Have you ever wondered why iPhones never go on sale?
It's something you don’t see with other brands like Samsung as Android phones go on sale fairly regularly.
YouTube channel Apple Explained breaks down the exact reason why.
"Apple never offers sales on their smartphones, even though they're some of the priciest in the industry," the narrator described.
Advert
Instead, Apple 'encourages' its customers to trade in their old devices for a discount on a new one.
This is because of its business model.
Unlike Google, which makes most of its money by collecting user data and selling it to advertisers (which is why so many of its products are free), Apple makes its the majority of its revenue from hardware.
According to Apple Explained, only 12% of Google’s revenue comes from hardware, while for Apple, hardware makes up a huge 78% of their revenue - this includes 44% from iPhones and 11% from iPads.
"Apple's primary focus has always been and continues to be on profit from hardware," he added.
Since iPhones cost around $500 to manufacture, there’s no point in selling them at that price if there’s no profit involved.
The keyword here is "profit, not revenue," Apple Explained emphasised.
Different tech companies use different models to make money.
Whilst Amazon’s strategy is to sell more 'affordable' tech like ebooks to attract as many customers as possible, Apple targets more 'premium' markets.
"Instead they [Apple] go in the opposite direction hoping that by offering a superior user experience, customers will pay a premium for their product," he added.
"It worked with Mac, which only made up about 7% of all computers sold in 2019 but accounted for almost 14% of the entire market's revenue."
This is because Apple’s profit margins are much higher than the competition, so they can sell fewer products as long as those margins stay high.
Take the iPhone, for example. When it was first released, many believed that the price was 'out of reach' for the average customer.
However, Apple wasn't too concerned as upon its release in 2008, former CEO Steve Jobs hoped to capture only 1% of the smartphone market share.
Interestingly, Apple gained more iPhone customers when they increased its price to $1,000 so lowering it or putting it in a sale would actually be 'counterproductive.'
The YouTuber concluded: "And that's exactly why Apple will never lower the iPhone's price to try and sell more units.
"If they did, they would literally lose billions in profits overnight."