Mikey FendickMay 2012

How has Apple maintained its power base?

History of Apple • Steve Jobs and Steve Wozniak created Apple Computers on 1 April

1976• They both liked electronics and that led to an interest in computers. • They both wanted to make personal computers that were really user

friendly • They developed and launched the Apple Mac in 1984 • The Apple Company is now a market leader in making and launching

new products.• But it has also been very aggressive in how it protects its market lead.

So how has Apple been able to maintain its power base?

Apple makes great products• Apple learned to develop:

– great products – that matched a need – and were not just new technology.

• Steve Jobs – had a vision for products. – thought about people and what they wanted – developed products to suit people’s lifestyles "There's an old Wayne Gretzky quote that I love. 'I skate to where the puck is going to be, not where it has been.’ And we've always tried to do that at Apple. Since the very, very beginning. And we always will." —Steve Jobs, Apple CEO, Co-Founder and Chairman (1955-2011)

Apple knows what its customers want

• Apple doesn’t do market research. • They don’t talk about target markets• They don’t have focus groups.

Everything Apple designs is based on what Steve Jobs and his team think is a good product.

There’s a great quote by Henry Ford, right? He said, ‘If I’d have asked my customers what they wanted, they would have told me ‘A faster horse.’’’ Steve Jobs

Apple designs great productsThey• start with the look and the shape of a product • design the look and feel of the products• pay a lot of attention to detail• concentrate on the user interface

“In most people’s vocabularies, design means veneer. It’s interior decorating. It’s the fabric of the curtains or the sofa. But to me, nothing could be further from the meaning of design. Design is the fundamental soul of a human-made creation that ends up expressing itself in successive outer layers of the product or service.” Steve Jobs

Apple products are different from competitors

• They are mostly for content consumption, not for creating things like documents.

• They don’t have styluses, you input with your finger. • They don’t come with a user manual, because “you already

know how to use it”. • They link the software to the hardware, so it is the only way

you can use the product.

‘Using Apple products makes you feel like you are playing with technology from the future. Microsoft’s tablets may have been decent tools, but Apple’s iPads are more like cool toys.’ Robin Parrish in Apple Gazette

Apple has created a whole new language linked to their brand.

• They don’t use model numbers like the rest of electronics market.

• Apple product names are usually quite simple e.g. iPad, iPod, iPhone

• The letters I and P have become linked to Apple

• Apple product names have become almost the generic word for the category

Apple’s creates a captive market.

• All Apple products interconnect and interwork, locking in loyalty.

• Apple keeps introducing new services and features, including apps, games, iCloud, Siri

• The more Apple continues to integrate services, the more loyal its users become.

‘Steve Job’s pitch, as he leveraged the success of the iPod, was very simple: Apple products work, and if you buy more than one, they work better.’ Philip Elmer-DeWitt in Fortune Magazine

Apple inspires strong brand allegiance• 84 percent of iPhone users would choose the iPhone as their next mobile device, followed by

60 percent of Android users and 48 percent of BlackBerry users.

• Many survey-takers cited ease of use, quick navigation, and customization as the top reasons for not wanting to switch devices, meaning that comfort level is a major factor for consumers when considering a switch.

• Those who are satisfied with their current set-up will be difficult to tempt to a new platform and the more services they use, the greater a consumer's loyalty to a brand.

• The greater number of services a customer uses from one company, the more likely they are to stick with that brand.

• Apple also has a "cool factor," especially among young consumers. The iPhone's user-friendly interface can be personalised and the trendy marketing appears to be a winning formula.

Source: Gfk Worldwide Smartphone Research, October 2011

Apple creates a strong corporate image.

• It has strong corporate ethics, such as volunteerism, support of good causes or involvement in the community

• It has its own visual and verbal vocabulary, expressed in product design and advertising. Apple products look similar and their advertising and brand image are the same.

• It makes a connection with its customers. The company thinks about its customers and how they live, then designs products for them.

• Customers feel that when they buy an Apple product, they are joining a group of people who are like them

Apple creates very clever advertising.

Apple’s advertising communicates

• how different Apple’s philosophy and products are • how their products are simpler, easier and more user

friendly• how this is better than the competitors

The look and feel of its advertising is important to Apple, and all the ads have• simple designs and graphics • monochrome colour schemes• imagery the same as the brand and the stores

Apple has a different approach to selling its products

• Apple wants to ‘delight’ its customers when they come into its stores. • Apple stores look different with modern designs.• Apple stores put products on tables rather than shelves, so customers can use them. • Apple wants the customer to feel important and so has good tech and educational

support.• Apple sales people are taught not to sell products. They are there to help customers

solve problems. They ‘empathise’ with their customers.• Apple is constantly updating its stores• Apple uses technology. The shops don’t have cash tills and the sales people complete

transactions on mobile devices.• Apple Store staff are recruited for their knowledge of Apple products as well as their

enthusiasm.

‘More than 50 million customers go to an Apple store every three months, and half of them who buy something are first-timer purchasers.’ Apple

All this makes customers think that Apple is different to its competitors.

• Apple’s packaging look is always simple and clean. • There is no product description or selling words on

the box. • The only graphics on the package are the Apple

logo and the product name • The product’s technical data is on the back at the

bottom.• The accessories in the box are the same.• There is no owner’s manual in different languages.

“You already know how to use it”.• The box and the paperwork are good quality

Apple’s packaging is an important part of its success.

Apple spend a lot of money on product launches• Apple hypes a new product by releasing just enough information for

rumours to start. • Apple follows this with a keynote speech where they describe the

product and all its features. • Apple release information months in advance to build up anticipation

about the product. • When the product is launched, it is given a lot of advertising and

publicity. “Once the product comes to market people have been known to fly half way round the world to snag their devices early. Some simply skip work, college, or school, to sleep on the pavement outside stores overnight to queue, and hopefully pick up their devices on launch day. We actually don’t have to queue outside stores for new toys. We can just give Apple money via its website for products sight unseen. Some of which aren’t even in manufacture at the time of ordering.” Steven Northcott of Touch Reviews

Apple aggressively protects the rights to their products.

• They will go to court if they feel a competitor in any way infringes their patents on hardware and software that they have developed.

• Apple is in court with a number of cases with Samsung, and is also suing Motorola.

• Steve Jobs was quoted in his biography as saying that he was going to "destroy Android, because it's a stolen product. I'm willing to go thermo-nuclear war on this."

Objective of the researchTo use a series of research methods to find out if the target audience think that Apple’s products’ interface and functionality and their marketing strategy is better than the competition

Primary research Research has been carried out amongst UK residents to discover if these findings are true of the UK population

Methodology Used1. An AB Survey to show the target audience the Apple iPad and

an Android tablet and to find out which interface and functionality they prefer.

2. A Surveymonkey online questionnaire to find out what the target audience’s experience of Apple and its products and their usage patterns.

3. Face to face interviews to understand what people think of Apple as a company and their product and marketing strategies

Results of AB Testing Research Before respondents saw and used the tablets

Results of AB Testing Research After respondents saw and used the tablets

AB Testing Research Conclusion

Before the respondents saw the tablets:• The Apple users were loyal to Apple and wanted more products

because they had a positive experience of the brand. • The Android user had made his purchase decision just on price

and had no loyalty to the Android system.

After seeing and using the two tablets:• The Apple respondents became stronger in liking Apple. • The Android owner still preferred the Android tablet because

of its size and price.

Therefore the target audience think that Apple’s products user interface and functionality and their marketing strategy is better than the competition. • Apple users don’t change their mind after seeing and using

Apple products. • The Android user thought that Apple’s products interface

and functionality and their marketing strategy were good. The reasons he preferred Android (low price, small size) were not part of Apple’s marketing strategy.

Survey Monkey Survey Analysis• Gender of respondents

Results

More females than males completed the survey

• Age range of respondents

Results

The majority of respondents (Over 66%) were 40+ years

• Number of Apple products owned

Results

The majority of respondents (74%) owned only one or two Apple products.

• Initial Apple product

Results

Respondents first experience of Apple was quite broad with around 25% quoting iPod and a similar amount for iPhone and a Mac computer of some type.

• What is it about Apple products that you like or dislike and why? Analysis or reponses Functionality 11 commentsDesign 13 commentsReputation 1 commentOther 2 comments Therefore:The majority of the respondents, when asked which aspects of Apple products they liked best felt it was either the functionality of the products or the design of the products

• Do you think that there are any Apple products that you feel are "must have products"? Analysis of responses iPhone 15 commentsiMac 3 commentsiPad 2 commentsiPod 1 commentMacBook Air 1 commentNone 7 comments Therefore: The majority of the respondents, when asked which Apple product was a ‘must have’ felt it was the iPhone. However a significant number did not think any of the Apple products were ‘must haves’.

• Why do you feel these are ‘must have’ products?

Analysis of responses Features and Functionality 11 commentsDesign and style 4 commentsPopularity 3 commentsAvailability of apps 1 commentOperating system 1 commentOther 2 comments Therefore:Of those who felt there was an Apple must have product he majority of the respondents, felt it was the products functionality and features. However a significant number liked the style and design of their nominated product and 3 respondents felt their product was a must-have because it was popular or friends had one.

• Usage of Apple products

Results

Respondents who had Apple products used them for a number of different tasks. The most popular tasks were accessing the internet (87%) and accessing and sending emails (78%). Apps were very important to users as well with 52% quoting usage. Nearly half of respondents (48%) used their Apple product for music.

• Price Perceptions

Results

Most of the respondents (73%) thought that Apple products were either too expensive or quite expensive. Only 4% felt that they were good value for the price.

• Can you explain any brand loyalty you may feel about apple?

Analysis of responsesPrevious product/Like Apple products 8 commentsApple service 4 commentsDurable, quality products, well made 5 commentsFunctionality 1 commentApple Stores 1 commentProduct Design 1 commentRange Compatibility 1 commentNot Loyal 7 comments Therefore:The majority of respondents were loyal to Apple. (23/30 comments) The main reason for loyalty was a good experience with the Apple product that was purchased. Because they like the product they would be willing to buy again. There was also a wide spread of other reasons why respondents considered themselves loyal to Apple, with the quality and durability of the products an the good customer service given by Apple quoted most.

Surveymonkey Survey Conclusions• Respondent’s first experience of Apple was quite broad with around 25% quoting iPod and a similar

amount for iPhone and a Mac computer of some type.

• The majority of the respondents liked either the functionality or the design of the Apple products.

• The majority of the respondents felt the ‘must have’ product was the iPhone. A significant number did not think any of the Apple products were ‘must haves’.

• The majority of the respondents who felt there was a ‘must have’ product thought it was the product’s functionality and features that made it appealing.

• Respondents who had Apple products used them for a number of different tasks. The most popular tasks were accessing the internetand accessing and sending emails.

• Most of the respondents thought that Apple products were either too expensive or quite expensive.

Only 4% felt that they were good value for the price.

• The majority of respondents were loyal to Apple. The main reason for loyalty was a good experience with the Apple product that was purchased. There was also a wide spread of other reasons particularly durability and the good customer service.

Apple Research: Face to face interviews

Purpose Face to face interviews to understand what people think of Apple as a company and their product and marketing strategies Methodology I did the research by sitting down with them or interviewing over the phone. Three of the four interviews were carried out in my home and the fourth was done over the phone. The interviews took about 15 minutes.

Results for non purchaser:

All the respondents were over 25 years. Three were male and one was female. They lived in different parts of the UK, but the majority lived in the south of England. Only one respondent did not own an Apple product. His main reason for not owning one was price. His perception of Apple was• Their products are popular• Their image is clean and stylish• Their stores appealing and their advertising is

entertaining

Results for purchasers:Three of the respondents owned Apple products. All three owned more than one. • The main reasons for purchase were user friendly functionality, ease of

exploring content, friend’s recommendation and liking Apple products. Apple products were thought to be good quality and easy to use but expensive.

• The most important things about Apple for these respondents were product style, design and reliability and Apple’s service in stores.

• These respondents felt that Apple’s strengths were in product design and quality, but their high prices were the main weakness.

• Generally these respondents like the way that Apple markets its products. They thought the advertising was appealing and that recommendation worked for them because the products were good. They also felt that Apple customers were very loyal to Apple. One respondent felt that Apple’s reputation for products that are very easy to use was not always the case.

Apple Research: Face to face interviewsConclusionsAll the respondents were aware of Apple and its products All the respondents felt that Apple products were• Good quality• Good design• Easy to use All the respondents felt that Apple’s marketing was• Clean and stylish imagery• Entertaining advertising• Modern stores which are friendly and easy to use. Three respondents bought Apple products because they were esy to use and recommended by friends. The respondent who had not bought an Apple product felt they were too expensive. These results are the same as those found out in the secondary research.

Final Conclusion

Apple has maintained its power base by

• Knowing what the customer wants• Making good quality products• Focussing on design and functionality• Making their products better than the competition• Creating a whole new language for the brand• Keeping customers locked in with inter working• Creating a good corporate image• Creating a brand image that customers like• Creating advertising that is entertaining• Selling their products in a completely new way• Packing their products to make them feel special• Creating lots of hype around product launches• Aggressively protecting their product rights Apple does this on every product they launch. Consumer research shows that Applecustomers know all of this and like the way that Apple makes and sells products. Evenpeople who are not Apple customers like it. This is what makes Apple successful.