How a 16GB iPhone 6 Will Make Apple an Extra $3B

iPhone 6

In a move so genius in its simplicity that only Apple Inc. could pull it off, the smartphone, tablet, and computer giant is set to save a whopping $3 billion by offering a 16GB version of the iPhone 6 and iPhone 6 Plus. These phones, however, have barely sold at all, Forbes reports.

When Aple announced it would retain the 16GB model as the entry-level tier while offering the 64GB model as the next level for the standard $100 increase in price, it didn’t make a lot of sense to some. Why not just start at 32GB? The answer is so simple, it’s fiendish.

With Apple offering the 16GB alongside a model with four times more storage for just $100 more, consumers are more likely to choose to spend that extra $100 faster than ever before. What they are doing is performing the “sure, why not” move on a massive global scale.

So many customers are opting for the mid-storage tier that the weak sales of the 16GB don’t hold a candle to savings and extra profit Apple is raking in. Since Apple’s iPhone’s still don’t offer expandable storage, and likely never will, moving customers into a higher storage tier is a sure-fire way to guarantee profits down the line.

Currently the 16GB version of the iPhone 6 and 6 Plus basically exist solely to encourage buyers to get the 64GB for the $100 extra, but once you’ve convinced millions of your customers to move to the mid-level tier, they are more likely to stay there.

So if the future (and hypothetical) iPhone 6S, for instance, starts off at 32GB and offers 64GB as the mid-level tier for that $100 extra, chances are higher that a larger population of consumers would opt for the mid-storage tier. Analysts estimated that 30 percent of ex-16GB iPhone owners who upgraded opt for the 64GB version instead.

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