There has been a year's worth of debate over whether Apple should launch a low-cost iPhone. When the world realized Apple had launched the iPhone 5C everyone thought that the company had launched a low-cost iPhone. It turns out that's not the case.

The 16GB iPhone 5C costs £469, where the 16GB iPhone 5 was £529. The 16GB iPhone 5S is just £80 more at £549, a £20 on the iPhone 5 starting price.

Apple's entry-level iPhone is the iPhone 4S (currently £349 off contract), with its legacy port and 4.5in screen surely this is a phone gearing up for retirement.

The entry level price of £349 is MORE than the price of the iPhone 4, which was £318 before Apple discontinued it on the 10 September.

Who wanted a cheaper iPhone?

Calls for Apple to start selling a cheaper iPhone came initially from analysts and investors who indicated that with the smartphone market reaching saturation point in the West, Apple would have to start targeting Emerging Markets like China where there is a huge untapped market of consumers who cant wait to get their hands on the iPhone, but right can't afford the iPhone. 

For example, the entry-level iPhone 5 was priced at 5,288 yuan (£532). That's equal to about six weeks’ pay for the average urban worker, according to data from the National Bureau of Statistics. The average monthly pay in China is about 3,585 yuan (£360).

It's not just Chinese, Indian and other emerging markets that have a large number of people who want to purchase an iPhone but are put of by the price. There are plenty of potential customers in the UK who can't afford the initial outlay for the iPhone. People are still swayed by a low cost, or even free, smartphone when they are looking to upgrade their contract. Apple may well be losing out to other smartphone manufacturers because they are undercutting it on price.

However, it's been argued that Apple has always offered a cheaper iPhone option. The company's usual practice when it debuts a new iPhone is to continue selling the old iPhone models at a lower price.

As we mentioned above, when Apple launched the iPhone 5 it reduced the price of the iPhone 4S and iPhone 4 with the entry point for an off contract iPhone 4 being £319. Apple did the same when it announced the iPhone 4 and the same when it launched the iPhone 3GS in June 2009. As a rule, Apple carries on selling the previous year's low-end iPhone and cuts the price of that model, although this time round it's keeping on the two year old iPhone 4S (we think because the iPhone 5 is too similar in spec to the iPhone 5C).

However, not everyone is happy to buy a phone that is more than two years old, even if it's never been used before. This is one reason why so many people have opted for cheaper Android devices.  

The iPhone 5 in a colourful body

Apple's new strategy is to package up last years model, the iPhone 5, as a new phone with a completely new look. 

Aside from criticism that the price of the iPhone 5C is too high, it has also been condemned for being an iPhone 5 repackaged in cheaper materials.

The fact that the iPhone 5c shares many features with the iPhone 5 lends weight to this argument. However, it's not necessarily a bad move on Apple's part to rebadge the iPhone 5 in this way.

It's been Apple's habit for the past few years to knock down the price of the previous year's model when it introduces a new iPhone. Until recently you could buy the iPhone 5, iPhone 4S and the iPhone 4 from Apple. With the two-year old model being Apple's low-cost, or even free, option.

Potential iPhone buyers could to choose between paying a premium for the current, up-to-date iPhone or saving a little bit of money by cheaping out and buying last year's model.

The announcement of the iPhone 5c changed the iPhone buying calculus in a big way. Now there is the option of buying a slightly upgraded iPhone 5 in a colourful shell. This iPhone 5c feels like a new iPhone. It looks unlike any previous iPhone model. It will be considered a new iPhone. So 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.

Is Apple's iPhone 5C cheap enough?

Is the price of the iPhone 5C right? It depends where Apple is pitching it. Perhaps Apple never intended it to be a low-cost product, rather it may have designed it for the mid-range market, which is probably where Apple should be aiming.

As Business Insider explains in this report it would have been wrong to suspect that a 'low-cost' iPhone 5C should be cheap. That report suggests that Apple should be aiming at the mid-range market and that the $300-$400 (£190-£255, or 1,836-2,448 Yuan) or price range is considered perfect for the middle-range smartphone market.  Apple is currently in the high-end market.

However, the iPhone 5C will start at 4488 yuan ($728) in China when bought without a contract, making it only 800 yuan cheaper than its cousin, the iPhone 5S.

Analysts had estimated a lower price point at $400-$500 (that's £255-£318, or 2,448-3,061 Chinese Yuan).

Is the price too high for China then? According to Morgan Stanley's Katy Huberty, Chinese consumers consider 4,000 Yuan to be an acceptable price range for the lower-priced iPhone – and that's even higher than the predicted prices. 

However, Chinese handsets producers are luring customers with smartphones costing less than 1,000 yuan (£100) each. This is what Apple, and other smartphone manufacturers including Samsung are competing with. 

It looks like the iPhone 5C is definately not priced in the region that was being called for. Does this matter? 

Too cheap would be wrong

While some were calling for Apple to make a cheaper iPhone, others – including Apple - were suggesting that Apple would be wrong to pitch its phone at the very cheap end of the market is that it would be damaging for the brand.

Apple's senior vice president of Apple marketing Phil Schiller hinted as much when he told the Shanghai Evening News back in January that Apple would: "Not develop cheap smartphones in order to grab market share".

We shouldn't really be surprised that Apple has not gone back on its word.

Another concern voiced amidst rumours that Apple would make a cheaper iPhone was  the suggestion that selling a lower priced iPhone would mean the margins Apple makes would be smaller.

Apple's profits have fallen for two consecutive quarters, and one reason for the declining profits is the fact that consumers are opting for the iPad mini over the regular iPad and the older iPhone 4S rather than the new products.

However, as we noted in our article: How the low-cost iPhone will make money for Apple, it's not only the hardware that adds up to profits for Apple. There is another way Apple can make money from the iPhone - namely the software and services that the company sells to the iPhone owner.

If Apple can continue to grow the marketshare with the iPhone it could continue to grow revenue from sales from iTunes and the App Store, and from everyone that makes a device for the iPhone (the company takes a cut from anything that has the Made for iPhone logo on the packaging).

Selling a cheaper iPhone could have meant that Apple could sell more iPhones and sell more content on the App Store and more accessories. 

C is not for cost, it's colour

So, it turns out that the C didn't stand for cheap. The C stands for colour. The iPhone 5C offers variety and this is the key to more sales, we presume that's what Apple thinks anyway.

The new iPhone 5C comes in a variety of colours and this will be enticing for consumers. We already know that blue will be popular, based on our poll. Read about how the black iPhone 5S and blue iPhone 5C will be the most popular choice among potential customers.

There have been suggestions that Apple needs this variety among its iPhone range. Samsung has a wide variety of handsets in terms of both price and screen size than Apple. 

Contrary to this, there are suggestions that its better to have fewer products to focus on and that having too many different products will dilute the attention Apple can place on existing products. This has never been a problem with iPods though.

We expect that there will be a backlash against the prices that Apple has set for the iPhone 5C. Whether this is because everyone expected them to be lower, or because they really priced to high remains to be seen. Apple may grow marketshare thanks to this new range of iPhones, or it may find that customers look elsewhere. 

The unknown part of the picture is the reception of iOS 7 - will customers love or hate the new iPhone interface. This will be the real selling point for the iPhone 5C. 


Apple's 'budget' iPhone 5C costs over $700 in China

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