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Apple’s iPhone 5C and why it isn’t a flop

Sometimes your expectations can really cloud your view of reality.

According to a study from Consumer Intelligence Research Partners, in the closing days of September 64 per cent of all American iPhone buyers chose the iPhone 5S. Only 27 per cent went for the 5C, which many analysts (including myself) have said is too expensive to play the role of a “low cost” iPhone.

That has led CNBC, to give one example, to go with the hysterically false headline "Nobody seems to want Apple's iPhone 5C."

But the 5C is performing comparably with iPhones in its price bracket over the past two years. For the past few years, Apple has always had three iPhones on the market: A new high-end smartphone for $200 (£125) with contract, last year's model for $100 (£63), and then the two-year-old model for free.

In the quarter when the iPhone 5 came out, Strategy Analytics estimated that about 39 per cent of iPhones sold were the 4S model, which held the same place in the market that the 5C does now. During the fourth quarter of 2011, the new iPhone was even more dominant: According to Consumer Intelligence Research Partners, 89 per cent of buyers picked the iPhone 4S, and only 7 per cent chose the iPhone 4.

So it's obvious that when a new iPhone comes out, most iPhone buyers want the fancy one. The iPhone is a luxury item, and the relatively small price difference just isn’t enough to drive most people to the cheaper model. The 5C is priced just like previous models in this cycle were.

Later in the purchase cycle, more sales may shift to the 5C. A less expensive, non-flagship product is for later adopters, not the day-one buyers. That's why analyst Ben Bajarin is saying "the time for the 5C is early to mid 2014."

Why the iPhone 5C?

The iPhone 5C may have been a marketing experiment – Apple seeing if it could juice up sales of what is essentially last year's iPhone by putting a coloured back on it and giving it a new name. It looks like it's been moderately successful, just not disruptive.

Remember that the iPhone 5C is selling – it's just not selling as well as analysts hoped the mythical $300 (£190) iPhone would have. An estimate of 11.4 million iPhone 5C sales in a quarter is no mean feat, and according to analysts at Cannacord Genuity, this basically recycled phone is outselling Samsung's Galaxy S4 at US carriers AT&T and Sprint, a feat the older iPhone 5 couldn't accomplish over the previous few months. Apple probably couldn't have pulled that off without the new name and look.

There's also no proof so far that the mythically disruptive, low cost iPhone would actually make money for Apple. Never confuse profit share with market share. Apple makes high-end, high-margin products. As long as it sells enough of them to achieve consumer critical mass – which it has done, consistently, since 2007 – that continues to be a very profitable business.

Apple can take some lumps for fooling itself to some extent here. According to the Wall Street Journal, Apple expected to sell more 5C phones and fewer 5S devices, and has thus had to tweak its order mix. Apple may have had more faith in the reality distortion field than was warranted. But once again, that doesn't make the 5C a failure. Not with 11 million sold.

The iPhone 5C is a tweak of Apple's strategy, not a complete re-envisioning. It's a test to see if more people will buy old wine when it's in a new bottle. It looks like that strategy's successful, just not as successful as some people wanted it to be.

But please, let's not confuse "the iPhone 5C is selling as well as previous iPhones at its price point did" with "ZOMG THE 5C IS A FAILURE NOBODY IS BUYING THEM." Nobody is buying the Microsoft Surface. The 5C is a successful, midrange smartphone that could flourish as later adopters pick up iPhones early next year. It's not a disruptor, but given Apple's on-going sales and profit success, it doesn't have to be.

For more on the new iPhones, check out our reviews of the iPhone 5S and iPhone 5C.