Apple

Analyst Bill Shope of Goldman Sachs recently stated in a note to investors that he believes the average single iOS customer is worth $1,053. According to Shope, iOS device users are so loyal to Apple and unlikely to switch platforms that he believes their total collective value is nearly $295 billion. Both values are based off the assumption that the average selling price of an iOS device for the June quarter is $535 with 5% erosion, gross margin being at 45%, and annual defections being at roughly 5%.

Shope said the following regarding customer value for Apple:

With a value of roughly $295 billion, iOS customers represent about 55% of Apple’s current market cap. This is before including the company’s $110 billion cash balance, an iOS install base that continues to grow at a tremendous pace, or the value of the company’s Mac and iOS businesses. Goldman Sachs conducted a consumer survey of over 1,000 respondents recently in an effort to better understand the costs that customers face when switching platforms. This survey found that 21% of respondents said no discount, regardless of the amount, would make it worthwhile to make the switch. From those who said they would consider switching, more than half of those said they’d need a discount of greater than 30%. Furthermore, from those who participated, 71% said they are “highly likely” to choose an Apple device for their next tablet or smartphone purchase. Another 23% are “likely” to stick with Apple’s ecosystem, while only 1 percent were “unlikely” to stick with Apple.

The cost of switching for customers only grow when they own more than one device in the Apple ecosystem and iCloud adds another layer to the switching costs. Among those polled by Goldman Sachs, 30% said they were paying extra for extra storage capacity or iTunes Match with iCloud. "Considering that apple has disclosed that it has 120 million iCloud users as of its earnings release on April 24, this is quickly becoming yet another high-margin revenue stream for the company," Shope said. This leads him to believe that a large portion of Apple’s installed base is adding another source of explicit switching costs.

Overall, he estimates that switching cost per iOS user ranges anywhere between $122 and $301 which is enough to deter many from swapping in the first place. Basic math would conclude that the average user would need a discount of 49% to switch to a competing platform, barring the decision to want to do that in the first place.

Source: Goldman Sachs via AppleInsider