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Apple To Offset iPhone 5S Price With Trade-In Program (AAPL)

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Apple (NASDAQ: AAPL) has come up with a way to reduce the amount existing customers will pay for the next iPhone.

Instead of trying to sell a low-cost iPhone in its place (a strategy Apple is expected to employ in emerging markets), customers will be allowed to trade in their old iPhones for credit toward the new model.

According to 9to5Mac, Apple might begin its trade-in program next month -- just in time for the iPhone 5S.

While trade-ins are nothing new to Best Buy (NYSE: BBY) and other major retailers, Apple has yet to do the same at its own outlets.

Related: Apple In Talks With Japan's Largest Wireless Carrier

When consumers need to get rid of their old iPhone, they typically turn to eBay (NASDAQ: EBAY), Craigslist and retailers that currently offer a trade-in program. In all three cases, the money or store credit earned from the trade-in could go almost anywhere.

By offering trade-ins at every Apple Store, the iPhone producer will be able to guide consumers back to its own retailers. Even consumers who are not yet purchasing a new iPhone (or have switched to Android) may come to an Apple Store to trade in their iPhone. If they do, they are more likely to purchase another Apple product than they would be if they sold the old device on eBay.

This is good for customer retention, and it could also help the iPhone obtain new users.

After Apple begins to collect old iPhones, the company will need to get rid of them. It could sell the units to another retailer that specializes in used items, but it is more likely to sell the pre-owned iDevices via Apple.com. If the price is right ($100 or $200 lower than a new model), some Android loyalists might be willing to make the switch to iOS.

That scenario is theoretical, but price has been the number-one obstacle that Apple has faced in the fight against Android. If the company can lower its MSRP with a lower-cost model (such as the rumored iPhone 5C) and a selection of used iPhones, Apple might be able to gain an edge.

Android devices will still be cheaper, however. Samsung (OTC: SSNLF) sells a smartphone at virtually every price point. But if Apple can reach a price point that's low enough to where further discounts do not matter, then Android will have lost its monetary advantage.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

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