If Apple is able to breakthrough innovations? In September, the company introduced the new iPhone 6s with 3D display touch screen, the Apple TV 4 with support for games and apps, big iPad Pro with a stylus, which will allow the technology giant to occupy new niches in the market. All of these gadgets look very innovative, but, in fact, are updates rather than genuine innovations. In nothing supernatural. Breakthrough innovation Apple is, in fact, refers to the financial sector: the company introduced a new program to update your iPhone – the Apple Upgrade Program – which is largely brilliant.
Purchase the 16-Gigabyte iPhone 6s in the Apple Store will cost you $649. With the Apple Upgrade Program you can pay $32,41 per month for two years, but total payments will be $778, because the program includes AppleCare+. It’s a beautiful name for an extended warranty system, which in fact adds only three things: the deadline for technical support is increased from 90 days to two years, warranty – year two, Apple will replace your phone if you accidentally move or drown in the toilet – with all the iPhone from time to time it happens.
But there is another important point. After 12 months, when Apple will present the next iPhone, you will be able to give the “old” (already a year ago) the phone back to Apple and get a new version. Your contract will automatically continue for 24 months, in 12 months you will receive a new iPhone, and the cycle will continue. This plan, which would be proud of even the financiers Goldman Sachs, writes the columnist of the Financial Times.
And here’s why: the program turns the Apple into a company where the iPhone is transformed from product to service. For $32,41 per month your constitutional right to achieve happiness through owning the latest model of iPhone is finally coming true. Buyers will change the phone every year instead of once in two or three years, which will significantly increase iPhone sales in the US.
Sales growth will lead to increased profits. In the current situation when interest rates are close to zero, the financing will cost Apple, say, 4%, or $26 per year (for a phone worth $650). Apple raised the price of AppleCare+ for $30 from $99 to $129 per year. This will more than cover the cost of the first year, and if you continue to upgrade your phone you have along with it and buy AppleCare+.
But that’s not all. When a customer buys a phone at the Apple Upgrade, the binding AppleCare+ to it mandatory. You simply do not sell the phone without the extended warranty. When buying a cellular and even via the Apple Store you can refuse it. Profit from AppleCare+ will be just space.
In 12 months Apple will get a lot iPhone a year ago, which will be resold in emerging markets. This will allow it to compete with companies selling cheaper smartphones in these countries.
With Apple’s Upgrade Program, the company will get rid of dependence on mobile operators who have so far contributed to sales growth. Now customers will be tied to Apple, not the operators.
The question is, whether the consumers AppleCare+ valuable enough to pay extra for it. As with other Apple innovations, the chance of success is high, but guarantees no one can give. However, now we see that Apple is still capable of innovation.