In price-conscious India, the world’s second-largest smartphone market, Apple is trying hard to safeguard its premium brand positioning while attempting to sell its iPhone devices using ingenious offers. In the past few quarters, Apple has launched a series of promotions that mark a departure from its previous one-strategy-fits-all-markets model.“For Apple, it is a changed India stratagem in 2013,” said Manasi Yadav, senior analyst, mobile phones and tablets, at research firm IDC India, “With this, Apple recognizes that India is an important geography, acknowledges its potential, and brings a more focused approach to the market,” said Yadav.
Until last year, Apple was an outlier in the Indian smartphone market. The gap between iPhone sales and sales of market leader Samsung’s smartphone devices or even the cheaper, slick models of aggressive local vendors such as Micromax, looked unassailable. Samsung and Micromax each sell almost 10 times more smartphones than Apple. In Figure A, Apple sales fall in the "Other" category.
Apple sales fall in the "Other" category.
But stagnating sales in saturated Western markets and the promise of India — the country’s smartphone market grew by 227% year-on-year in the 3Q of 2013, according to research firm, IDC — has goaded Apple to do a serious rethink on its approach. This past year has marked a turnaround, and the iPhone’s growth has been striking in the past quarters. Apple has rumoredly even set itself a 2013 annual revenue target of $1 billion, though it is projected to just fall short of that.
To be sure, Apple’s anticipated India target is only a fifth of its own revenues in the neighboring China market.Still, it has been a marked shift for Apple as it drives different sales strategies and distribution models. The phone maker’s biggest challenge in India is to lock more consumers into its ecosystem, said Tarun Pathak, an analyst at research firm CMR’s India telecoms practice. “They have to widen distribution and reach in smaller cities by shortlisting 20-30 such high potential markets and build a critical mass of users.”
The device maker is certainly expanding its footprint and is pushing sales of iPhones and other products in smaller Indian towns. It has moved away from selling phones solely through operators and has widened its distribution network beyond its own Apple stores.
Earlier this year, Apple introduced an equated monthly installments (EMI) scheme in India. EMI has been a tried-and-tested strategy by marketers of a variety of products and services to hook young Indians.
In the past quarters, Apple launched a series of promotional tactics that are not intended to look like price-cuts yet are designed to achieve the same results. Buyback offers, zero-interest financing schemes, and dropping prices on older models (such as 4 and 4s) has seen iPhone sales volumes grow significantly.
When Apple’s recently-launched, so-called “cheap” iPhone 5C took India by surprise with its not-so-cheap pricing of about 40,000 rupees ($660), Apple launched bundled offers with carriers. Apple's 5C is "too highly priced" for emerging markets like India, aiding iPhone 4s to be the volume driver, research firm Gartner said in a recent report.
Apple came back with an aggressive trade-in scheme in India where customers can trade in the iPhone 4 for cash discounts on the new iPhone 5C. In front page advertisements in leading newspapers, Apple offered a minimum 13,000 rupees (over $200) discount as trade-in value.
There is a delicate balance of premium branding with customer-friendly pricing. Apple's branding has made the iPhones coveted even though competitors offer the same or better features for far less. Bringing down prices would directly impact Apple’s brand equity.
“It is a conscious strategy to not make the iPhone too affordable as it would make it lose its premium appeal and dilute the brand image,” said Yadav. So, introductory prices on its phone models remain high.
Apple definitely needs to convert more smartphone buyers to iPhone users, especially since it does not have a choice of devices at the entry level which its competition offers. According to Pathak, “While currently iPhones sell to hardcore Apple loyalists who want to upgrade, the phone maker realizes that the way to grow volumes and market share is through gaining buyers amongst new segments."
Saritha Rai is an India-based journalist and commentator who covers technology, business and society from her ringside seat in Bangalore.