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Cascading Behavior in the Sales of iPhone

This month, Apple released its much anticipated iPhone X, a special celebratory device designed to celebrate the 10th anniversary of the iPhone line. Along with the iPhone 8 that was released earlier this year, the two new products immediately become the strong contender of the bestselling phones of the year. Even though Apple stopped releasing the first weekend sales numbers since iPhone 7 due to demand outweighing supply, plenty of third-party data can still be used to try to fill that vacuum. For instance, the data from the mobile engagement platform Localytics measured users who have received their phones and have started using apps to give an estimation on the user adoption rates for Apple’s newest devices.

The data shows that the market share of Apple’s new products was lower than some of the previous ones, with 0.93% of the overall market share for iPhone X and 0.7% of the overall market share for iPhone 8 after the first weekend of sales. These are below the 2.3% market share that the iPhone 6 models grabbed back in 2014 and the 1.3% and 1.2% adoption experienced by the iPhone 6S and 7 models in 2015 and 2016. Many factors contributed to the difference in the market share of products. For example, Apple’s previous products were competing against smartphones from different companies, while iPhone X is competing against iPhone 8 sales, which skews the market to some extent. However, the major reason is believed to be directly related to the benefits that the product offers. It seems that Apple’s risk in introducing a much higher priced model (iPhone X are available for either $999 or $1,149) makes its cost outweigh the benefits for some of the potential purchasers. Also, informational effects might play an important role as well. The decision of not buying the new products made by some of the potential purchasers could provide indirect information about their opinion on the performance and cost-effectiveness of the product, and thus influence the decision of subsequent purchasers.

It is also noteworthy that there is an increasing trend in the overall market share of iPhones from iPhone 4 to iPhone 7. With the similar reasoning analyzed before, we can deduce that informational effects might convey the indirect information about the opinion of purchasers, and thus makes the sales like a cascade model and leads to a continuing increasing trend. Additionally, direct-benefit effects provide another possible explanation, as there are direct payoffs from using iPhone when there already exist a large number of iPhone users, and these payoffs arise from using compatible technologies (i.e. Apple’s iOS mobile operating system) instead of incompatible ones.

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November 2017