Apple really do need to improve their off-contract value proposition if they want to increase their appeal (in Europe at least).
Off-contract prices matter to people who use prepaid, and in Europe prepaid can be really good (e.g. Giffgaff in the UK, Congstar in Germany).
Apple might not like it, but they are in an ecosystem war. They're not just competing against the latest flagship Samsung Galaxy, but all other Android phones as well. Nowadays, you can get a really good Android phone quite cheaply.
Here's what Apple's lineup looks like today:
- 8GB iPhone 4 - €400
- 16GB iPhone 4S - €579
- 16GB iPhone 5 - €679
- 32GB iPhone 5 - €789
- 64GB iPhone 5 - €899
That's simply too much money, especially for the older devices. Most of the visual effects from iOS7 won't even work on an iPhone 4. Nobody would recommend you spend your €400 on an iPhone 4 with 8GB of storage.
Now let's take a look at Amazon.de's best-selling off-contract smartphones, Amazon price (RRP):
#1 - Samsung Galaxy S3 Mini 8GB, €237 (€440)
#2 - Samsung Galaxy S4 16GB, €500 (€700)
#3 - S3 Mini 8GB again
#4 - Huawei Ascend Y300, €127
#5 - Samsung Galaxy S3 16GB, €370 (€700 - likely old figure)
Average price: €294 (€461 if you say the GS3 has a €600 RRP, which is still quite high)
In fact, Apple's highest entry is on page 3(!). That's simply shocking, but when you compare the value proposition, it's hard to disagree. Would you recommend an 8GB iPhone 4 against any of those phones? Even the €130 Huawei has a 4-inch 800x480 screen!
Just to be nice to Apple, I'm ignoring the Nexus devices because they're sold at cost. I don't expect Apple to match that, and thank God for them that not more people know about them!
Apple need to drop the 8GB model for 16GB minimum, and improve the quality of their offering at the €400 price (that should be RRP - with room for retailers like Amazon to discount it to nearer the €350 mark).
Apple have huge economies of scale - as they showed us with the iPad - and huge margins that can afford a little trim if they increase volume. You definitely get a sense here that the European market is slipping away from Apple because there's no additional value for the additional cost.
It's very similar to the narrative that Google is getting better at design faster than Apple is getting better at services. Apple may not know how to make a €400 iPhone that isn't an outdated piece of junk, but other companies are making excellent devices for those prices and even lower than that.
My proposal:
16GB iPhone 5S - €400
32GB iPhone 5S - €500
32GB iPhone 6 - €600 - €650
64GB iPhone 6 - €700 - €750
128GB iPhone 6 - €800 - €850