Strategy to help Apple take Android market share

Every year, phone manufacturers launch new products with a series of upgrades to attract users. Before the period when the whole world was affected by Covid-19, some reports from market research companies showed that the smartphone replacement cycle was usually 2 years. But during and after the pandemic, this period tends to be extended, at the same time recording the rise of the consumer segment, the business of used devices. Apple with iPhone running iOS and Android phone manufacturers are all in that picture.

Nowadays, old smartphones have become products that stick with users longer than before and are often passed through hands and owners to optimize the economy . New phones are often expensive, but also more durable than before and smartphone technology has almost reached saturation when modern features do not have many practical applications.

Policy for old phones

According to a report from WSJ , American consumers are favoring old, used devices or choosing to buy refurbished products that are re-supplied by manufacturers to the market. In the second quarter of 2022, the number of iPhones in this market exceeded 50% for the first time (according to Counterpoint Research), which is larger than Android, and by the end of the year, this rate increased to 52.5%.

Many Apple products that are several years old still receive software upgrade support.

Notably, that growth does not come from Apple's new product sales, but from the company's policy for old devices. In 2022, "Apple" will still update software and security patches for iPhones released in 2017, something no other Android smartphone manufacturer can do today.

After 5 years or more, iPhones are still enough to meet the needs of users and almost only need to replace the battery or a few less important details. Market research data shows that iPhones still work stably and usually have at least 3 owners before being discarded.

The habit of keeping old phones around seems to be supported by carriers, as telecom companies often discount new devices if subscribers trade in their older models and renew their contracts.

"Long-term" strategy

Apple didn’t suddenly gain a large market share in its home country, but rather it was the result of a long-term strategy. According to Carolina Milanesi, a technology analyst at Creative Strategies, Apple has built “an entire ecosystem” of compatible and interdependent products to keep users engaged.

Apple has a product ecosystem to retain customers

iPhone owners will soon realize how convenient the music experience on AirPods is, and the way the Mac, iPad, and Apple Watch sync and support each other in daily tasks is likened by the expert to "a walled garden" that makes users more attached to the brand.

Apple has also succeeded in “premiumizing” its devices—a strategy that has allowed the company to find ways to offer more expensive products that consumers will still pay for. During the 2022 holiday shopping season, the average price of a new iPhone topped $900, an all-time high and nearly 10% higher than the previous year.

The iPhone 14 Pro Max, priced at $1,599, is still selling very well, but the number of people who say the device is expensive is "insignificant" compared to the number of customers willing to pay. As a result, this model is constantly out of stock.

Sell services to retain old customers and attract new customers

Market research firm IDC estimates that 283 million used/refurbished phones will be sold globally in 2022, accounting for nearly one-fifth of all phones sold worldwide. The firm predicts that by 2026, that number will reach about 415 million devices, representing a growth rate of nearly 14% per year, four times higher than new phone sales. According to technology analysis firm CCS Insight, the iPhone accounts for more than 80% of the used phone market.

Apple provides a series of optimal services for its ecosystem and earns a large amount of money from it.

But the boom in used devices has not made Apple worry about the fate of its new iPhones. The company is the world’s largest manufacturer of used devices, opening up another business opportunity: services and software.

Last quarter, Apple hit a record $20.8 billion in services revenue. A significant portion of that came from monthly subscriptions to services like iCloud and Music, which the company provides. In fact, this group of customers accounted for 17% of Apple’s total revenue during the period. The profit margin on services is also much higher than that of hardware sales.

Not only does Apple make a lot of money from services and utilities for its device users, it also makes a significant profit from "commissions" paid by third parties for transactions arising within its ecosystem. The huge number of users (both old and new devices) continues to be a "gold mine" for the "bitten apple".

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