Apple’s Better, Special, Different
Watching the Apple keynote this week – and reading this – all highlighted the importance of starting with the product to drive differentiation. Everything Apple does is about difference – not just to others in the market but to what preceded it.
Prices then go up over time and are a result of innovation.
As Tim Cook said in his interview with BusinessWeek:
“We never had an objective to sell a low-cost phone,” says Cook. “Our primary objective is to sell a great phone and provide a great experience, and we figured out a way to do it at a lower cost.”
And critically, the product and pricing are optimised for a specific market – where the Apple ecosystem is most vital – America. As Ben demonstrates well:
The Apple ecosystem is of most value in the American markets first, the European markets next, and the Asian-style markets last … therefore, it’s very rational for Apple to optimise its pricing for the American-style markets, and the most logical price is $550/$99.
What Ben is getting at in all of this is a set of marketing fundamentals I see most marketers, miss:
- Price to product differentiation – not just relative to market but also prior product instantiations. Don’t price solely to category entry point or pricing dynamics.
- Pricing must exist in the context of broader market dynamics in most cases, but not all. There is little logic to the iPhone Pro pricing relative to other competing products. It is priced on its merits as a “luxury” device. Pro is always the misnomer in tech – it’s code for luxury.
- Pricing substitution isn’t necessary – each Apple product is priced relative to the market and its brand effect. iPhones don’t sell for less than they are worth in the hope you will buy iPods and other services. There is no “hope” in Apple’s strategy.
Start with: product (innovation & differentiation), position, price. Not with price, the product, then position.
Effectively Apple’s brand power is the point of leverage and “strategy” insurance. The massive investment in the Apple brand creates the halo that protects pricing power and ensures demand. But without effective product innovation, priced and packaged to the core target market, the brand wouldn’t make the difference up.
Stratechery is a great read and well worth paying for.
Big Thinking for Business
We recently launches our Business channel on YouTube. Early days yet but go take a look at let me know your thoughts.
FREEMIUM
Chris has a great response to The Economist on free models. I’ve long argued that free often gets misread as literally free. (the comments are worth reading)
Every customer comes with a cost. Rather than pay to market to you and obtain revenue now, instead I choose little or no marketing or distribution cost, focusing instead on the belief that you will pay for the product later. These freemium models are all round us. Google is doing it with Picasa. Flickr with FlickrPro.
There are those that also believe that, if you believe, you will pay. CC Cleaner is a great example. Terrific free utility for Windows. You pay to support the product if you think it is worth it. And its worth it. They are essentially monetizing a percent of their customer base that has a conscience or real enthusiasm for what they are doing.
Also worth a read is this survey of free business models online. More links here….
Penn On Professional Job Losses
Interesting column from Mark Penn on the impact of the recession on professional jobs. He makes a good point here:
“We are totally unprepared for this new phenomenon. We have safety nets for the chronically unemployed, for the fast-food workers let go (oddly they may be the only ones keeping their jobs in this recession), and for the manufacturing plants that have been shuttered. The stimulus will create construction jobs galore. But we have nothing for the tens of thousands of displaced advertising creatives and newspaper writers and editors that are among the newly unemployed. They can’t build roads — all they learned how to do was to write ads and draft editorials.”
