Published: - Nov 10, 2017

What is behind Apple’s groundbreaking success?

Leer en Español: iPhone X: el celular y el premio Nobel de Economía

Apple Computer Inc. is close to becoming the first trillion-dollar company. The iPhone X celebrates the first decade of the iPhone itself, which has sold over one billion units on its 18 iterations. Steve Jobs announced the original devise on January 7, 2007; Apple’s stock has become more valuable ever since.

No iPhone ever has been more fragile than the iPhone X, which bears a 64% gross margin for every $999 device put in circulation. Morgan Stanley predicts total sales for 123.1 million units, which means $123 billion gross earnings and $78.7 billion in profit for the X model in 2018. Customer service demand is also expected to rise.

Analysts’ confidence resides on the expectation of a strong 2017-holiday season as credit becomes more expensive, while Chinese and American unemployment rates average is 4.02%, the lowest it has been in a decade. Now, the 2007 financial crisis seems to be long gone and recovery in iPhone abiding nations is starting to be felt, plus, it’s a very strategic moment in Apple’s buying process following the 2015 golden age.

The iPhone 6 turned three years old on September 19th, which in accordance to the company’s Product Greenhouse Gas Life Cycle Assessment means retirement. The iPhone 6 holds the current record for the most units sold in Apple with 231.1 million pieces checked. The iPhone 8 and X family is expected to sell 13% more, Katy Huberty, Morgan Stanley Managing Director of Research, declared. Still, there is more to the iPhone X’s success than macroeconomics.

Richard Thaler won the 2017 Nobel Prize in Economics for his work in behavioral economics. His simplifying perspective about human decisions imply that human beings lack self-control, carry a limited capacity to process information and are more influenced by emotions than previously thought. Disregarding irreducible rationality can be very helpful to understand why the iPhone X is so popular.

According to behavioral economics, expectations drives behavior. In order to foster certain conduct then a number of conditions must be set. A nudge is the condition Apple sets in order to make people spend more money on a smartphone. Nudges are Apple’s secret weapon for increased sales and positioning in user’s top of mind.

Tim Cook is the living face of Apple. As such, it’s his job to defend the nearly million-dollar price tag on his product. The tech giant’s CEO nudged costumers by making the price relatable to everyday transactions by saying “if you think about that, that’s a few coffees a week. Let’s say less than a coffee a day in one of these nice coffee places”.

In the end, Apple’s core business goes beyond selling phones; it’s a signal business. Tim Cook’s team makes a terrific job by creating a product that will convey information about the user for social exchange. The tech giant re-enforces the idea that owning an iPhone makes you special. Customers live up to the challenge.

According to the corporation, owning an iPhone will make you look responsible, as well as wealthy. A message Apple never ceases to express despite not saying it explicitly. It’s the psychological game in which the Cupertino based company owns a competitive advantage and which will continue to make them rich.

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto