MoguliteSamsung heightened expectations last week by renting Radio City Music Hall to announce the introduction of the Galaxy S4.
The problem is that the product has not lived up to the big build-up. Reviews have been largely disappointing. As of this writing, the stock is down 5% while archrival Apple’s stock has soared up $23.16 per share since the Samsung announcement – presumably since the market does not see the Galaxy S4 making a significant dent in the iPhone’s market share.
Of course, the anticipated increase in Apple’s stock dividend has helped, but ironically, the biggest assist seems to be from Samsung disappointing the market.
Facebook’s shares jumped to $32 after the Company announced a mystery press conference to “Come see what we are building.” Unfortunately, once the mystery was revealed to be Graph Search, investors and analysts alike were disappointed. It was not clear to them how Facebook is going to monetise Graph Search. As a result, the stock has been bouncing between $26 and $28—a 13 to 19% drop from the press conference build-up.
Even Apple disappointed the market after its introduction of the iPhone 5. It has seen its stock price plummet from a peak of $705.07 per share to bouncing in a range between $420 and $456. The disappointment fuelled fears of a post-Jobs Apple and knocked it off its perch as the most valuable company in the world.
What is the problem? Why are so many “smart” high-tech companies not so smart with their new product announcements these days? The answer seems to be that they have forgotten a marketing technique that Apple under Steve Jobs knew very well – how to under-promise and over-deliver.
Introduction of the iPad
Remember the iPad introduction? After the product was announced, Apple detractors talked about what it didn’t have rather than what it did. Many savvy professionals and students I know said to me, “Who needs an iPad? I have an iPhone and a laptop. Who’s going to buy one of these?” Brooke Donald, writing for the Associated Press, interviewed me about the product name for her article “Shiny gadget, icky name: iPad jokes fly on Web.”
Even the French paper Libération denounced Apple after my interview gave a positive view of the iPad announcement. In an excellent post by Erick Schonfeld in TechCrunch, the headline reads, “Nobody Predicted The iPad’s Growth. Nobody.” He points out that the most optimistic forecast was 7 million iPads sold in 2010. Apple ended up selling nearly 15 million units – more than double the most ambitious prediction.
Revolutionary marketing lifts the sales of evolutionary products
When Apple introduced the iPad2, most tech watchers said it was evolutionary instead of revolutionary. Even so, buyers queued up around the world in lines longer than expected (and longer than for the original iPad) for the opportunity to buy an iPad2 sooner rather than later. There are even reports of people selling their body parts to buy the iPad2. Furthermore, Apple’s marketing has managed to turn a lowly iPad2 accessory into a featured product by branding it as the Smart Cover with desirable benefits and features to produce greater sales.
How did Apple do it?
Under Mr. Jobs, Apple routinely used an under-promise and over-deliver strategy. They discovered that this strategy has numerous benefits.
- Sets expectations lower so that the delivered products exceed expectations.
- Helps to avoid tipping off competitors.
- Helps to avoid shareholder disappointment and lawsuits.
- Enables Apple to gauge any negative reactions to the under-promised products.
- Allows the company to respond to these reactions by improving the products before delivery.
- Generates far more excitement and publicity when the product beats expectations.
- Quiets detractors who knock Apple and their fans.
This strategy worked. Even though technical reviewers too often pointed out what Apple products didn’t have, Apple customers were surprised and delighted what they did have. Products exceeded their managed expectations.
From under-promise and over-deliver to over hype and under-deliver
Under Mr. Jobs, Apple did a really good job of managing expectations. His team learned over the years that this strategy made sales and the stock price jump. The new regime seems to have lost that skill. In fact, as Dan Crow aptly observes in the Guardian, “The iPhone 5 is better, but it’s really not that much better, and iOS 6 has had some decidedly mixed reviews. But you wouldn’t know that listening to the hype from Bob Mansfield, Tim Cook, Phil Schiller et al. The problem with over-hyping is that people notice, and over time it erodes their faith.”
Fueling underlying fears
One of the biggest questions after Steve Jobs’ passing is would Apple continue with its thirst for leading-edge perfection. A friend of mine, who is a former executive at Apple, put it this way – “Tim Cook is a talented executive, but many are wondering if he’ll be able to see around corners the way Steve could.” The lack of excitement surrounding iPhone 5, the absence of new breakthrough products, and the lack of Jobs-powered product introductions fuel these concerns. These are some of the reasons for Apple’s lackluster stock performance of late.
Competition gives Apple the break it needs
With the disappointments of the Samsung Galaxy S4 and the latest offerings from RIM and Nokia, it looks as if Apple gets some breathing room to get back in the groove they were in before being derailed by iPhone 5 disappointments. Without Steve Jobs, Apple needs to understand that it is charismatically challenged and that people are expecting more than they have been getting. It has to do a better job managing expectations and delivering products that delight and surprise customers.
Facebook victimized by its own over promising
As for Facebook, the company has brilliant people, but their IPO and recent “come see what we are building” let-down shows that they are still amateurs when it comes to introducing new products, marketing and monetizing. The hope is that they will learn, but stockholders may be getting impatient with a stock price that fluctuates in a narrow band of mid to high 20’s – similar to Microsoft’s pattern over the last few years. After all, Facebook has a couple of huge advantages over others – (1) a member base of over 1 billion users that advertisers can micro-target and more efficiently reach because of the opt-in data members have provided and (2) the ability of users to share information on products they like with their friends and others in their social network.
There is a solution
There is a simple basic solution for the mistakes outlined above. Rather than hype and disappoint, these tech companies need to under-promise and over-deliver if they want to win bigger in the marketplace. While over delivering is easier said than done, it is necessary to playing in the big leagues, taking advantage of positive word-of-mouth pyramids in social networks, and making sales and stock prices jump. Steve Jobs understood that. I am not quite sure the others do. For their (and our) sakes, I hope they learn quickly.
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