A coworker
brought this issue into focus for me. He was complaining about all the
hype about the new iPhone 5. He does not see that it as all
that much better than the iPhone 4S. He has an iPhone 4S and sees no
reason to upgrade.
My take is that the hype is not about how great the iPhone 5 is, but
how popular it is and how many millions will be sold. We've already
heard that the iPhone 5 sold out online. This helped raise Apple's
stock price, creating more hype and interest. All this news - plus the
few honest improvements - are creating a huge media frenzy.
If the iPhone 5 isn't a revolution, who are these new buyers?
iPhone Upgrades
There will be a few iPhone 4S owners who have to switch to the
latest. This group will be small. Buyer's remorse over the 4S is not
large. These owners will be happy to upgrade to iOS 6 and keeping
going with their existing iPhones.
The next largest group will be those with older iPhones, especially
those whose two-year contracts are up. They are already with AT&T
or Verizon. They are used to paying for a phone-and-data plan. They may
just as well have the latest device. It is a one-time purchase, and it
is less than their total two-year contract will cost.
You are kind of missing out if you don't upgrade. AT&T and
Verizon have already built into their pricing the cost of one iPhone
over the life of your contract. You have to pay the same price for
service whether you upgrade or not, so why pass up a subsidy for a
brand new iPhone?
None of these are new iPhone users, and we know that the product is
still growing.
iPhone Switchers
Where are the new customers coming from?
There has to be two basic groups of new users.
- Those who are starting fresh. They are switching from a plain phone
or maybe a feature phone that has text. This group has been convinced
by the marketing or sold on the idea based on advice from friends. This
group is going to be shrinking every year.
- The most important new buyer will be Android users.* This
group has already accepted the financial cost of a phone-and-data plan.
They've experienced the benefits of apps, checking email, and surfing
the Internet from their phones.
If the experience has been good but not great, or if they see the
iPhone as a little nicer, they become a ripe group for Apple to pick
off. The iPhone does not have to be revolutionary - or even great. - it
just has to be better than what they already have. When their contract
is up or when the newest phone comes out, they have of choice. They can
stick with okay but not perfect or switch to the most hyped and
talked about phone in the world.
For now, the choice clearly favors the iPhone. The newest model,
regardless of how revolutionary it is from the previous one, will be
perceived as the best possible choice for at least the next six
months.
After six months or so, people will start holding out, waiting for
the next iPhone. 
