When I was in the fifth grade, my mother perpetrated the worst kind of atrocity one could on a 10-year-old kid: she bought me a pair of Converse jogging pants, sort of. This was actually a great development. Converse was the hot brand at the time, and jogging pants were haute couture to fifth graders. I wore my new duds to school with exuberance and swaggered up to my friends with a “check out what I got” cockiness.
And then they laughed at me. Heartily.
“What the hell is going on?” I asked with exasperation. “Have you read what your pants say?” they replied.
According to the style, Converse’s brand was splashed down the left pant leg in its trademark font. In my exuberance that my mother had finally got me the cool pants I’d always wanted, I never actually bothered to fact-check her purchase. To my horror, the pants read “Conserve,” not “Converse.”
Clearly, I had been duped. My mother had bought cheap knock-offs at some discount store and then tried to pass them off as the genuine article to a child that was too stupid to notice. Of course I never wore the pants again and the whole situation is a large part of the reason why, to this day, I still don’t trust my mother.
I thought I’d relate that story because I was asked in a number of post-iPhone-event interviews whether Apple was devaluing its brand by introducing two separate devices, one of which is clearly positioned to be lower-end. I saw at least one Twitter comment to that extent—that children will be ashamed to bring their $99 iPhone 5C, which is basically a clone of the existing iPhone 5 but with a plastic body, to school because it will stigmatize them as having cheap or less-well-off parents.
In other words, could the iPhone 5C be the Conserve of phones?
Despite my obviously deep-rooted psychological baggage on this issue, I don’t think so. The world of laptops, where Apple is the premium brand regardless of category, is a good example for why not.
MacBook Pros with Retina displays start at $1,499, while MacBook Airs start at $999. In both cases, the respective computers are considered to be top of the line—one in the high-end powerhouse category, the other in the ultra-portable. So even though laptops are one category of device, there are actually at least two sub-categories – and Apple rules them both.
The smartphone market is seeing a similar development, with lower-end and high-end sub-categories emerging. The iPhone 5S, selling for $199 on a two-year contract with its faster processor, better camera and fingerprint scanner, is catering to the traditional buyer Apple has always gone after. The 5C, meanwhile, is going for those people who don’t yet have a smartphone or who have secretly always wanted an iPhone but weren’t prepared to pay extra for it.
J.P. Morgan had an interesting chart a few months ago that showed where the smartphone market was going. Most sales are happening either at the high- or the low-end, with not much in the middle. The 5C, with an off-contract price starting at $549, still falls on the high end of that chart, while the 5S will start at $649. That’s only a $100 difference.
In other words, don’t let the low on-contract price fool you—the iPhone 5C is no cheap knockoff. Apple is clearly looking to be the premium brand in both phone sub-categories, which are actually not that far apart. That’s good news for fifth graders everywhere.