Apple’s iPhone: Why pay less?

In a New York Times’ 10-year retrospective, Bernstein Apple analyst Toni Sacconaghi has the money quote.

From Brian Chen’s Dear iPhone: Here’s Why We’re Still Together After 10 Years:

Since Steve Jobs introduced the iPhone in 2007, the smartphone has become a close — if not the closest — digital pal for millions of people around the world. With more than 1.2 billion iPhones sold to date, it has also become one of the best-selling gadgets ever. And even though Apple’s phones typically cost several times more than rival handsets, the company is No. 2 in sales in the smartphone industry after Samsung Electronics.

“People spend hours on it every day, so they can justify paying more for what they believe to be the best device,” said Toni Sacconaghi, an analyst at Sanford C. Bernstein, who has studied Apple for years and called the company’s positioning of the iPhone “unique.”


Chen’s retrospective, written as a love letter, touches most of the sticky points: The walled garden of the App Store, free help at the Genius Bar, FBI-strength privacy standards, a tight ecosystem that mostly just works and what Sacconaghi calls a “brand halo.”


  1. William Kortum said:
    This is a situation where paying more can cost less in the long run. Four and a half years ago, I bought an iPhone 5 for about $ 650 (when you add back the cost of repaying the subsidy, maxing out the memory, adding Apple Care & local sales tax). Cost came out to slightly more than $ 12 a month over the four and a half years. And I did not need to buy a new protective case for the iPhone SE I replaced that phone with. The old case fit the SE. Show me a competing phone that “just works” and is as competitive on price.

    August 24, 2017
  2. Fred Stein said:
    Brian’s article in the NYT makes a good case for stickiness, but this statement is way off, “And even though Apple’s phones typically cost several times more than rival handsets,”.

    Comparable Android phones are priced at near parity. (Example Pixel vs. iPhone 7, which outsells Pixel better that 30 to 1) Below $400, used iPhones (an installed base of 288M) compete with low-end Androids.

    But actually iPhones are cheaper. As Joseph notes, iPhone buyer get a rebate of about 20% by selling their used iPhones. Brian notes the value of Genius Bar, security, privacy, etc. These are all bundled services, but doesn’t see it monetarily. If you bought a Cisco router, or an HP Server, you’d pay at least 10% annually for service contract that provides these services. The iPhone is not a gadget. It’s a high-end industrial-grade personal computer, and server and router and camera…. At two years, adding both the services bundle and resale value = 40%.

    August 24, 2017
  3. Ken Cheng said:
    Don’t forget Brian is the writer, when he was at Wired in 2009, where he said the Japanese hate the iPhone, by distorting what some Japanese interviewees had said.

    August 24, 2017

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