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.
Hey & Highway Robbery
Watching the scuffle with Apple and HEY playout is interesting. Am wondering if we have reached that watershed moment when Apple will have to acknowledge their incredible market power (not a monopoly but at least a duopoly) and how punitive pricing punishes rather than enhances the developers we all depend on to create the next big thing.
Does the world’s largest company really get to decide how millions of other businesses can interact with their own customers? In fact, Apple’s policy distances you from your customer.
I get Apple’s argument – it is our platform, play by the rules, we know what is best for customers. Without denying Apple’s right to make money – and they are pretty savvy at that – perhaps its time for them to acknowledge they can’t hide behind that mask and its time for fair and equitable pricing? They’ve got a distribution chokehold on the community.
So what do we want? I’m not saying IAP shouldn’t exist, or shouldn’t be an option. For some businesses, it might make sense. If Apple is sending you all your customers, it probably does make sense. The 30% rate is still highway robbery, as Congressman Cicilline recently said in an interview, but the fundamental problem for us is the lack of choice.
Apple, please just give your developers the choice! Let us bill our own customers through our own systems, so we can help them with extensions, refunds, discounts, or whatever else our own way. It’s our business, not your business. And Phil Schiller’s suggestion that we should raise prices on iOS customers to make up for Apple’s added margin is antitrust gold.
It’s one thing to argue what is right for customers but as the subscription economy continues to boom, its another to exercise total control over it in a dominant ecosystem. And if they are they need to give us as consumers much better control and transparency. Dealing with, for instance, family purchases and subscriptions is a nightmare for most parents.
The simple answer is a small commission for marketing and enabling the sale of the app, then the consumer chooses how they want to subscribe. When you publish an Android app you can freely choose between using Google’s subscription mechanism and paying them a cut, or implementing your own solution and not paying Google anything.
The argument that developers could just stop making apps for IOS is weak. Apple simply has too much market power and reach to ignore. What developers could do is stage a mass walkout, perhaps, but at what cost? Ultimately Apple needs to take a fresh look at what is right for consumers and developers.
One thing is clear beneath all this. The rules don’t apply equitably and are at best nebulous. in some cases popular apps don’t function as they should – The Audible app has no in-app subscription mechanism, Kindle doesn’t let you buy books through the iOS app. Subscription-based email apps like Microsoft Outlook are permitted on the app store without Apple getting a cent.
So, Netflix, Spotify, Amazon, Microsoft are all companies with enough size and power that Apple could be in serious danger if any of them decided to pull their apps from iOS, and even more potential trouble if they decided to challenge Apple’s practices from a legal standpoint. If you are too big to fight, you get a free ride. If you are smaller, obey or get out of the store.
This issue goes beyond just the HEY skirmish. It’s time they reviewed their approach to subscriptions, not just products, and do better for developers and consumers.
Tracking Twitter
Twitter’s changes last week mean lots of marketers – anyone with a social dashboard should see a change.
In short, as of last Wednesday all links (longer than 20 characters) posted on Twitter.com or any Twitter client are now marked with a t.co URL. As NextWeb says, “this means all analytics tools are picking up t.co as the referrer as opposed to a particular twitter client (Twitterrific, Tweetdeck etc.) or just twitter.com”.
Now Twitter should get the attribution it deserves. Not that this is the reason Twitter is using. They say Twitter uses the t.co domain as part of a service to protect users from harmful activity, to provide value for the developer ecosystem, and as a quality signal for surfacing relevant, interesting Tweets.
Super. The real rub though is that marketers will now get to see the impact and influence of the entire Twitter ecosystem – a key metric given so many posts and links don’t occur on Twitter itself.
NextWeb has a great overview.
