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Apple's Trying to Push iPhone Upgrades — and That's OK! – Motley Fool

Apple‘s (NASDAQ:AAPL) iPhone business is experiencing some turbulence from a number of factors, including lengthening smartphone upgrade cycles, trade tensions between the U.S. and China, and the company’s temporary low-cost iPhone battery-replacement program. 

Now, according to a new report from Bloomberg, Apple has apparently “asked retail employees to promote new iPhones using methods not seen before.” 

An Apple store employee with a customer at an in-store iPhone display.

Image source: Apple.

Here’s how Bloomberg described those efforts:

Technicians were told to push iPhone upgrades to consumers with out-of-warranty devices. Senior sales staff had to make sure other retail workers were suggesting upgrades, and easels offering generous trade-in deals for the iPhone XR were erected in stores. Apple’s online homepage was also replaced with reduced iPhone pricing that required a trade-in of older models.

Although this is newsworthy because Apple hadn’t previously employed these tactics, it’s simply a good business move. Here’s why. 

A new reality

The tactics that Bloomberg described might seem like temporary measures to help Apple get through a rough patch for its iPhone business. I don’t think they are.

It’s true that some of the issues currently impacting Apple’s iPhone business may prove fleeting. Trade tensions are likely to get resolved eventually, for example, and Apple probably won’t lower the price of battery replacements again. But there are some permanent matters the company will need to cope with on an ongoing basis.

For instance, market research company IDC believes that the smartphone market may experience a decline in unit sales for the third consecutive year in 2019. Apple is not immune to a smartphone market slowdown, and if the market is shrinking, you’d expect each smartphone vendor to aggressively protect its share while trying to poach customers from competitors.

Apple also participates exclusively in the higher-end portion of the smartphone market, which is troublesome when the low end of the market seems to be outpacing the higher end. 

In the face of this new reality, Apple needs to adjust to maximize its sales and profitability. 

More aggressive marketing over time

Even though Apple has implemented new marketing tactics to boost its iPhone business, and even though the discounted iPhone battery-replacement program has come to an end, the company’s financial guidance for the current quarter isn’t particularly optimistic.

Apple told investors to expect revenue to be in the range of $55 billion to $59 billion this quarter, down from $61.1 billion in the same period a year ago. Furthermore, Apple’s non-iPhone businesses are set to grow year over year, meaning that the company expects a severe decline in iPhone sales. 

This implies that Apple’s work is far from done on the marketing side. Over time, the company will need to continue finding new ways to stoke interest in its products and keep working to find ways to make it easier for customers to pay for new devices. Just building great products is no longer enough.

Apple has its work cut out for it, and I think the actions Bloomberg reported represent the first step in what’s bound to be a multiyear journey to transform the company’s go-to-market strategy. 

Ashraf Eassa has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple and is long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.


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