How Apple Could Copy Samsung to Revive iPhone Sales
After years at the top of the smartphone heap, an uninspired new flagship phone disappointed fans. Sales and profits tumbled, along with the company’s stock price.
The story of Apple and its iPhone 6S? Sure. But it’s also the tale of the Samsung and the Galaxy S6 last year. Samsung has turned things around this year, and the Korean company’s revival offers some potential lessons for Apple.
Perhaps the biggest change from 2015 to 2016 at Samsung was paying more attention to which features actually drew customers to its phones. Last year, Samsung dropped some of its long-time signature features from the Galaxy line, including a removable memory card slot and waterproofing.
This year, it not only brought back both features, it also made a change that might be considered heresy at Apple: it made the Galaxy S7 thicker and heavier so it could fit a bigger battery. The S7, at a thickness of 7.9 millimeters and a weight of 152 grams, was 16% thicker and 10% heavier than the old S6. But the extra size and weight allowed for a 3000 mAh battery, an 18% increase in capacity.
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Apple’s changes from the 2014 iPhone 6 to the 6S last year weren’t as radical as Samsung’s, but new features in the iPhone 6S lacked widespread appeal. Android phone makers didn’t even deign to copy 3D touch or live photos. Super high-definition 4K video was a cool addition, but most videos are played back on the iPhone itself, where the higher resolution isn’t as spectacular. And a huge jump in processing power from the iPhone’s A9 chip just isn’t that important to customers who spend most of their time reading Facebook and listening to Spotify.
According to some rumors, Apple may already be heeding this advice. The new device, which outsiders have dubbed the iPhone 7, is expected to be waterproof and contain a dramatically improved camera for taking photos in low-light situations. Those are both straightforward features users can easily appreciate.
But Apple’s iPhones take years to develop, making rapid change at the last minute unlikely. Some rumors about the upcoming device seem less customer-oriented, including the unchanged physical design and removal of the traditional headphone jack. A truly game-changing feature that will be attractive to every user, a crystal clear OLED screen, isn’t expected until 2017.
Another key to the success of Samsung’s S7 was the increased value to buyers over the prior model. Not only did Samsung reduce the price, but it also threw in all kinds of freebies for early buyers, ranging from its Gear virtual reality headset to tablets and even 48-inch TV sets. Carriers also offered two-for-one deals to customers adding lines.
Apple has not reduced the price of the iPhone since 2007, an increasingly tough stance as U.S. carriers have stopped subsidizing most phone sales. Furthermore, Apple doesn’t make the same kind of ancillary gear that the broader-focused Samsung can throw in to entice upgraders. But it does own the popular Beats headphone line, many iPhone cases and other accessories, and the Apple Watch.
Apple could raise the value proposition for iPhone buyers by “bundling with something cool,” says Neil Shah, partner at Counterpoint Research. “Apple needs to bundle the watch, which anyways is seeing a decline in sales for the first time for any Apple product in its first year of launch.”
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Apple could also increase the storage memory included on the entry-level iPhone from 16 GB to 32 GB, a move that many critics says is long overdue. That would give someone upgrading from an older entry-level iPhone model double the storage right out of the box.
Finally, Samsung also got itself back on track by improving its line up below its most expensive, flagship phones. Improvements and new marketing for cheaper models like the J-series helped Samsung pick up sales in developing markets.
Apple, meanwhile, is getting killed by cheaper models in China. Its overall sales in China plunged 33% last quarter even as smartphone sales there were relatively flat. Now, Chinese manufacturers of cheaper phones like Oppo and vivo are having growing success in other markets.
Apple got off to a good start on addressing the middle of the market with its new 4-inch screen iPhone SE, which starts at just $400. But it may need to broaden its offerings, particularly as Asian consumers tend to favor larger screen sizes.
If it wants to avoid further sales declines and the accompanying falling stock price, following some of Samsung’s strategy may pay off.