Before the official announcement of the iphone 5c, many Apple’s fans expected that Apple would offer iphone 5c at a relative low price to compete with cheap devices running Android. The lower cost smartphone would be priced at around 400 dollars in order to address developing markets such as China. However, everyone got very wrong since the “c” in iPhone 5c did not stand for “cheap” in any way. In reality, the iPhone 5c is completely different, with Apple offering a phone with a 172 dollars BOM and manufacturing cost, and a 549 dollars market price. Previously, Apple’s strategy was to position one new version for the high-end of the market and discount older version for the price-conscious segment. But the company just stopped offering iphone 5(one of the old versions) by offering two new versions which are iphone 5c and iphone 5s to different types of customers. Basically, iphone 5c is really similar to iphone 5 except the different colors of plastic cases. The company chose a new market strategy believing that the appearance of new means something is new, no matter what came before. By lowering its cost, Apple is optimizing its iPhone hardware gross margins to attain maximum profitability.

The target audiences of iphone 5c will be kids or teenagers and the 5s is for higher income people. From customers’ point of views, the price of the iphone 5c was supposed to be cheap but they were shocked by the truth. Those customers who have middle income might feel disappointed after they knew the price of the iphone 5c; instead, they might prefer iphone 5s to iphone 5c. For those higher income people, it would not bother too much for their decisions of buying iphone 5s as they have already valued 5s as their identities.