Pure genius is how a new report described Apple's (AAPL) new device Upgrade Program that essentially will make the iPhone 6S and 6S Plus available for as low as $1 per day on release date. And the tech giant will surely haul in loads of cash as a result.
Analyst Benedict Evans, according to BGR, views the new Apple Upgrade Program that will be introduced with the iPhone 6S as Apple's direct and indirect ticket to huge profits in the years to come. The tempting deal, which will make every new iPhone model more accessible, is shaping up as a solid revenue generator for the iPhone maker, Evans said.
Here is how the program works:
Lure in Android switchers
In the Upgrade Program, iPhone buyers will pay roughly $390 per year of leasing the unit of their choice. The amount, Evans said, will cover for the base-model. When the payment term is spread out in 12 months, the cash damage is only $32.50 or just over a dollar per day.
The figures not only embrace affordability but to many the iPhone 6S and succeeding models will look cheap, therefore irresistible. The sticker price, Evans, will surely serve as a magnet for new iPhone buyers with Apple specifically targeting Android switchers. Now that translates to potentially hundreds of millions of new iPhone users. For Apple, that would be overwhelming sales almost on a regular basis.
Lock-in upgrade to next iPhone
With the Upgrade Program essentially operating as a lease deal, an upgrade option once a new iPhone become available is in effect and customers will only need to surrender the old device, pick the new handset with the same storage configuration then carry on with the same payment fee.
By offering its in-house deal, Apple is also increasing the possibility of customers jumping to the next iPhone. Letting telcos to do this, Evans said, will allow a window of opportunity in which previous iPhone users might switch to a new Android flagship.
Now how could an iPhone 6S user resist a standing offer from Apple to upgrade to the iPhone 7 in 2016 at no extra cost? And the cycle, favorable to the tech giant, only goes on and on, Evans said.
Selling an iPhone unit twice
While securing the possibility of iPhone users getting to the next model, Apple is also ensuring that the balance of the total cost of a new iPhone will be recovered as Evans explained that the company "is explicitly entering the secondary market." Upgraders will have to turn in their existing iPhones, which Apple will surely re-sell for a profit.
The basic iPhone 6S sticker price, for instance, is $650 and Apple leased it out for $390. Following its return, what Apple will do is to refurbish the unit and ship it out. The likelihood is the company will surely recoup the projected $260 balance on the unit of get even more. Evans said that in emerging markets, pre-owned iPhones sell to a high of $400, unrefurbished. But a pre-owned 16GB iPhone 6S coming directly from Apple, refurbished and with warranty will easily sell at $500, the analyst said.
So with the Upgrade Program that Apple will roll out with the iPhone 6S and 6S Plus release date, the iPhone maker stands to earn more over the long term, BGR said on its report.