Apple stock has declined 25% since May 2015 as Wall Street analysts — almost unanimously — predict that iPhone sales have gone into decline. Two analysts, Tavis C. McCourt and Mike Koban at Raymond James, even believe that sales will continue to down after the launch of iPhone 7 later this year.
The theory that iPhone 7 will not be a big deal rests partly on the idea that the expected improvements in the iPhone won’t be that spectacular. iPhone 6 was such a success that relatively few people felt the need to upgrade into iPhone 6S, especially as the older model was on sale for less money.
The fear is that iPhone 7 will feature similarly marginal improvements, and fail to move the needle.
Here is a chart from Raymond James that illustrates that theory:
But don’t underestimate Apple. It looks as if the company is once again going to deploy one of its favourite secret weapons for iPhone 7: product signalling.
That signalling could come in the form of three distinctive physical changes to the way the iPhone looks:
- A non-metal “compound” body.
- Cord-free wireless earbuds.
- The removal of the home button in favour of Force Touch on the lock-screen.
Note that none of those changes are going to let you do something “new.” They’re all merely physical or cosmetic. But those physical changes would make any iPhone 7 instantly announce its presence, and call out any older iPhone as yesterday’s phone.
The best way to describe the power of Apple’s product signalling is to cast your mind back to the launch of the iPod. When the iPod launched, it had white earbuds and wires. That was unusual. Until then, headphone wires were mostly generic black. The white wires and buds signalled to everyone, “Hey, I have an iPod.” Getting your own white wires was like joining a visual club. Not having white wires announced, “I don’t have an iPod. I have a sad, off-brand music player.”
You can imagine how teens reacted to this. No one wants to be the kid with a Walkman in a schoolyard full of iPods. The white Apple headphones were a flag, signalling who’s in and who’s out.
Likewise, when Apple launched a gold iPhone 5S and then a super-sized iPhone 6 Plus, the new colours and sizes loudly broadcast to everyone else, “I have the new phone.” They called out smaller phones, and older black phones. The more people who bought the new models, the more subtle peer pressure is applied to older iPhone users (and to Android users) to upgrade to the new-new.
The wireless headphones and the buttonless screen face are going to create a lot of curiosity, if Apple launches them on iPhone 7. When people sit for meal or a drink, they put their phones on the table in front of them. If you have the new button-free phone, people will want you to show them how it works. If it has a mysterious non-metal casing, people will want to know how it feels. If you’re listening to music without wires, people will want to know how it sounds.
Product signalling works.
(The best non-tech example of this is Corona beer. There is no reason for a lime to be in the top of a bottle of Corona. But ever since Grupo Modelo figured out that you sell more Corona if bartenders put limes in the top, limes and Corona have gone together. It works because when a customer sees someone else getting a bottle with a lime in it for the first time, they say “What is that? And can I have one too?” A Corona with a lime in is distinctive. If you get any other pint of beer in a glass, there is no way for anyone to tell what brand you’re drinking.)
It’s not perfect, of course. Apple really wanted the Apple Watch to signal its presence in the same way. But the underlying product is so limited and so inconvenient that even die-hard Apple fans have their doubts about it. Apple has sold a lot of watches. But the fact that the company declines to put a number on units sold — unlike its policy for all its other devices — speaks volumes. Companies are usually modest because they have something to be modest about.
My bet is that Apple will make iPhone 7 look as different from iPhone 6 as iPhone 6 did from iPhone 5.
The signal will be unmistakeble. And this is why analysts who think iPhone 7 sales will be lower than either iPhone 6 or 6S will turn out to be wrong. (Also, India.)