Apple. Android phones are currently outselling iPhones but the iPhone’s early market dominance since its launch in 2007 means there are plenty of old models around. The trade-in offer could sway consumers choosing between Android and iOS for their next upgrade.
Figures from analyst firm Gartner suggest that Samsung had a 32 per cent share of smartphones sold worldwide in the second quarter of 2013, compared with 14 per cent for Apple. By operating system, the Android dominance was even more pronounced, with a 79 per cent share of new phones sold in the quarter.
However, the installed base of iPhones is still climbing even in terms of market share and by 2014 Gartner predicts it to reach 26 per cent worldwide, compared with 49 per cent for Android.
Apple is expected to launch two new iPhone models next week, including the high-end iPhone 5S and the company’s long-rumoured budget iPhone.
Gartner principal research analyst Anshul Gupta says the iPhone 5 is Apple’s most popular model but the average sales price had declined to its lowest point ever, because of strong sales of the discounted iPhone 4.
He says this shows the risk of Apple introducing a new phone at the lower end of the market.
“Although the possible new lower-priced device may be priced similarly to the iPhone 4 at $300 to $400, the potential for cannibalisation will be much greater than what is seen today with the iPhone 4,” Gupta says. “Despite being seen as the less expensive sibling of the flagship product, it would represent a new device with the hype of the marketing associated with it.”
The iPhone now represents 53 per cent of Apple’s total revenue, according to Gartner. The iPad is now the second largest contributor to Apple’s overall revenue (20 per cent) followed by Mac (14 per cent) and iPod (5 per cent).
Less than seven years after the introduction of Apple’s iPhone, the worldwide installed base of smartphones and tablets will surpass that of PCs in 2013.