Clearly, Apple had a big opportunity to establish itself in this market and, if not break market leader Nokia India’s monopoly, then at least give it a tough fight. It’s an opportunity that is now being assiduously chased by rivals such as Samsung Electronics Co. Ltd and Research in Motion Ltd, or RIM, the makers of BlackBerry.
It’s not about price
IPhone’s comedown in India has been described as a pricing failure by most. But on the face of it, it doesn’t seem logical. Priced at Rs34,999, Nokia N96 costs around Rs4,000 more than iPhone’s 8GB handset and Rs1,000 less than its 16GB model. IPhone’s other rivals, such as Samsung’s Omnia and BlackBerry Bold, are priced even more steeply . “More than the price, it was the pricing communication that hurt iPhone in India,” says a top executive of a leading telecom company who did not wish to be named. The executive points out that before the launch of the phone, Apple CEO Steve Jobs had made a public announcement that iPhone would be priced at $199 globally (about Rs9,490).
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“This built a false hope in the minds of those consumers who wanted to buy it and turned away those who could have actually bought it,” says Cheil’s Suthan.
IPhone is being sold at $199 in the US and at similar rates in several other markets, yet Apple couldn’t have offered Indian consumers the same price because the market dynamics here are very different. The US is predominantly a post-paid market where consumers buy the handsets from service providers under different deals. Carriers such as AT&T Inc. can afford to sell the phone at $199 because they can recover the real cost by raising call charges or through some other options. And Apple doesn’t get hit in the process because carriers give it the actual price.
This, however, is not possible in India because it is mainly a pre-paid market. Here, most consumers change their handsets, and even service providers, quite frequently in favour of cheaper options. Also, handsets have never been traditionally sold by service providers.
Apple had to tag the product with its real price because its licence holders in India, Bharti Airtel Ltd and Vodafone Essar Ltd, couldn’t have subsidized the price. “The reason why the price of an iPhone seems so high (in India) is because it is not sold on a contract. This selling process has not yet caught on here,” says Apple’s Mitra.
The two service providers, however, are providing finance options for as low as Rs2,600 a month to make it easier for those who want the product. But this hasn’t helped much.
According to analysts, Apple’s biggest failure lay not in pricing the product steeply but in not having communicated the reasons for the difference in pricing in India and other markets. “Most consumers thought they were being short-changed and they also hoped the prices will crash and come down to (the) $199 level eventually,” says Suthan.
Flawed distribution