It’s the cumulative effect

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Apple Inc. (NASDAQ:AAPL) showcased last week its new iPhone 7 and 7plus, along with the new Apple Watch.

Is it just me, or this is the 3rd time in as many years we’ve heard the public’s reaction be something along the lines of: “yeah, good, but not good enough for me to change phones”.  That was true from 5S to 6, from 6 to 6S, and now from 6S to 7, as a consequence, many iPhone buyers have kept their old handsets, and have opted to wait for further models, with bigger updates.

The cumulative effect is described as the total enhancement a product shows after several iterations. As it stands now, the iPhone 7 offers enough enhancements to merit an upgrade from all those 5S users that didn’t jumped neither on the 6 wagon or the 5SE wagon, while the general public will be waiting to see what Apple comes up with next year for iPhone’s big 10th anniversary.

In the mean time iPhone sales have dropped for the first time since launch, which corroborates the above statements that the marginal benefits technologies offer in each iPhone release are being significantly reduced, and it makes it worth people waiting two years before upgrading.  Two years that generally match the carrier plans offered with a new handset.

On the other hand, we have Apple’s phone for life plan, where you pay a fixed monthly fee and you get an unlocked new phone every year.  This is somewhat akin to leasing a car for about half the price of the new car over the life of the lease, but never owning it.  It has been going around for a year or so in the US, and those who took part in the plan should be getting new phones soon.

In conclusion, innovation being packed into new phones from Apple as well as those from its its main competitor Samsung (KSE: 005930) seem to be waning with every release to the point that their marginal increase doesn’t drive customers to purchase a new phone.  This drove iPhone sales to first increase at a lower rate (for the first time since its launch in 2007), and then to outright decrease.  Let’s see what numbers the company comes out with once they start shipping.

Until then, happy phoning.

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