IPhones Overview: Asia
China is Apple's third largest market for iPhones after the Americas and Europe accounting for $11.4 billion in revenue, while significantly impacting the performance of iPhones in the Asian region. China's nationalistic movement to shifting towards domestic brands amidst the trade war has been a leading cause for consumers switching towards other brands. The probability of switching as of 2018 was around 40%. However, the decision to switch to other brands ultimately lies with the individual customer.
REASONS FOR BUYING & STAYING WITH THE BRAND
- Apple is doing well in the mature and wealthy economies in Asia such as Japan, Singapore, and South Korea where high prices are affordable to the general public.
- In China, Apple is still seen as a luxury brand and impartial customers still continue to use it. This is also helped by the goodwill that the brand had created by being involved in social causes such creating 5 million jobs in the country.
- While there are nationalistic consumers who refuse American brands in China, there are many users to whom it does not matter much. Ultimately, this decision depends on each individual consumer.
- Apple has a strong market in the UAE due to the immense loyalty and prestigious image associated with the brand in the region, where customers are ready and willing to upgrade their device.
PROBABILITY OF SWITCHING TO OTHER BRANDS
- According to Morgan Stanley estimates, the iPhone retention rates in China, the largest iPhone market in Asia, has been 60% during 2018, which can be translated to a 40% (100-60%) probability of switching to other brands.
- During 2017, the probability of Chinese iPhone users switching to other brands was only 26% (100-75%), which is indicated by the retention rate of 74%.
REASONS FOR SWITCHING TO OTHER BRANDS
- Nearly half of iPhone users in China that switched to other brands chose Android devices, where almost half of them opted to switch to Huawei. The main reason for this switch is the loyalty towards domestic brands—particularly Huawei, which is intensifying within the Chinese market.
- In economies such as Thailand, Indonesia, and Vietnam, the iPhone lags behind rivals since most buyers choose to go for cheaper Chinese and South Korean brands.
- Some customers in China switch to Huawei due to the availability of employee discounts for buying this brand, and also due to Chinese made phones offering better value for money.
- According to local sources, using the American made iPhone in China is seen as an embarrassment among some consumers. The impact from US trade war against China and the blacklisting of Huawei exports is further strengthening the movement within the country to boycott Apple products.
- In addition to the unfavorable economic environment, the lower demand for iPhones resulted from more people replacing batteries instead of buying new phones. The decrease in battery replacement prices from US$79 to US$29 as well as the general durability of the phone is another contributing factor.
LOYALTY BASED CUSTOMER SEGMENTATION
- Under the leadership of late Steve Jobs, Apple had used mono-segment positioning to appeal to individual customer segments. However, after Tim Cook became the CEO, this shifted towards a multi-segment type positioning.
- Both US and international iPhone customers consist of two loyalty based segments. These include "hardcore loyals" who buy only iPhones, and "switchers" who do not show loyalty to the brand.