Back when the program was first introduced Munster predicted that 15% of new iPhone customers would opt in on what is basically a 24-month lease. That may have been way off the mark.
In a note to clients issued late Monday, Munster reported that of 188 iPhone 6S buyers surveyed in mid-November, 70 people (37%) chose the new program. By the end of the quarter, Munster believes, the actual rate could turn out to be as high as 50%
The iPhone upgrade program gives customers AppleCare+ and the option to trade up to an iPhone 7 next year for 24 monthly payments ranging from $32.41 to $44.91.
Fortune outlines some of the program's benefits to Apple:
● It gets to sell more high-margin AppleCare+ contracts
● It locks customers into the iPhone indefinitely
● It halves, in theory, the iPhone upgrade cycle (to 12 months from 24)
● It builds an inventory of used phones that can be refurbished and resold
● It takes control of, and legitimizes, the grey market for second-hand iPhones
● It unbundles hardware costs from carrier costs
● It leaves cell service complaints clearly in the carriers’ hands
● It could raise, according to RBC Capital, Apple’s iPhone profit margin from 50% to 55%.
More details on the iPhone Upgrade Program can be found here. Munster thinks that eventually 75% of customers will move to an annual upgrade cycle resulting in a 10% increase in sales.