Apple's Upgrade Dilemma

Apple has been taking a beating on Wall Street in part due to scepticism over future growth of iPhone and iPad sales. With the market becoming saturated with iPhone and, to some extent, iPad users, Apple will soon need to rely upon upgrades rather than new customers to fuel sales. Apple's problem is that their products are so good, people aren't upgrading fast enough.

Many people assume that people upgrade their iPhone at least every two years, at the end of their contracts. However, anecdotally, it seems that people are upgrading their iPhones and iPads in longer cycles. For example, I see significantly more iPhone 4/4S models than iPhone 5 models. In fact, I see more 3G/3GS models than iPhone 5 models. My wife loves her iPad 2 (almost two years old) and sees no need to buy an iPad 3, 4 or mini. She likely won't be in the market for a new iPad for another couple of years. I have several friends perfectly content with their first generation iPads.

This isn't necessarily a bad thing. It means that Apple has been producing high-quality products that consumers love to use and keep. These people will likely replace them with new Apple products eventually. But eventually doesn't generate sales now.

What's the solution? The best solution is to create new products that are significant upgrades to older products. This gives people the most incentive to upgrade. It's also the most difficult solution. Displays can only be so retina, processors can only get so fast, and 16GB is already plenty of storage for most people.

A poor solution would be to prematurely stop supporting older products, which seems to be the game played by Android phone manufacturers. It would be disappointing to see Apple artificially limit software upgrades to older devices simply to encourage people to buy the latest model. However, it won't be long until it becomes an attractive option to increase sales. Let's hope Apple avoids the temptation.

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Virtual Pants is a column that provides commentary and unique insight on the latest technology news. You will find viewpoints there that aren't expressed by others in the tech blogosphere.


Comments

    Didn't Apple already discontinue support for iPhone 1 through to 3GS?

    Apple’s problem is that their products are so good

    Methinks it's probably that they do not differentiate enough with new releases - they don't offer anything particularly new or enticing.

    If you said "their earlier products were so good, that there isn't anything they can really improve", then I'd possibly agree with you.

      I hear the next iPhone's headphone socket is going to be on the bottom *mind blown*

        You mean we all now have to go out and buy new compatible headphones?

          Yep, headphones for your arse instead of your head! Don't you know you're just using them wrong!

    "Many people assume that people upgrade their iPhone at least every two years, at the end of their contracts. However, anecdotally, it seems that people are upgrading their iPhones and iPads in longer cycles."

    It's good to hear that people are being sensible with their upgrades. No need to get a new device until there's an actual reason, rather than "oh it's the new shiny."

    How about add features that exist in their competitors? Expandable memory, better cameras, better connectivity (hdmi for example), NFC.

    I can't speak as a user, although I have no problem with the quality of their product, it seems to me that it is awfully expensive, given that they've sold so much of it. Perhaps a drop in price..?
    Also, if they stopped being so pedantic about what the user can plug into the bloody things, that might help.

    Last edited 21/02/13 11:33 am

    Could this have been worded any more provocatively? "Apple’s problem is that their products are so good" is no different from the PC market in general. Computers have been delivering on the promises they used to just offer glimpses of for some time now. I think it is the main reason iPad has been successful at all - Apple were quick to realise that the booming netbook market showed that very few users actually needed all the power that Intel's latest CPUs had to offer and they exploited that epiphany brilliantly.

    As the market matured they were bound to lose impetus, as they have long positioned themselves as a premium product. Now that Android has started to flood the volume end of the market with great value competitors, Apple will have to settle for their premium margins on a smaller slice of the pie. It was inevitable.

      Rather than quick, their response to netbooks was reallllly, really slow, as was their response to tablet computing. They were very late to the party in both respects. But you're right- is was a response and it was a smart one, combining the two things was a smooth move.

        Just look at what happened when they were too early, though - the first MacBook Air was a useless joke. It deserved to suffer teh same ignominious fate as imitators like the Dell Adamo but it survived based on the loyalty/stupidity of the Apple faithful, who don't need a reason (r even an excuse) to give money to Apple. It wasn't until the 3rd generation that they actually managed to produce a useful device. OTOH, they nailed the iPad from the start. That and the fact they managed to be the first to do it properly suggests to me they took precisely the correct amout of time, as well as taking less time than everyone else.

          I disagree with the "less time than everyone else" part of your response. They eventually produced a useful tablet after many years of people formally requesting they make one (I know they were approached numerous times by healthcare companies who had to look elsewhere in the end), and it was initially quite a lot less than people actually needed.

          Technologically there's nothing to the ipad story, it's a basic, obvious device that was already being build by others in other forms and was really just a larger version of their iphone/ipod platform initially. The success was in marketing and capturing mass consumer appreciation for it because of price, usability, brand name, aesthetics (to a very minor extent), and most importantly: off of the back of the consumer good will for the iphone and the usability training people had had with their ipods.
          It was primarily a strategic marketing success. And it eventually allowed them to claw back all they'd lost when they had their pants around their ankles during the cheap netbook boom.

            All of your raving ignores the enormous sales success of the thing which, I can assure you, is the only measure of success any business cares about.

            What other device was around before it that was anywhere near as useful? Clearly iPad could not have succeeded without the power of the App Store behind it, which I have no doubt is the entire secret of it's success against everyone else who was trying to make a device that ran a full OS efficiently. But the fact remains that I couldn't name a single lightweight tablet device that existed before iPad. Yes, there were PDAs and laptops with touchscreens but they were anythign but successful.

            I agree completely that Apple's marketing made it a success but if the thing didn't work for customers, like the first MacBook Air, no amount of marketing would have sold the tens of millions that they have shipped.

              Raving? - We don't like in others what we hate about ourselves. ;)

              As to the rest of your comment, you're replying to your own imagined version of what I've said. Do you do that sort of thing every time you reply to comments? must get a little one sided.

                I am replying to the clear intent of your post, which was to suggest that iPad was nothing special. You have to know by now that as a computing device I don't rate it at all but the thing's popularity is almost unrivalled, yet you dismiss it as a simple marketing success. I'd suggest that is only the case when you compare it to the popularity of netbooks. To me, iPad is the logical next gen netbook - it has almost exactly the same pros and cons but with far fewer compromises. Yes, it was marketed to within an inch o fits life but to suggest that is the one and only reason for it's success is selling it well short.

                And well done in sidestepping my request to name a tablet that was around before iPad.

      You just can't help yourself, can you? Troll.

    I purchased the ipad 1 and less than two years later they pulled the support even though the ipod touch got support and has the same tech specs . I have gone android over it. At least when the official support stops you still have a large community of people still working to update the device.

      Not only that, but with Apple products you don't get the option to DOWNGRADE when you do an update and realise your 3GS is too slow to run it. I'm also on Android now and never going back.

    I'm typically ok with updating my iPhone and iPad once a year. This is because it doesn't cost much extra to upgrade (after selling the old device), and with updates released only once-per-year the new device is usually a worthy upgrade. If however Apple starts releasing more frequent product updates (in an attempt to stay fresh) I definitely won't be keeping up with new releases.

    With a once-per-year product cycle you know you're going to have the best device available for about 1 year. With more frequent updates though you know your top-of-line device is going to superseded in just a few months by a device that's only a minor upgrade on your existing device, so why bother updating? For me this really removes the impetus to upgrade.

    I don't actually care if Apple starts releasing more frequent updates, but I won't be moved into updating until multiple minor improvements have accumulated to the point where my current device seems very defunct.

    I think they need to decide on a product cycle and stick to it, because as soon as there's uncertainty about when the next upgrade is going to be released people become hesitant to buy. Nobody likes shelling out a lot of money on a new gadget only to have it superseded a few weeks later. People are more inclined to commit their funds though if they know the next iPad won't be out for another 6 months, because that's a long wait.

    Perhaps one option to promote purchasing turnover would be a guaranteed 'buy-back-to-upgrade' scheme, where Apple buys back your old device at a certain price giving you the option to pay the difference in cost for the latest device. The 'buy-back' phones could then be used for parts as well as refurbed and resold.

    Still using an original iPhone, it's about 6 or 7 years old and works great, only 2G data speeds when away from wifi, but I only use it for email and a bit of web browsing anyway so that's OK. Not buying a new iPhone until it dies.

      Legitimate reasoning, no question about it, but I think your response also encompasses why so many people have made the switch to Android. With both high and low end models available, you could make a $0 switch with your current carrier to a new phone with better specs and increased functionality. It wouldn't be the best on the market, but it would be considerably better than a 6-7 year old phone, would do everything you want it to do at faster speeds than your current phone, would have a warranty to cover it and because it's still a newly released device you'd have support for at least the next 1-2 years at which point you do it again. Zero to lose, plenty to gain.

      Personally, I upgrade about every 2-3 years and hand my old phone to one of my nieces or nephews for the awesome-uncle-browny-points it earns me! I can't say how often I upgrade a tablet as I've only just bought my first and only then because my wife wanted one for a uni course.

        Do eveything I want at faster speeds? Wow, make faster phone calls? Send faster texts? Play faster 'Angry Birds'? Your response in turn encompasses what's wrong with the world. Spend money and waste time and resources for no reason whatsoever.

          You said you use the phone for email and a bit of browsing at 2G speeds, so therefore, yes, a new phone on 3G or 4G will be faster. Also, a faster processor will allow you to launch programs more quickly, something that most people appreciate. Lastly, I mentioned that you'd be able to upgrade your phone for $0 and so not spending any money, negating your last sentence.

          Your snide remarks to my response encompass everything wrong with, well, people like you. I wasn't trying do anything more than provide an alternative and possibly helpful viewpoint, while you chose to take it as a personal attack and attempted to deride me. Grow up.

          You think that's everything that's wrong in the world. I think you're exaggerating massively, there. With my phone I can do lots of stuff that I couldn't with yours, which I think is nifty, but I don't plan on upgrading until it breaks (which hopefully won't be soon), so I agree. If other people decide the niftiness outweighs the cost, so be it.

          I don't understand why you bought an iPhone in the first place, however. Why not a twenty-year old brick. It'd work just as well for phone calls, if not texts. It's barely a necessity.

      Really? I wish my iPhone 3G was the same, it had trouble even loading the messages app. Glad I was able to pick up an iPhone 4 for a cheap price.

    Apple’s problem is that their products are so good, people aren’t upgrading fast enough.

    And never a bigger fanboy piece of garbage was ever written...

    If Apple actually improved their features, people may upgrade, but while an iPhone 5 barely offers any improvements over a 4, people have no reason to upgrade.

      yupe not upgrading my 4S to 5.... bought Nexus 4 though for my work phone.... and it's great.... feels like 5" iphone hahah...

      too bad the camera sucks.

    It would be disappointing to see Apple artificially limit software upgrades to older devices simply to encourage people to buy the latest model.

    Yeah, because Apple doesn't already do that... I lol'd.

    Last edited 21/02/13 1:33 pm

      My ipad 1 is no longer supported in the sw upgrade cycle, and its enough to make me consider alternate products to replace it. It's consumerism at its finest, the supplier is forcing a solution on a problem that doesnt exist (the hardware is TOO good for it to be outdated already).

        It's a joke. The first thing that comes to mind for me is Siri, the major selling point of the 4S at the time. Apparently the 4 wasn't capable of handling Siri, yet jailbreakers got it running without a hitch, and no comment from Apple.

        And even now with turn-by-turn navigation etc on iOS 6, which isn't supported on anything below iPhone 4S, yet there's a heap of third-party apps that have it turn-by-turn on even the 3GS.

        No one can say Apple doesn't already artificially limit updates to their older devices.

          Metro Australia, brilliant turn by turn came out long before siri. Not to mention Tom Tom, Navigon are all on there too. Apple are bringing old things to the table, with a shiny new coating and calling it innovative.

    apple seems to have fallen in to the trap that other manufacturers have solved with planned obsolescence....their products are market leaders in terms of hardware quality (even if they dont change too much between iterations), so it seems like software support is the only way they are going to be able to differentiate themselves. maybe if they changed their hardware release cycle from yearly to every second year, with the appropriate advances to make it attractive, it might entice people to upgrade.

      The problem with planned obsolescence is
      a) Every time a buyer looks to upgrade, they likely will look at the competition. If the buyer perceives that 'planned obsolescence' is a factor in them entering the market, as is often the case with people on tech sites (but perhaps not with more casual buyers?), then they will likely take those issues with their previous devices manufacturer into strong consideration. It could very well lead to a situation where a manufacturer actually provides the encouragement for a customer to look elsewhere.

      b) In cases where A plays out, you then lose out on auxiliary cash flows if your company has them. Maybe less of an issue for companies such as HTC, but Apple and Google make money on an ongoing basis if a user stays in their ecosystem. Theres a balancing act where you want buyers to upgrade, but if they go to a competitor you're likely to loose ongoing revenue from app stores and the like.

      Anyway I'm not sure any of the main players have 'planned obsolescence' as something they strive for, rather it just occurs due to economic restraints and progressing technology that makes it difficult to support products that may have left the market 18 months ago but users still own. If you are a CFO of a company like HTC that doesn't have a music or app service, spending millions to support a device you ceased to sell a year ago might be a hard thing to justify.

    Android manufacturers cannot afford to keep updating older models, it's too fragmented as it is. So they keep the newest, for the newest so to speak.

      You don't really understand the concept, do you?

      Fragmentation is the effect, not the cause.

        I never implied it was the cause? But tell me why you think it isn't the cause.

    However, anecdotally, it seems that people are upgrading their iPhones and iPads in longer cycles. For example, I see significantly more iPhone 4/4S models than iPhone 5 models.

    Something to keep in mind is that not everyone buys their phone day one. With the 4S coming out in late 2011, two years ago the iPhone 4 would have been the flagship model, and many people with a 4S will have up to 18 months left on their contract (and thats assuming they bought it before the 5 was announced...they could have got one afterwards).

    The other factor is Apple have deliberately kept older models in the market, so some users upgrade path may not be to the latest model.

    No doubt the iPhone 4 and 4S are more common....but I don't think thats surprising.

    The iPad is probably a harder sell as there will be far fewer sold on a contract where a user gets a perceived 'free' upgrade every 24 months.

    Last edited 21/02/13 7:05 pm

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