Did Apple make a strategic mistake by offering 16GB iPhone 6s?

BY Gautam Prabhu

Published 13 Sep 2015

16GB iPhones

Apple unveiled the ninth generation iPhones at its media event on September 9 with revolutionary features such as 3D Touch, faster A9 chip, better cameras, faster Wi-Fi and LTE.

But one of the disappointments was that the base iPhone 6s and iPhone 6s Plus model still comes with 16GB storage space. It didn’t come as a surprise, as like everything we knew before the event, we also knew that Apple will continue to offer 16GB iPhone.

So the iPhone 6s lineup stays at $199 or $650 for 16GB, followed by $299 or $750 for 64GB, and tops out at $399/$850 for 128GB with or without a contract.

Matthew Yglesias writing for Vox believes that Apple has made a serious strategic mistake by offering only 16GB storage in the base iPhone 6s and iPhone 6s Plus models.

Killing the 16GB phone and replacing it with a 32GB model at the low end would obtain things money can’t buy — satisfied customers, positive press coverage, goodwill, a reputation for true commitment to excellence, and a demonstrated focus on the long term. A company in Apple’s enviable position ought to be pushing the envelop forward on what’s considered an acceptable baseline for outfitting a modern digital device, not squeezing extra pennies out of customers for no real reason.

It is possible that Apple has diagnostics info which has revealed that a sizeable number of people don’t fill up 16GB. One could also argue that features like iCloud Photo Library and streaming services like Apple Music have helped in reducing the storage space required on the device.

So one could excuse Apple for releasing iPhone 6 and iPhone 6 Plus with 16GB, but with the iPhone 6s and iPhone 6s Plus that come with features such as Live Photos that take up twice the storage space as still photos and 4K video recording where a minute of takes up as much as 375MB, a 16GB base model is unacceptable. If customers plan to use these features, the base 16GB model is not a viable option.

It seems unfair that Apple is making customers pay for the cost of these new features and innovations. Once people run out of space on their iPhone, they are also likely to stop buying apps and music, which is bad for Apple and developers in the long term. I have seen arguments on Twitter and blogosphere that it is all about segmentation, and 16GB storage is fine as there is a percentage of people who don’t take many photos or videos or use many apps and games and hence won’t end up using that much storage space, but that isn’t a fair one.

Instead of looking at diagnostic information, the question Apple should ask is: how many people would have still bought the 64GB model if the base model was 32GB? I bet a large percentage would have been happy with just 32GB, and saved $100.

By offering the 16GB model, Apple not only reduces the cost of manufacturing the entry level model, it also forces a majority of the people who want to use these features to upgrade to the 64GB model. The 64GB model offers even higher profit margins. So Apple has been accused of being greedy, and it is a strategic move to make profits. Some people say that Apple has so much cash that it can afford to offer 32GB as at the end of the day. I don’t think that’s a good argument. We should expect Apple to give away things because it has a huge stockpile of cash.

I am not sure if it is a serious strategic mistake as Apple has got away with it before, as people continue to buy iPhones in droves and will continue to do so if Apple continues to up the ante with features like 3D Touch. But I do agree that it is losing customer’s goodwill. Apple should have increased the base storage capacity to 32GB to incentivize customers to use the new storage consuming features without worrying about storage space or going through the painful process of freeing up storage space.

I hate to bring Steve Jobs in the conversation, but here’s a statement Steve Jobs made in the 1997 Worldwide Developers Conference (via Forbes):

You’ve got to start with the customer experience and work backwards to the technology…I’ve made this mistake probably more than anybody else in this room…As we have tried to come up with a strategy and a vision for Apple, it started with ‘What incredible benefits can we give to the customer? Where can we take the customer?’…I think that’s the right path to take.

16GB as the base model is not something I would expect from the company we’ve all grown up to love and admire.