04th Mar 2013
It is a fact that the iPhone delivers one of the best experiences on a mobile phone. However, the smartphone has not got much of a market share in India and a primary reason for this is the exorbitant cost of the handset that limits its adoption only to the upper middle class. While some may argue that it is cheaper in the US, the contract-bound phone ends up costing as much or even more, by the time the contract gets over.
Nevertheless, there is certainly a keen interest in the device as we had reported just before the iPhone 5 became legally available in India. New IDC data also confirms this notion because it reported a 400% increase in sales, indicating that a growth potential exists. It would be interesting to know how Apple could achieve something that was thought to be impossible to achieve in a price-sensitive market like India.
Thus far, Apple had been relying on selling the iPhone mostly by tying up with service provider contracts, the same way as in the US. However, there is one major difference between the pricing - US consumers are required to pay just the monthly bills, while Indian consumers still have to pay the price of the iPhone upfront, thereby negating the perceived usefulness of a contract-bound device. To their credit, the mobile phone companies provide incentives such as not having to pay the monthly rental for a year or so and also free calling minutes, SMS, and data usage up to a certain pre-determined limit, which a few presume will easily offset the cost of the handset in a couple of years.
It seems that Apple drew from its experience in China and applied it to a similarly untapped market in India. Rather than relying on the earlier distribution method via mobile providers, the company is now selling the flagship smartphone off the shelf via distributors and retailers like other companies do. The company has employed Redington and Ingram Micro to distribute and its smartphone to retailers.
This seems to have worked well in its favour because these distributors, backed by Apple, have started selling the smartphone on instalments. In a budget economy like India, EMI is a more viable payment option. Also, this helps expand the customer base to include even those who would not want to part with a large chunk of their monthly earnings in one go.
Another important and visible thing that was done by Apple was to start an extensive advertising and marketing campaign in India last September. While most companies use in-house resources to take care of these responsibilities, Apple did it through its partners. These partners obviously had a better perspective about what works in India, which would have been difficult for Apple's in-house team to achieve. The financial burden of the advertisement budget was also reimbursed by Apple by offering higher margins on iPhone sales.
With Samsung's dominance in the high-end market, things are not going to be easy for Apple even with the increased sales. A primary reason is that Samsung has a host of Android smartphones ranging from affordable to expensive GALAXY S III, which still costs a lot less than an iPhone. Apple, on the other hand, has just the iPhone, with no variants to cater to different market segments. Probably the only way to counter this competition is by introducing a mini version of the iPhone with a reduced feature set. Rumours have already been going on about such a device being prepared and we have every reason to believe it to be true, ever since the company launched the iPad mini.
To recap, here are three strategies Apple has used in India:
a) Incentives by mobile operators, to customers who buy an iPhone.
b) Sales off-the-shelf via distributors and retailers, who then offer EMI payments.
c) Extensive advertising and marketing campaign in India through partners.