How important is price?

The graphs above suggest demand for Android and iPhone depend on price.
However, in the real world, the price is only one factor that consumers consider.
For many consumers, a phone is heavily used throughout the day. Given we can
spend several hours a day, our demand for phones is quite price inelastic. We
don’t look for the cheapest phone; we look for the phone which will give the best
overall function. This means if we feel one phone has better features, the price
becomes relatively unimportant. (good news for Apple, since their phones are
often 25% more expensive)

However, if Android phones become better quality, then this may be a significant
factor in encouraging consumers to switch from the iPhone to Android. In recent
years, Android phones, such as Google Pixel 2 and Samsung Galaxy 8 have
improved quality and diminished the gap between Android and iPhones. Now,
Android phones have similar quality (retina screens e.t.c) When iPhones first
came out, they were a clear market leader and so for anyone wishing to get the
‘best’ phone they were the most obvious choice. But, product development
means Android users have a wider choice and Apple are losing their market
position. This means they are becoming closer substitutes than in the past.

Brand loyalty
An important issue for consumers is the issue of brand loyalty. For many iPhone
users there are many factors which make it likely that for their next phone, they
will only consider another iPhone. For these loyal consumers, an Android is a
very weak substitute. Why do existing consumers have such brand loyalty
towards the iPhone?

 Compatability. If you buy a new iPhone, all the data, apps and contacts
are automatically and seamlessly transferred making the purchase easy
and with no time cost. If you switch from the iPhone to Android, you have
to spend considerable time switching apps, contacts e.t.c. This is a big
disincentive to switch.
 Complementary products. For Apple users, typically it is not just an
iPhone but an Apple computer or other products, like a watch. If you switch
to Android, you lose all the benefits of having complementary Apple
products and seamless sharing of contacts e.t.c.
 Ease of choice. The number of phones is bewildering. When I got a new
phone recently, it was hard enough choosing between different iPhone
models (SE, 7,8 – I went for SE in end) I didn’t want time costs of having to
weigh up all the Android models too.
 Being the first mover in the industry. The iPhone will always retain a
strong brand loyalty for being perceived as the prime developer of the
 Smartphone. By attracting positive publicity for groundbreaking features
and design, this has created strong brand loyalty which has been retained
by many consumers. Apple can generate media publicity for its product
launches that you never see on the same scale with Android phones.
Evaluation – will time tell a different story?
At the moment, iPhone is in a strong position because of its early dominant
position. It benefits from the brand loyalty of many existing consumers. However,
with technological products, brand loyalty can change over time. It is a fast-
moving industry and being the first firm is no guarantee of prolonged success.
Just ask IBM computers, Microsoft, Yahoo search and MySpace. With Google
joining the market, Apple faces stiffer competition. Consumers may tire if they
feel Apple are charging a price premium not matched by quality.

In the short-term demand tends to be price inelastic, but over time people have
the opportunity to switch. Over time, demand can become more price elastic and
Android may be seen as a closer substitute. For some industry watchers, the
weaker enthusiasm for the launch of iPhone 8, is symptomatic of the fact, ‘peak
iPhone’ may have passed. (In other words, the business life-cycle has reached
peak period of growth)

5 October 2017 by Tejvan Pettinger

Are Android and iPhone close

substitutes?
https://www.economicshelp.org/

The statistic shows the market share of mobile operating systems in Pakistan from January
2014 to December 2017. In December 2017, Android held a share of 83.53 percent of the
mobile operating system market in Pakistan.
Published by Statista Research Department, Sep 11, 2020