iPhone Pricing Factoid, plus Motorola’s Missteps

Here’s a good stick with which to beat iPhone skeptics in my next CNBC appearance:

A note to everyone who believes that $499 is too much to pay for Apple’s iPhone: The Motorola RAZR was
originally introduced at that price. It went on to become the best
selling phone in the world before RAZR marketer Geoffrey Frost died and
Motorola went on its “We will not be undersold” price-cutting binge.

Speaking of Motorola, Friday’s WSJ had a great, must-read piece summarizing the many missteps that got Motorola to where it currently is.

[via Blackfriar]


  1. I read the story, but what really made the RAZR a 100 million unit seller was its steep price cuts within a few quarters of its introduction.

  2. Exactly. Everyone knows phones are introduced at high prices. But there is simply no way the iPhone’s price will drop as fast. It’s BOM is much higher than a RAZR. There was nothing special about the RAZR other than it’s thinness. There’s nothing on the list of COGS that would make that phone expensive to make which is why it had such high margins. The only thing that made that phone sell well was that it was small. The StarTAC is another good example of this effect. And one more thing that the iPhone isn’t.

  3. it only became the best selling phone in the world after the price dropped low enough so that real average everyday people could afford it.

  4. Rafael Montoya says:

    People thought that the iPod was too expensive at the launch time. The price has stayed up, and every iteration has different capabilities.
    The iPod user changes the model almost as often as his or her cellphone. When you change your cellphone, you usually give it away, hand it down or forget about it.
    But, interestingly, the user keeps the older iPods and at least use/look at them from time to time. I.e.: my wife owns 3 different models and I have my own 3, none of which are the same ones, and we do not plan to get rid of them. Apple has managed to make us (and other users) feel that our iPods are some sort of pets. The same happens with our Macs (I still have a Powerbook 100 among others, and now I use a MacBook Pro).
    The challenge for Apple is to get the same response from the iPhone. With the previous experiences I expect them to succeed.

  5. The iphone does not need to sell 100 million unit to be successful. Heck. A lot of skeptics would be impressed if Apple meets its 10 million sales target by end of 2008. For version 1 of the phone to get Apple an incremental a small number of billions is terrific. If 2 years after launch, Apple can pull in $5 billion additional sales a year, that will be a 22% increase from now. If the product works, this goal is very achievable.