How Apple's 'inadequate' storage strategy makes $3.8 billion a year
http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=11378687
Despite claims Apple's 16GB phones barely have enough storage for all the pre-installed software and apps, let alone a user's files, the company continues to sell it as an entry-level model.
But, rather than being a short-sighted move, one analyst believes it is a calculated strategy designed to get people to buy larger devices as soon as possible.
In fact, Neil Cybart claims Apple makes an extra US$3 billion ($3.89 billion) each year by not doubling the amount of minimum storage every time a new model is released.
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Apple storage strategy explained
By limiting the amount of storage on entry-level phones, in the 'lower tier', customers will eventually upgrade to a larger device, in the middle tier, the following year. These customers are more likely to then stay in the middle tier, or in some cases move to the upper tier, but are unlikely to downgrade to less storage. This trend is even more common if Apple keeps the entry-level the same, but boosts the storage by three times or more in the following year. However, if Apple doubles the amount of storage on the entry-level model each year, people upgrade but stay in the lower tier. All of these figures are taken from Neil Cybart's Above Avalon site. Example 1 In year one, Apple offers a 16GB, 32GB and 64GB model and the customer buys the 16GB version. The following year, Apple offers 16GB, 64GB and 128GB models. The current iPhone 6 and 6 Plus are available in these sizes, for example. This prompts the user to either stay the same, or upgrade to 64GB in year two. This 64GB costs more than the 32GB version did the previous year. By the third year, Apple can offer 32GB as an entry-level model, but the customer won't downgrade storage and stays with the 64GB as a minimum. Example 2 Alternatively, if Apple offers an entry-level 16GB one year, but then increases this lower tier storage the year after to 32GB, the customer may upgrade to a phone with larger storage, but they're still technically buying the entry-level model. And so on into year three, if Apple offers 64GB as a minimum. This means they spend less money each year, and Apple can't move customers from the lower to the middle or higher tiers.
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