At a generally gloomy time for sales of its flagship iPhone, Apple Inc. is finding a silver lining: Customers are willing to pay more for better features.
When it launched its iPhone 7 in September, Apple for the first time packed the more expensive “Plus” model with extra hardware not available in the standard model, in addition to a larger screen.
The iPhone 7 Plus, which starts at $769, comes with a dual-camera system that delivers better portrait photos and sophisticated zooming capabilities unavailable in the standard iPhone 7, which starts at $649. The 7 Plus also offers longer battery life and more random access memory, or RAM.
The strategy appears to be working. Cowen & Co. estimates the 7 Plus accounted for about 40% of the roughly 58.5 million total iPhone 7 devices it estimates Apple sold world-wide in Apple’s fiscal first quarter, which ended in December. That’s a 17 percentage-point jump from the 23% who opted for its larger predecessor, the 6s Plus, in the same quarter the previous year.
That should lift the average-selling price of iPhones to $693 for the December quarter from $691 a year ago, according to UBS. And the increase would help Apple report an expected 2% rise in revenue for the December quarter when it announces financial results on Tuesday—despite what analysts say was softer-than-expected overall demand for iPhones.
Overall, the iPhone 7 has struggled compared with predecessors, analysts say. Today’s consumers are holding on to phones longer, and the technological divide between iPhones and cheaper alternatives is narrowing. Competition is surging in China, where local rivals are chipping away at market share. Further complicating matters, the anticipated release of a 10th-anniversary iPhone later this year—which Apple is expected to load with new features—has led many consumers to postpone purchasing the current model.