Does Apple’s cheaper iPhone hurt its brand?

Among the announcements at Apple’s big product unveiling Tuesday was the long-awaited confirmation that it will offer a version of its popular iPhone that comes housed in plastic rather than metal and is considerably cheaper than its high-end iPhones 5 and 5S.

The budget phone is called the iPhone 5C, and its unveiling prompted elated responses from people pleased with its affordability (the cheapest one is $99 with a two-year service contract):
Responses like that would seem to be Apple’s goal in offering the new 5C, along with making it easier for people outside the United States, where cell phones aren’t subsidized with customer agreements and contracts, to buy them. Still, brand experts say the move to produce a lower-end phone may not have been the best PR move for Apple.

“Apple is a lifestyle brand known for premium products,” says Lex Perryman, professor of management at the Milgard School of Business at the University of Washington Tacoma. “The company already has a broad fan base, from children with iPads all the way to seniors using iPhones. Without some numbers to analyze, at face value, this move runs the risk of bringing the quality of the entire line into question without adding a significant number of new customers.”

Brands usually can’t have it both ways, he says. They tend to either thrive as low-cost leaders or high-end innovators, but rarely both. (Though there are some exceptions, such as Ikea.)

Branding expert Rob Frankel says what Apple is doing isn’t all that unlike what often happens in the fashion industry.

“An expensive designer label reaches its saturation point, at which time it begins increasing its distribution through lower-end retailers,” he says. “Nobody really thinks much of Gucci, Tommy Hilfiger or Rolex anymore, because just about anyone can buy them.”

Even so, Shel Holtz of Holtz Communication + Technology emphasizes the cheaper phone’s aim isn’t to pull down the brand in the United States; it’s to open it up to other countries.

“In China and other emerging markets, a cheaper iPhone is a solid bet,” he says.

Gary Tobin, principal at Tobin & Associates, also notes that the features Apple touted for the 5C and its upper-end sibling, the 5S, such as a fingerprint scanner, probably won’t do much to differentiate these new phones from competitors. It’s a “feature war,” he says.

“To the external observer, what is being played out in the marketplace is a series of tactics with no apparent strategy,” Tobin says. “The question is, has Apple fallen prey to the thought process and tried turn a series of tactical moves into a strategy?”

Frankel adds that Apple isn’t doing much to deter people from privacy concerns—two years ago, atracking scare turned into a PR crisis for the company—by collecting people’s fingerprints.

Perryman says it isn’t particularly out of character for Apple to introduce incremental upgrades for its phones, but the iPhone 6 should probably be a big leap into something new, not just a feature a competitor can quickly copy.

Of course, Apple was likely expecting to be party to a debate about those topics. One the company may not have been expecting, though, was a political scuffle over the Koch brothers, the bankrollers of a number of major right-wing political campaigns, acquiring one of Apple’s major suppliers.

Cheap phone or not, an issue like that may make it hard for people with a liberal slant—the stereotypical Apple customer—to buy another iPhone.

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By Matt Wilson