Growing markets will determine the future of capitalism for at least the next 30 years. In 2015, Google had a plan to increase sales in emerging markets. But now, in 2021, Apple is beginning to gain traction in emerging markets and this is clear evidence of the power of marketing.
Apple released a Q3 earnings call and the company particularly focused on the growing number of conversions from Android to iOS in emerging markets, including India, Vietnam, and Latin America.
In comparison, in developed markets, it was negative (as it became known from the Apple vs Epic Games case).
This trend demonstrates a strong pent-up demand for Apple products in emerging markets. Yes, the company is focused on the upper segment of the market, offering quite expensive models (which led to the dominance of Android in the middle and lower segments).
Also, conversations with used device retailers speak of the “growing demand for used iPhones.” If this trend continues, it will be a clear demonstration that in today’s world, a strong brand plays a leading role, especially in emerging markets.
iPhone SE is a key to Apple’s success
It makes sense, especially since this is the model that accounts for the majority of sales in emerging markets. In a conversation with UBS analyst David Vogt, Tim Cook also hinted that the company’s success in emerging markets has a lot to do with the success of the cheapest model, so it will continue to be produced.
In fact, there are two scenarios: in the first, the iPhone SE will be a springboard for customers who want to try iOS but aren’t willing to pay a lot of money (especially for developing countries) for Apple devices. In this scenario, a part of customers will buy more expensive models in the future.
However, in the second scenario, there’s a chance that Apple would be hostage to a situation in which it will be forced to sell the cheapest model, which will become a sales hit and will hit the more expensive models, forcing customers to focus on the entry-level iPhone.
Another factor that positively affects Apple’s sales is the high liquidity of used iPhones. In fact, the price of them drops significantly less than similar-level Android phones (I’m not even talking about the resale of used budget Android devices, because they’re very hard to sell, and the price loss is up to 70%).
What may go wrong with Apple strategy on emerging markets
Of course, Apple has huge growth prospects in emerging markets. Especially if the company lowers prices for entry-level iPhones. However, this approach has its own threats, which the company must take into account. If the entry-level iPhone is too good (and the iPhone SE is), then the company could become hostage to mid-level sales, as consumers simply will not buy the more expensive models.
As a result, the company will find itself in a situation where it will be forced to offer a profitable entry-level iPhone in order not to lose sales and not to scare investors.
Therefore, the company has to act in the logic of a springboard, so that the iPhone SE is not the best device in terms of price/quality, but only the initial model, which encourages some customers to buy a more expensive iPhone the next time they change phones.