First, Apple gets to retain those loyal customers already using an iPhone — you know, the ones who see that fancy Samsung Galaxy S IV with its big bright screen and think they want to switch. Apple has never had to give customers an incentive to buy a new version of the iPhone, and it's never had to run an exchange program like so many cellphone providers have for years; then again, Apple's never faced competition like it is from Samsung right now. Either the upgrade incentive was obvious — of course an iPhone 3G owner would get the iPhone 4 — or most self-respecting dumb phone owners getting into the market would choose an Apple phone over the other options. But even since the iPhone 5 hit the market in September, those expectations have changed wildly: The iPhone has been losing user loyalty while Samsung has kept gaining on Apple. A recent report found that Samsung passed Apple in the U.S. cellphone market — at least for now. That could all change once Apple announces another new phone — people tend to hold off on upgrades until the next big unveil out of Cupertino. But with the walls starting to close in a bit, it won't hurt for Apple to start nudging people in that direction.
Second, the new trade-in plan reflects Apple's attempt to position itself in emerging markets, where your average cellphone customer doesn't want to spend upwards of $200 on a device. In addition to the rumored cheap iPhone, which looks more alive than ever with Apple's Foxconn breakup, the upgrade program is a great way to get lower-priced devices to people who want them. The used gadgets will only be sold in countries with demand for a cheaper set, the sources told Bloomberg's Peter Burrows. The older models won't be used as replacement devices for customers with broken iPhones, a practice that angered consumers in China so much that Apple changed its warranty policy there. This latest ploy, which won't be available at your local provider store, is just another way Apple could increase market share in those overseas markets, where it hasn't had as much success because the iPhone remains just too damn expensive.