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Apple Needs To Eliminate A Barrier To IOS And Accessory Upgrades

|Includes:Apple Inc. (AAPL)

Apple have generated enormous customer enthusiasm, and with the rise of the iPod, iPad and iPhone, caused an iEconomy to sprout up around these products, creating a moat for Apple in its business model.

For example, between 2003 and 2006, the purchase of a $200 plus music system with the 30 pin iPod connector, meant a customer was likely to replace their iPod with another iPod only, as the cost of swapping out such a device would render their iPod compatible devices as useless.

It represents why many Apple users would not be interested in looking at anything other than Apple products, because in addition to an iPod, you would need to replace multiple power adaptors and cables at home and work, speaker systems ranging from small clock radios to more significant stereos like the Bose Sound Docks, plus any other device which connected through the old 30 pin connector. Car integration is a key point. Using less useful connectivity after genuine iPod integration in a car would be a hassle for many drivers.

A move to an alternative product might look initially cheaper, but would work out more expensive when you needed to swap out your other accessories or buy adaptors in order to have a seamless digital technology experience.

This makes the assumption that once you've had a seamless iPod or iPhone digital experience in your car or with your home sound dock system, you are less enthusiastic about connecting with an analog connector through a headphone jack that doesn't offer the full functionality. This would sacrifice useful tools like accessing playlists through a remote control, or through steering wheel controls in a car.

When the iPhone came along in 2007, iPod owners immediately saw how helpful it would be to swap out their current mobile to iPhone, as most of their existing accessories would work. If those devices weren't fully functional, future updates in vehicle fleets or accessory industry would ensure they were. In some cases, this would only require a software update on the iPhone. Future iPod and iPhone owners could happily charge their phones on the same kit, or if existing owners would now have multiple chargers (one for home, one for work, one for travel, one for the downstairs office and one for the bedroom).

The iPad was less important here, as its increased size and nature of its use precluded it from being used with music devices, or plugged into cars. Its increased wattage over iPod and iPhone meant new chargers were needed. However, some clever accessory manufacturers have designed devices that work with iPad, iPhone and iPod in an elegant fashion.

Apple released the Lightning connector at a special media event on September 12, 2012, roughly six months ago. Initially, only the iPhone 5, iPod Touch and iPod Nano were Lightning enabled. In October 2012, iPad Mini and iPad 4 were released with Lightning only connectors.

Naturally, Apple released an adaptor that would bridge the old 30-pin connector with Lightning devices, as well as Lightning with Micro-USB, a connector more popular in Europe. At least there was a means for backwards compatibility but it wasn't as practical for many devices like sound docks.

The move to Lightning was necessary. It has delivered Apple a smaller, more capable and more efficient connector for iOS devices. However, in doing so, it rendered all third party devices immediately obsolete. The sale of an adaptor some felt should be free engendered some grumpiness from users at the time.

It also became clumsy for integration with existing chargers, music devices, car connectors and more. This is the opposite of the Apple user experience.

The consequence of this, the author posits, is a slower upgrade cycle by iOS users.

To move from an older iOS device with the 30 pin Connector to a newer Lightning device would require numerous extra purchases of USB-Lightning cables, adaptors, newer sound docks for true plug and play, and inconvenience in swapping out cables or even whole car stereo units to ensure an upgrade for your car connectivity.

This has deterred the author from upgrading his iPhone 4S and his wife's iPhone 4 to the current iPhone 5, as the following extras would also need to be purchased - multiple charging cables, car connectivity changes, new sound docks at home and at the beach. For some this might represent an unacceptable cost.

The purchase of an iPad Mini for our children has introduced a Lightning connected device into our household, and with it, a less than seamless experience involving extra cable swapping for power charging.

The author notes that there are two possible consequences from the move from the old connector to Lightning that affects Apple's moat in customer retention:

- A person will wait until they need to upgrade their iOS devices and accessories, so they can then eliminate the old connector from use and have a seamless user experience. This represents a slower upgrade cycle for Apple.

- A person will consider other devices like Android, Windows or Blackberry if they are no longer bound by the use of the old connector and the seamless integration it offers. This represents a potential loss of business to other platforms.

So what can Apple do to assist its users in swapping out their older iOS technology and accessories to new Lightning equipped devices?

The first suggestion is that Apple might consider a rebate system of some kind that compensates purchases for new USB-Lightning connectors. If someone needs a second cable for a brand new iOS device, then Apple should have a voucher that enables him or her to get one very cheaply or even free. They would only need to do this for 6 months or so to be effective.

Secondly, they might have a cashback rebate or discount system for anyone who buys a Lightning equipped accessory from the online Apple Store, retail Apple stores, and select retail partners at the same time as an iOS device. This would encourage uptake of new Lightning enabled iOS devices and would represent an aggressive move by Apple to keep customers in the fold.

Thirdly, it might even offer for a limited time, a trade-in system through Apple stores and select retail partners for old sound dock devices, to help bring in customers with obsolete accessories.

Fourthly, it might even consider working with car manufacturers to bundle or offer a rebated Apple iPhone with new Lightning connector equipped vehicles.

Apple's technology is hugely impressive, and delivers significant joy to its user base. Yet users have other options, and can slow down their upgrade path if they have barriers. Eliminating all barriers to the rapid and easy adoption and re-adoption of iOS technology should be a primary goal of Apple. Building goodwill with existing customers now will help retain them well into the future.

Disclosure: I am long AAPL.

Additional disclosure: No connections to the technology or consumer space otherwise.

Stocks: AAPL