The Secret Behind Apple's Loyal Customer Base

| About: Apple Inc. (AAPL)

By Carl Howe

Pundits often refer to them as "zealots" or "fanboys." The more polite references include "Mac loyalists." I am, of course, talking about Apple's (NASDAQ:AAPL) more vocal customers, those who will defend the company and its products in any debate going on around them. What is it that drives their passion for most things Apple? Is it a deluded mind, warped by the Reality Distortion Field that Steve Jobs so successfully wraps every new product in? In short, the answer is no.

The truth behind the scenes is not that Apple has a large group of customers that are too dedicated and passionate about their products, or the company as a whole. The reality is far more simple and obvious: Apple simply has a large group of very satisfied customers — and that's the secret ingredient left out of nearly every analysis or op-ed piece that mentions these "zealots."

The obvious side to Apple's customer satisfaction lies in their attention to detail in every facet of product development. All their products are designed, at every stage, with the customer clearly in mind and each product is tailored to make it as easy to use as possible for the customer, regardless of how technically savvy or not they may be.

The less obvious side involves two keywords: freedom and choice.

In The Tyranny of Too Much, we explain how too much choice is a problem, a significant problem even. Recapitulating, too many options to choose from will increase our expectations and decrease our satisfaction with the choice we've made. Barry Schwartz's book, The Paradox of Choice, explains it in great detail and is well worth a read.

This presents a problem for businesses, because it means that to satisfy customers they ought to give them less to choose from; however, our western society is so focused on offering choice that this almost certainly seems like a poor business decision. After all, choice is — for better or worse — transparently linked to freedom, and freedom is what today's society is all about. But the fact of the matter is that less choice, and consequently less freedom, is what actually liberates us as customers because it gives us greater satisfaction.

Apple is one of the very few companies that get this — and yet, they get chided for it much more so than praised.

When the iPod first came out, it was written off as a failure-to-be because it didn't offer various features. It was a choice-limited product and therefore it couldn't possibly succeed in a market that was all about choice. Rob Glaser, CEO of RealNetworks, even used its choice-limited characteristics as an argument to predict its downfall "five years" later. Funny, that: it's five years later, and iPods have just passed 100 million sales.

The biggest mistake many technology companies make, whether they're hardware– or software-oriented, is thinking that consumers want choice, because choice equals freedom. However, what consumers want is satisfaction, and as explained above, too much choice leads to less satisfaction.

If you compare Apple's iPod offerings to those of, say, SanDisk
(SNDK) or Creative (OTCPK:CREAF), the one thing that really stands out is that Apple essentially offers only three music players: the iPod shuffle, the iPod nano, and the regular iPod. What do their competitors offer? Ten and sixteen players, respectively. That's a lot of choice — too much choice.

When a consumer has to choose between the Zen Vision W, Zen Vision, Zen Vision:M, Zen Neeon, Zen Neeon 2, Zen V, Zen V Plus, Zen Nano Plus and so forth, what are the chances they'll actually figure out which one is right for them? Their names are as differentiating as their feature sets are, with sometimes only miniscule differences between the various players.

This leads to less customer satisfaction, because if you buy the Zen Neeon, it's not hard to imagine that the Zen Neeon 2 might have been a better player for you. This is not the case with Apple's iPod offerings. Its three iPod types are clearly distinguished from each other, making it less likely that you'll think a different model was more suitable than the one you bought.

Apple's limited choice creates more satisfaction. Less time is spent trying to find the right player, less time (if any at all) is spent wondering if the chosen player was actually the right one, and as a result, more time is spent simply enjoying the purchase.

This is exactly why, when Apple releases a new type of iPod now, it replaces an existing line, so as to keep the number of choices to a bare minimum. The iPod nano easily could have lived next to the iPod mini, one being flash-based while the other still uses hard drives. Instead, the mini was replaced because both products fit the same rough customer desire: an extra small music player that still had a decent amount of storage space (and a screen).

The same scenario plays out with the Macs on offer. Go to Dell or HP and you can find an absurdly large number of computers to choose from, most all of which differ from one another in only the slightest details. With a Mac, these small differences in CPU speeds or screen size are "hidden" from the consumer by being placed after the choice stage, not in the middle of it. When you get to choose between a 17", a 20" and a 24" iMac, you've actually already made the choice that really matters: you've chosen an iMac. That screen size is only an afterthought in the process, a personal customization step that seemingly has nothing to do with your choice of machine.

All this leads to the obvious but often overlooked fact that it makes the customer happy when they've finally purchased their product. Product quality, while important, is only a part of what makes a customer satisfied; the other part lies in knowing that you made the right purchase to begin with.

Apple's "loyalists" are no more than very happy, deeply satisfied customers, and their competitors should learn from that.