Apple's Interesting Challenge with Its Best Buy Deal 21 comments
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Apple (AAPL) barged its way into the cell phone business and created lust in the wireless marketplace by creating a singular, super-fidelity handset. Stretching further toward the mass market by selling its products in Best Buy stores (BBY) will create an interesting and potentially dangerous test for Apple.
I've been working on a book, to be published next year by Doubleday, on the trade-offs consumers make between the fidelity (or experience) of something and its convenience (i.e., how easy is it to get and use). The trade-off plays a huge role in business successes and failures. One of the discoveries is that it's almost impossible to offer consumers both high fidelity and high convenience at the same time. Products and services that do best are usually one or the other, while trying to do both muddies the brand message and starts to erode either the fidelity or convenience.
It's important to note that part of the secret to a super-fidelity product is at least a certain amount of exclusiveness. In the case of the iPhone, for instance, it's way cooler to have an iPhone when most people don't than to have an iPhone if everybody does.
So, you probably see where I'm going with this. The iPhone is a great, high-fidelity product in and of itself. But part of its fidelity comes from its unusualness and its cool factor. Apple sold about 5 million iPhones in 2007. This summer, it sold 3 million iPhone 3Gs in just its first month on the market. Meanwhile, the price keeps dropping, which makes the iPhone more available -- and at the same time, more pedestrian. Selling the phones at retail outlets like Best Buy instead of just at Apple Stores will contribute to that trend. At what point will the iPhone no longer seem so cool? (This is pretty much what happened to Motorola's (MOT) RAZR.)
Apple, it seems, is at a strategic crossroads with the iPhone. It can pull up short now, continue to pump R&D into making the iPhone the industry's premium product, keep prices high and availability low, and maintain a solid niche market of fanatical owners. Or it can drive the iPhone down into the mass market -- a la the iPod -- and create a brand new top-end, super-fidelity handset that holds onto coolness/exclusivity. That is, IF it can. Not easy to do.
If Apple simply pushes the iPhone into the mass market, it will be a temporary victory. As the RAZR showed, sales will take off like a rocket as the price drops -- until a point comes when consumers see the product as run-of-the-mill, margins shrink, and prices can't fall any further. Sales suddenly fall off a cliff, and the brand is all but dead.
Can't wait to watch Apple and see.
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This article has 21 comments:
The fact that the computer and printer cost double what other computers cost was not a factor in my purchasing decision. What was a major factor was that one could print exactly what one wanted too the first time without a considerable amount of trial and error and the added fact that numerous fonts were a part of the package was an additional benefit.
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The other feature that sets Apple apart from other companies besides inovation is there absolute adherence to using their programming language. I have some knowledge of early programming courtesy of the USN and what I learned is when you turn on any computer it has to go through a "bootstrap" procedure and it checks its circuits to make sure everything is ready to respond. It sets the pointer at octal 001 (machine code) and asks the operator to push the start button to begin. In the case of the Kaypro it showed a small blinking arrow which I believe was the command line asking the operator to begin making entries. This blinking arrow was common among most computers whether they were IBM PC's or the Commodore computers.
The Apple program chose not to follow this approach and mapped every pixel on the computers screen and it had something no other computer had which was a "mouse." All the PC users laughed at us (Applefiles) because we did not have a command line with our computers we had to do something called point and click.
I remember one of the famous guru's of computerdom telling everyone that the Apple computer would fail because of this childish feature. Funny how predictions can be so wrong. It just takes some people longer to discover the "light" even when it is right in their face.
I remember the first BMUG (Boston Mac Users Group) where I was able to listen to two men speak. One was Bill Gates the other was Steve Jobs. It was quite obvious to me which of the two was the innovator. I ask anyone reading this comment to follow the innovators. They might not always be right but they certainly are not part of the flock. Chow GW.
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For luxury items that are NON-ESSENTIAL this statement may be true.
A Ferrari has fidelity and is convenient, so are luxury, exclusive hotels, member-only nightclubs etc.
However, EVERYONE needs mobility and a personal communications device with access to business and personal data. These are no longer just WANTS, but today they have become NEEDS.
Apple excels because it provides a UI (user interface) that is easy, and fun, to use. It happens to be cool, BECAUSE it is easy and fun to use, not only because it has a small market share.
Notice, that when Apple introduced the 3G iPhone it looked almost EXACTLY like the 2G iPhone. Also they both use the IDENTICAL software and SAME user interface.
Other handset manufacturers have many handset models in their lineup. Unfortunately, changing to another handset of the SAME manufacturer means that you have to become accustomed to a different designed device.
Apple determines what the easy and fun user interface should be, and then spreads that same UI throughout its product line. This gives its customers consistency and productivity with every one of its devices.
Apple is pushing this device as more than just a phone...it is the next computing platform. It, and devices like the iPhone, are what everyone will be using in the future. This is the mobile computer that people have been talking about for years. I've never understood why people think an 11" laptop is a mobile device. Something that is truly mobile needs to fit in your pocket, not in a bag on your shoulder.
They need to get as many people using the iPhone as possible so that they are ahead of the competition. The Best Buy deal will help them do that. Not to mention, many people using an iPhone will probably convert to the Mac platform, which happens to be sold in many Best Buy centers.
The halo effect was in many ways the point of the iPod, at least that became a nice bonus. With the iPhone, however, this isn't as important in the long term because people will not be using desktops, even laptops, the same way in the future. Mobile devices like the iPhone will be the second computer of choice for many people.
I bought an iPhone at an AT&T store. It had a fit/finish problem (the glass was not seated properly under the bezel), which I did not notice for a couple of days. I went back to the AT&T store and was told that it was a warranty issue and that I'd have to deal with Apple.
After a few tribulations I got to see a "genius" at a local Apple store. She fetched a replacement unit, which she was ready to swap with me, when she learned I had bought the phone at an AT&T store. Because I had not purchased it at an Apple store, she could not give me the unit she had in stock. Rather, she had to order a replacement unit, which took 10 days to arrive, I had to make another "genius" appointment and another trip to the Apple store. I left the store frustrated and disappointed.
If Apple will continue to treat as second-class citizens its customers who choose a more convenient purchasing option, I worry about the company increasing such options.
That was only different in design, not in functionality or features. It's a ludicrous comparison.
You are really pushing your theory to hold up the Razor as a failure, and suggest that the iPhone would folow that merely well designed phone when the Razor never received 100th the attention the iPhone has, and for obvious reasons--it's a phone, not a computer.
ridiculous article
companies that rested on their laurels with one popular product, got what they deserved. Apple makes a range of products and is developing new ones all the time. you just can't compare them to one-trick-ponies.
best buy has reported that people are constantly asking if they carry the iphone...and the best buy i went into (to see the Apple department) has a surprise waiting... a real APPLE guy!! in uniform and everything just like at the Apple Store, ready to deliver good customer service. He said he's full time there and there are others being hired. This guy had previously been the ONLY person at the compusa store who knew what he was doing. (one clue about compusas' failure)
so Apple is not just sending off their complicated products... they're making sure it's done right. they learned the hard way, but it was a good lesson and paying off now.
The iPod, as pointed out, is perfect counterexample. An iPod didn't end up in every household in the world because it was rare or hard to get (nobody wants them because everyone is buying them?!?); in fact, the less expensive nano iPods proved more successful. The iPod was one of the best tech product successes ever because of product/software design and integration. Great product, great design, great quality, fantastic software integration (because it came from a company that understands product design, user interface and software.) Apple is one of VERY few companies that can roll out hardware/software pairs, let alone do it well. And its resources for doing so keep groing.