Posts Tagged With: Apple

The iPhone 5 is the latest example of “The Apple Effect” – how do they do it?!?

New product launches are like walking on thin ice. Same goes for service providers and retailers entering new markets. You can never truly predict how the market will react. You can have the best marketing campaign in the world supported by all the statistics money can buy, and still come up short. You could gather a lineup of Obama, Michael Phelps, Justin Bieber, RG3 (!), and Oprah jumping up and down on trampolines with big signs saying “greatest product in the world”, and still people may not be so quick to engage.

Enter the iPhone 5. Apple continues to be a marquee brand that other organizations aspire to be like. Regardless of industry, people look at what Apple has accomplished in terms of Customer Loyalty and constantly ask – how can we generate that same loyalty and enthusiasm within our industry?

Check out this video – can you imagine someone walking into a Volkswagen dealership and having the same reaction to a “new car”…that it turns out they already own?

Jimmy Kimmel: What Happens when we “Introduce” the iPhone 5 to the public – with an iPhone 4s?

While Apple detractors can use this as proof that Apple products aren’t all that great and it’s all about the “mystique” associated with the product, savvy marketers watch a video like this, their jaw sinks, head shaking, asking “wow how do they do it?”

Apple has a different approach than most organizations, one focused on what should be, not what can be. Jobs’ team is famous for running through boundaries when others are frozen by them. Let’s break it down by talking about the Apple experience in the context of Who, How, and Why.

Who?

Let’s focus on their 2 most high impact organizations – Design/Development and Marketing.

Apple does not develop their products based on what people WANT. They develop them based on what people don’t know they want…yet. Here is a great quote from Jobs that summarizes:

“You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new”

– Steve Jobs

People are inspired by innovation & change…and ultimately, that’s what any strategic marketer wants to do to grow their customer base and take market share – motivate their promoters to keep buying and promoting while activating the need to change amongst their competitors’ customers.

As great as their design team is, Marketingis where Apple really shines – some may say it’s easy when you’ve got great products, but the main thing Apple does better than everyone else? They believe in the Customer EXPERIENCE, not Customer SERVICE. What makes the people in that video so inclined to trust their emotions over their actual physical senses, when they are holding this iPhone 5 imposter? Apple has set the expectation that their brand is associated with innovation, improvement, and agility…regardless of if it actually is.

How? Apple does a better job of communicating with the consumer than nearly anyone else, in any industry. Whether it’s communicating with you via an interactive digital experience (App Store updates, iOS updates, iTunes, etc), or via an in-person experience (retail stores, call center, etc), they focus on 2 things – adding value, and measuring your experience while doing so. Just like a puppy who jumps when they hear the treat jar lid spring open, consumers jump when they are alerted to a pending Apple Experience…and they want in.

Why? Confidence. Consumers are confident that every Apple experience will meet their expectations, or exceed them. Apple builds confidence amongst consumers by constantly delivering on their promises. When they don’t – they want to hear about it. Heck, when they do, they want to hear about it. I have never seen an organization so dedicated to their engagements with consumers – if Apple could ask you every day “give me one word that describes Apple” (shout-out to BrandTags) and track that sentiment, taking into account all of the external variables (seasons/weather, market share, spend, product releases, etc) to measure the reasoning behind customers’ feedback they would. Apple has a level of respect for consumer sentiment that is unmatched in any industry. This allows them to align their delivery to their customers’ expectations, and ultimately drive consumer confidence and loyalty through the roof.

So to recap – how does Apple create a culture of loyalty so strong that anticipation, emotion, and promotion takes precedence over features and functions? Thank goodness for simplicity and flowcharts.

Disruption–>Innovation–>Commitment–>Engagement–>Experience–>Confidence–>Loyalty–>Revenue–>Profitability–>Shareholder Value–>SUCCESS

Simply put by Jobs himself:

“Our DNA is as a consumer company – for that individual customer who’s voting thumbs up or thumbs down. That’s who we think about. And we think that our job is to take responsibility for the complete user experience. And if it’s not up to par, it’s our fault, plain and simply”

Nice job Apple. Like my man Aziz Ansari said, “that’s how it’s done son!”

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What’s the iPhone worth to you? For mobile carriers…a lot.

If you’re a bit of a tech geek like me, you are probably checking in on the Apple v Samsung drama from time to time. Some interesting accusations and facts have come out, but one in particular caught my eye this morning.

What does Apple really charge carriers for the iPhone?

Thanks to documents released Friday, we have a pretty good idea.

For those of us who grew up during the peak of the Nokia/Sony Ericsson/Motorola days, remember when mobile carriers introduced the “free phone” concept? There was a period where quality service was expected, and carriers differentiated with their devices and associated marketing campaigns. That’s how AT&T scored the iPhone exclusively…at the time, even though Apple was a bit of an anomaly, as a whole the carriers called the shots. It was normal for carriers and device manufacturers to cozy up and work together exclusively.

Wow, how times have changed in just a few short years. Device manufacturers now rule the yard, as it’s their product that interacts directly with the customer…the service is a commodity, it’s the device that creates the relationship and maintains loyalty (quick plug for the power of the consumer!!!) Mobile plan costs have skyrocketed 2x and 3x from past pricing. The carriers claim its the advent of the smartphone and the need to invest in the bleeding edge technology that these devices require, and consumers expect.

Today, you sign up for new service via your preferred carrier, be it VZW, AT&T, Sprint, etc. you typically pay $199 for your shiny new iPhone. If you’re used to FREE, well, $199 can be tough to swallow. After all, those evil carriers are charging us $100-$200 a month, can’t they hook us up with a freebie device? Well, yes, if you’re willing to use the modern day version of the Startac. If you want that iPhone, pony up!

However, while the iPhone has literally changed the face of multiple industries, impacting our lives in many ways…who is footing the bill? Ultimately it’s us, but taking a look at their sales figures, there is more to it than that.

How much do you think VZW, for example pays for that iPhone?

Try $590.

Yes, Mobile carriers take, on average, a nearly $400 hit every single time a customer signs up for their service and chooses Apple’s one button wonder. Furthermore, if you look at costs over time, they are increasing steadily.

2007 (the iPhone is introduced) – $428 average revenue per device
2010 – $563 average revenue per device
2012 – $621 average revenue per device

These numbers raise a few observations and of course many questions. Before we draw conclusions, we need to point out some variables here:
– Firstly, there is no way to distinguish between the people who paid the $200 intro price, versus the $650 non-upgrade price either via Apple directly, or a carrier. So while the price per device numbers are direct from Apple, we can’t tell for sure how many devices were sold directly to consumers without a plan which would impact the overall profit loss carriers have experienced. Go conservative and cut it in half if you want, it’s still startling.
– Second, Apple still sells older iPhones at a discount. So in reality, if we are talking strictly their latest 4S model, the average cost per unit is actually HIGHER than what is above.
– Finally, Apple’s sales claims are quite contradictory. In 2011 Jobs claimed Apple had sold its 100 millionth iPhone. In 2012 analyst estimates were around 250m units sold worldwide. Per recent court filings, that number is approaching 100m iPhones sold…what number is correct? We will use the 100m number to be conservative.

OK, on to the commentary and analysis:

– Kudos to Apple for turning an industry upside down and completely changing the way their
partners think…and doing it by delivering what customers want, before we know we want it. This has ushered in a whole new era of customer focused companies who create the path forward versus simply copying others. Last night a friend of mine mentioned the new Sony Ericsson phone that “looks like a Droid 1.” If you aren’t innovating and driving consumer demand, you are the punchline. Companies have been dong this successfully for years, but Apple deserves their credit for recent contributions.

– Assuming 100m iPhones sold, at an average ~$400 loss…over the last 5 years mobile carriers have experienced nearly $40 BILLION in losses via iPhone pricing. That is one hell of a commitment to this technology and this device.

– For comparison purposes, in 2012 Samsung received $316 per device (Galaxy S2). That results in a much more cost effective proposition for carriers. Another testament to Apple that carriers actively market more profitable devices, yet consumers still choose Apple more than half the time versus dozens of other options.

– I would love to see someone do an analysis/chart of the major carriers’ R&D investment over this same time period. Has it truly risen parallel to the cost of service plans? Furthermore, how has profit risen/fallen over that same time period?

– Clearly the carriers feel this whole situation, at a minimum, is egregiously acceptable, or they wouldn’t be scrambling to get in on the action. However the trend here just isn’t sustainable long term. Something has to give. Plan prices obviously are increasing (and now we see a big reason why), one has to imagine Apple will continue increasing their prices as their own R&D costs increase. They are facing more legitimate competition than ever. I’m no Tim Cook, but I would venture to guess their strategy is to do what they have always done, but do it better, and faster. Well, for you automotive gearheads out there, you know the old adage – “cheap, reliable, fast – pick two”? Yep. There is also that little commitment they have to shareholders to grow profitability quarter over quarter.

My guess? Price hikes are coming…with regards to your plans…and your device. Carriers have to draw the line somewhere. If the iPhone 5 is released and Apple expects carriers to take a $500+ hit again and again…what will they do? My guess is charge the consumer more…maybe a $249 price point for the device, and some iPhone feature-specific pricing, if things get really hairy.

After all, someone has to pay for it 🙂

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