How Apple is Still Profitable even After a Clear Drop In Sales?

iPhone’s recent model, iPhone X Max costs $1099, whereas a few years back when iPhone 6s Plus was launched it cost only $749. The average sales price of apple has been ever increasing which has affected the buying behavior of customers and not all are willing to spend more than they used to.

Apple also gives customers a monthly plan with built-in upgrades, in which you get to pay for iPhone on monthly basis instead of all at once, kind of a loan scheme. Once your payment along with loan is paid back, iPhone will be yours. This program was further expended to iPhone Upgrade Program, where customers use the iPhone for a year and company give them a monthly fee for this. After a year, the phone is resold and a new model is bought.

The option of buying unlocked iPhone by going to Apple Store is still available, where no monthly plans are involved but this could cost you much as compared to the previous process.

The major effect of the increase in prices is that the time duration for using an iPhone has increased rather than buying a new iPhone every year. Even if a new phone is bought, the old one is passed on to someone else. This has increased the buying cycle for iPhones.

This resulted in a drop in iPhone sales. Instead of increasing, the sale has decreased. In the last 11 quarters, the sale has only been 5 percent or less.
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Even after the dropped sale, the company is going strong on the basis of outright size and profitability. This has made Apple remain as one of the most profitable and successful companies in the world. However, Apple's ranking in terms of most innovative company is declining.

Side by side, iPhone revenue is also doing great. It has been rising since the last 7 quarters and reached double-digit revenue growth this year.

The average selling price (ASP) of iPhones have been the major source of retaining it at the top. This could be calculated just by diving the iPhone revenue as reported by Apple with the number of iPhones sold. The result of the calculation will be the dollars iPhone is making per phone.

After the launch of iPhone 7 and 7 Plus, the phones prices have been increased and so has the ASP.

The price range of iPhone in 2017 had been $699, $799 and $999 whereas now it is around $749, $999 and $1099. If Apple does not opt for selling old models at discounted prices, the ASP is expected to grow.

When the sticker prices of iPhone models are compared, a steady growth in iPhones’ prices can be noticed.

A steady growth in iPhones prices can be noticed in this infographic
iPhone price range chart courtesy of Kirk McPike / Macworld

The line at the top represents the range of expensive iPhones the company is selling, which has abruptly gone up with the launch of iPhone X and XS. This was basically targeted to the customers who are die-hard iPhone fans and willing to pay anything to get the latest from the company.

The line in the middle shows the low prices for new iPhone base models. This depicts the consistency of iPhone prices when it comes to base models.

The bottom line, however, shows the prices of the old models that Apple sells directly. It also has some consistency in its price range, especially after discontinuing the sales of iPhone SE was causing many drops in the prices.

The evident gap in prices of the iPhones, from $499 to $1449, Apple has been appealing a variety of customers.

Lisa Jackson, Apple VP said in an event that Apple is paying much focus on increasing the usability life of its phones. iOS 12 is also built with a vision to have a better performance on older versions as well.

This would facilitate customers in many ways. As phones cost much, people would be more interested in using them for longer or even if they resale it, they can get a considerable value in exchange for it.

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