Apple's Shrewdly Radical iPhone Trade-In Program
Apple's trade-in program ensures that the customer experience starts -- and restarts -- with Apple again and again. Right now, Apple needs cellular service provider partners. Down the road, however, when these providers end up selling services a la carte, Apple will be ready with products, channels and customers ready to buy at Apple and add services later.
09/05/13 5:00 AM PT
Apple's new iPhone trade-in program has the potential to radically amp up Apple's control of its iPhone customer base and even has the potential to change how iPhones are sold. On the surface, it's just a play for customer convenience, a move to get a customer to walk back into a retail store and buy something.
Fair enough. Definitely smart.
I think Apple's trade-in program has the potential to do a lot more than encourage customers to re-buy themselves into iPhones, though -- I think it paves the way to a destination where Apple is able to provide iPhones without needing to have cellular service provider business partners in the same way that it does today.
No doubt, Apple's contracts with service providers tend to tip the benefits toward Apple already, but it seems to prefer playing alone whenever possible, as much as possible.
Not in My Sandbox
For starters, not only can we FaceTime over WiFi with excellent communication abilities -- I get better FaceTime calls than voice calls all the time -- we can use iMessage to send text messaging to our buddies on Macs, iPads, iPods and iPhones.
So right now, we can effectively channel a heckuva lot of our i-device communication over WiFi without needing cellular service.
If we add the momentum behind contract-free plans from T-Mobile or even AT&T's new Aio service, we could be heading toward a future when we buy a new iPhone in a new way -- without a contract -- and then we decide which cellular service to tap into and use.
This is a radical flip. Most people start with the service provider they already have -- or the provider they want to move to -- and then get the smartphone and the service contract. Or they simply upgrade to a new mode of phone and start another two-year service contract that will cover the true cost of the hardware through a relatively hidden subsidy program.
Apple's trade-in program ensures that the customer experience starts -- and restarts -- with Apple again and again. At the very least, this maintains Apple's negotiating advantage with carriers so that the carriers need Apple more than Apple needs them -- lest their own customers stop bothering to engage with their cell service providers at all.
So the carriers promise to pay premium prices for Apple hardware and promise to move very large numbers of iPhones, ensuring that the carriers market and push the iPhone, too.
OK, You Can Play - for a While
Right now, Apple needs cellular service provider partners. Down the road, however, when these providers end up selling services a la carte, Apple will be ready with products, channels and customers ready to buy at Apple and add services later.
In the meantime, Apple's trade-in program doesn't seem particularly dangerous -- nor does it look compelling to tech-savvy users who know their way around eBay. Apple's reported US$120-to-$250 trade-in values tend to be less than what many customers could potentially get if they just sold their iPhone themselves -- or used a trade-in or broker service from a company like Best Buy, DeviceFlip, Gazelle or NextWorth.
Heck, even Amazon has an electronics trade-in program that lets customers send in iPhones in exchange for Amazon gift cards -- with free shipping, no less. Right now, an AT&T-based iPhone 5 with 16 GB could go for more than $400.
What Apple brings to the table, though, is convenience. Plenty of customers are willing to give up potential iPhone sales money in favor of an easy process without risk.
So far, it seems as if Apple is content to simply push new two-year contracts with its carrier partners -- and that's the dark side of working with Apple right now on a trade-in: a direct incentive to get a spiffy new iPhone and sign up for another two-year service contract. More of the same.
Deeper, Darker Secrets?
There's always the possibility that Apple is just looking at the moment, in which case the moment might be shouting that Apple needs to have a spark of iPhone sales that pretty plasticky colors might not readily deliver this quarter all on their own -- hence, the trade-in incentives.
Or maybe Apple is looking for another way to get the Apple ecosystem into the hands of the downstream smartphone market to new customers, particularly in developing countries, without the need to continue manufacturing older iPhones.
Or maybe Apple is operating the trade-in program with all of these ideas in motion, working all the angles at once.