Apple’s Value Play Undergirds A String Of New Products

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AAPL
e made its reputation over the past couple of decades making high-end products with high-end prices. But in this summer of pandemic, lockdown, recession and uncertainty, one of the most striking new features of several new Apple products has been one thing: affordability.

Last week’s briskly paced non-iPhone product announcements included a cheaper Apple Watch, three bargain bundles of services, and more “Pro” capabilities for its cheapest full-size iPad. As part of a larger push for lower-cost offerings, it marks a well-timed shift to accommodate a big chunk of the market facing financial straits and/or the demands of work-from-home/study-from-home life.

The value push started this spring, with the debut of the iPhone SE Generation 2. It arrived as the pandemic, lockdown and economic freeze first hit the United States, with a perfect-for-the-moment pitch: “Lots to love. Less to spend.”

Analyst and long-time Apple watcher Ming-Chi Kuo predicted before launch that the $399 second-generation SE would sell as many as 30 million units in its first year, as much as its predecessor. The company has yet to break out sales for the SE Gen 2, but anecdotally it appears to be a hit with millions of people who like smaller, cheaper phones that work in the sticky Apple ecosystem.

At $399, Gen 2 is the cheapest iPhone since Gen 1, featuring a fast processor and a decent 12-megapixel camera, but a 4.7-inch screen that uses older LCD technology. That screen is one of the big compromises Apple made to get the price down, as was not including the charging brick and a wireless recharging puck.

Apple now will also stop including chargers with other lower-cost products, though during Tuesday’s announcement, it billed the cost-saving measure purely as good for the environment.

Those cheaper products now include the Apple Watch SE, announced this week. At $279, it’s $120 cheaper than the base model of the Apple Watch 6 that was also announced, and doesn’t have some of the 6’s high-end sensors like a blood oximeter and electrocardiogram.

In this case, the obvious market is senior citizens and young children who don’t have/want/can’t manage an iPhone. Instead, the SE with an extra cellular plan could work on the company’s new Family Setup app, which shares schedules, tracks sudden falls, and allows communication without a phone.

There’s also the aging Watch 3, at $199, but with no cellular capability or the ability to use Family Setup.

In its own way, Apple’s announcement of the $329 eighth-generation iPad ($299 for education buyers) was a value play too. With a A12 Bionic chip, Apple bragged that the tablet is up to six times faster than the best-selling competing tablets and laptops running Windows, Android and Chrome.

The real value, however, was the low-end IPad’s ability to use several high-end Apple add-ons, including the Pencil and Smart Keyboard, which used to work only with the company’s pricey iPad Pro line, and new iPadOS functions like the Scribble handwriting-recognition software.

Tuesday’s biggest value announcement may not even have been hardware. Rather, it was for Apple’s burgeoning Services business, which topped $13.2 billion in revenues last quarter and will add a new Fitness+ service sometime this fall, along with three different Apple One bundles of its subscription offerings.

Fitness+ will cost $9.99 a month, or, speaking of value propositions, become part of One’s $29.99 a month Family bundle. If you’re a clan of hard-core Apple users who already pay as much as $45 a month for iCloud, TV+, News+, Music, and Arcade, that’s a deal, especially with a fitness app added in.

Apple Music competitor Spotify immediately filed a complaint with the European Union that Apple was abusing its market power by offering the One bundles. Millions of users prefer Spotify over Apple Music, but throw it into a money-saving bundle with a batch of other useful (if not world-beating) services, and the value calculation will surely shift for many.

Not everyone thinks the value push makes sense for a company long known for making high-end, aspirational products. I’m part of a weekly Zoom gathering that includes marketers from some of the biggest names in consumer products To them, a value play represents an odd departure from Apple’s long-time value proposition.

But in a year when the lives of billions have been disrupted, and tens of millions remain out of work amid a stuttering U.S. economy and looming concerns about a winter second wave, offering its customers price-friendly options might be the right time and right message for one of the world’s most successful companies.