As the iPhone turns 5, everyone is marveling at Apple’s success. Some are saying that the reason is Apple’s platform control.
Others claim is the fastidious attention to design and detail. Still others point to the genius of Steve Jobs. They are all wrong. While these reasons have contributed to Apple’s success, they do not explain it. What is the evidence?
With their proprietary operating systems and designs, Apple always had platform control. Even so, Apple’s computer line never had more than a single-digit market share through the end of 2009.
Similarly, prior to Steve’s departure, its financial performance did not excite the capital markets.
In fact, many pundits used Apple’s proprietary platform (in competition with the Wintel “open” platform standard) as the reason for its lackluster performance in the microcomputer business.
Fastidious attention to detail
The Apple that Steve jobs ran always paid close attention to detail. He was known as a micromanager that obsessed over details in everything he did. In fact in the book, “Steve Jobs and the NeXT Big Thing” Randall Stross relates a story about a visiting delegation of Businessland executives. “While (they) waited on the sidewalk, Mr. Jobs spent 20 minutes directing the landscaping crew on the exact placement of the sprinkler heads.”
Genius of Steve Jobs
Although Steve Jobs deserves enormous credit for Apple’s success after he returned, he was certainly not considered a genius during Apple’s early years when the company had a very confusing brand platform that used numbers and letters to distinguish models. The Apple II line was indicative of this problem, with Apple II, II plus, IIc, IIx, IIfx. More importantly, nobody considered him a genius during the 12 year down period between his departure from, and return to, Apple.
Success by the numbers
Of course, the last 10 years tell a completely different story. Starting with the iPod, Apple has introduced a string of very successful products. Over the past five years, Apple’s market capitalisation has increased $422 billion compared with an increase of Google of $13 billion.
As Thomas Hazlett points out in this Wall Street Journal post, the iPhone is the single most popular smart phone commanding 73% of the mobile phone industry’s profits. He also points out that the iPad has a 68% share of the tablet market. Taken together, this success record has given Apple the world’s largest market capitalisation. A recent article in Forbes even predicts that Apple may be the world’s first trillion-dollar company.
What really created Apple’s success?
What has created Apple’s record of success if it isn’t the reasons typically given by the pundits? There are many factors, and of course, I believe the most important is they have been doing better marketing than their rivals. I know, “better marketing” is too general, so I will break it down according to what I call the seven building blocks of marketing.
- Corporate Image: Beginning with the success of the iPod, Apple changed its name from Apple Computer to Apple Inc. to reflect its shift to products that go beyond computers. With its string of successes and escalating stock price, its corporate image continues to rise.
- Positioning: During his wandering, Steve Jobs learned how to create effective branding platforms. Gone are the numbers and letters that caused confusion from the Apple II and III days. Instead there are the i-Platform products that are neatly designed in an attractive package to hook up with the Internet. They all begin with “i” and end with a single syllable word (with the exception of iTV) – iPod, iPhone, iPad, iMac, iBook, iTunes, iBooks, and iCloud. For higher-end computers, Apple uses platform names such as the MacPro, MacBook, MacBook Air, MacbookPro. For OSX operating systems, Apple has been using the names of ferocious cats. All products use what I call a combine strategy. They incorporate the Apple corporate brand and prominently display the Apple logo facing inward toward the user and outward to market them to the outside world. Each product has its own identity with little or no overlap between the models – thereby minimising any cannibalization. Since products are unique to Apple, they give the company a huge positioning advantage.
- Products: Products use the highest quality materials and industrial design with finishing details only found in finely crafted products even though they are mass-produced. The hardware and software of all Apple products are seamlessly integrated (i.e. iPod with iTunes) to insure that Apple products are easy to use with minimal after-sale support.
- Pricing: Products are priced to make money. Apple products have better margins than competitors. This enables Apple to consistently create and maintain higher levels of quality. Control over the price is possible because of the uniqueness that is built into every product. Moreover, once users experience Apple products, they rarely complain about the price.
- Distribution: Going back to the days when it was difficult to find resellers to carry Apple products, Apple created its own distribution channels with Apple Stores. Additionally, because of the popularity of Apple products, many other resellers such as the mobile phone service providers (ATT, Verizon, Sprint, and others) and big box retailers such as Best Buy, Target, and Wall-Mart were eager to carry them. And makers of automobiles and other products have made them compatible with iPods and iPhones.
- Promotion: Apple has come a long way from its “Big Brother” Super Bowl ad of 1984 that introduced the Macintosh computer. Yes, I know. Some have called this commercial the best Super Bowl ad of all time. However, sales of Mac computers were in single digits after the ad ran, and went down after that. Today, Apple commercials may not win creative awards but they promote the benefits of Apple products and are very effective at selling them. Apple has also become very proficient at orchestrating long lines and prompting news stories about them.
- Marketing Information System: Apple has a lot of data on its customers from iTunes, iBooks, and “bricks and mortar” Apple stores. Similar to rival Amazon, Apple uses this data to inform its customers about new products and to further its relationship with them.
Putting it all together
Apple has become very proficient at coordinating and integrated these marketing strategies for optimum effectiveness. Unlike the old days when rivals positioned Apple advantages as negatives, Apple has learned to communicate its unique advantages as benefits to customers. These advantages include…
- Platform control for a better user experience
- Better Design for ease of use and superior aesthetics
- Vertical integration of production processes to insure quality and meet demand
- Fastidious attention to detail to exceed customer expectations
- Ability to mass-produce a superior quality product.
With Apple’s string of successes that began with the iPod, the company has developed a great reputation. This has excited an ever-increasing fan base to anticipate each new product introduction. At the moment, the market is anxiously awaiting the iPhone 5.
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