updated 03:20 pm EST, Fri February 23, 2007
iPhone priced too high
Apple's decision to announce premium pricing for the iPhone will likely play a significant role in the adoption of the consumer device, but if the Cupertino-based company keeps its current pricing scheme -- which starts at $499 -- it may face significant challenges in attracting large numbers of customers. A new study released Thursday found that consumers are not willing to pay either $599 for the 8GB or $499 for the 4GB model; however, if pricing is cut significantly, the device may attract new customers to AT&T. Market research firm Compete found that about 25 percent respondents were likely to buy an iPhone, but that only one percent would pay $500. The report also indicates the pricing will likely change, either at launch -- as Apple has done with product introductions in the past -- or soon after to target the mass market.
The company found, however, that a much larger number of consumers are willing to pay between $200 and $300, according to a report published by PC World. The online market research firm Compete surveyed 379 people in the U.S., most of whom had heard of the iPhone and have shopped for an iPod.
Among the 26 percent of respondents who said they're likely to buy an iPhone, more than 40 percent said they'd pay $200 to $299.
The survey indicated that AT&T's compromises to achieve an exclusive deal with Apple may pay off. Nearly 60 percent of those in the survey who said they were likely to buy Apple's iPhone also said they'd switch their mobile operator in order to get it, the report said.
Not for corporate use, despite price drop
Although it has been compared to other corporate data devices, Apple's iPhone will likely face significant challenges in the enterprise market, but should garner greater adoption as the company begins to lower pricing.
Bear Stearns analyst Andy Neff said that products such as Research In Motion's Blackberry cater to the enterprise and that the iPhone is not well positioned for this market.
"Even though there's talk about this as an alternative to RIM, it's not a corporate product," Neff said in a conference call to discuss the results of the study. Apple's iPhone heralds a paradigm shift in consumers purchases toward smartphones and signals the the emergence of niches within the category, he said.
The report notes that Apple has been known to announce a product with one price, but sell it for less on launch. Apple TV, for example, was expected to cost $399 but sells for $299, the analyst said. Even if the phone is not discounted at launch, Neff believes that lower pricing will be Apple's goal in the months after its US launch in June.
"The phone may start out around $500 because early adopters will pay that," Neff told PC World. "But pricing will likely drop by $100 to $200 to target the mass market."