Monday, July 11, 2011

Apple's Market Positioning

In my earlier blog, I had written "How to beat iPad". In that article, I had written primarily about having functional features needed to beat iPad, but having all the right functional features is just not enough to win, it also requires the right positioning.

One person asked me comment on the market position of Apple in today's market and its impact on Apple. This made me think and write this article.

Apple is currently occupying the "white hot center" of converged personal computing & entertainment market, and that's a tough position to beat for any competition. So the best solution in such a case is to lure customers into a different market place - i.e, enterprise market place. e. g Apple, by nature & by business strategy, has never positioned itself in the enterprise space & that opens an opportunity for competitors like HP, Blackberry & others.

What is White Hot Center?

White hot center is a market position where all the customer's attention is on. Its essentially the prime spot of customer attention, and everyone is watching every step the seller makes.

To illustrate this, imagine a market or a Mall with a large central space where seller is selling his wares, and is surrounded by people in all direction, people are hustling to get in front and buy his products, and the crowd is making a huge commotion about it. This commotion and noise will attract other people who have come to the market and they too are watching the action at the center of the market/mall. Now, seller is at the white hot center of the market.

Today, Apple is at the white hot center selling its iPhones, iPads, Mac computer, Apple TV, iTunes, etc., and people are surrounding Apple store in millions, and making all the big noise, and then put yourself in another store at a corner of the market, trying to attract customers for your products. And that's where Apple's competitors are today.

Every market has one white hot center: Starbucks in coffee, BMW in cars, HP in printers, iPhone in Mobile phones, iPad in Tablets, Nike in sport shoes, Tiffany's in Jewelry, Marriot in Hotels, etc.

How did Apple get to the white hot center?

Apple did not get to the white hot center by accident, it was culmination of a decade's hard work and mistakes of its competitors. To understand this journey, imagine a mall of PC sellers. Certainly Apple was one of the early stores in the mall and other joined: IBM, Companq, Dell, HP, Digital, Gateway, Acer, Sony, Toshiba etc. Over a period of time the position of white hot center moved from Apple, to IBM, to Compaq to Dell to HP and back to Apple. During the last 30 years, several things changed in the PC industry. IBM was the early rock star of the PC world - but with time, Compaq was able to win that crown, and then came Dell, but as Dell stumbled & fell on quality issues, HP picked up the crown - and for a brief period of time, there was no one occupying the white hot center.

While the rest of PC manufactures stumbled and made mistakes, Apple has been executing flawlessly. Its not that Apple did not have its share of problems: Apple has faced several manufacturing problems - Imperfections in its transparent iMacs, Failure of toaster like design for PC, Scratches on iPod, dropped call in iPhone 3G, debris in 27" LCD monitors etc. But Apple has been successful in avoiding controversies, and has been very successful in cultivating customer satisfaction, Apple has been open and transparent of its problems and has taken all the necessary steps to fix those issues.

While the competition was entrenched with operational issues that they failed to produce competitive products. The fact that the competition had failed to respond forcefully to Apple's new product introductions - had enabled Apple to gain the white hot center.

Lets take a look on how Apple achieved the white hot center position in the market:

Step-1. iMac: Simple & easy to use PC, designed for style and personal resonance with the customer. At a time when all the PC manufactures was selling white box PC, and Black colored laptops, Apple took a fresh view of things and introduced stylish iMac. It was a bold design with an integrated monitor/CPU & without floppy drive. The boldness in design & style was unmatched till date.

Step-2. iPod: Personal MP3 player - with legitimate MP3 download music site - iTunes. Coming into the market when RIAA was suing Napster out of business, Apple created iTunes where customers could legitimately download music and enjoy it in iPods. The competition till date has not provided a competition to iTunes. Both Sony & Dell introduced MP3 players, but failed to create anything like iTunes

Step-3: OS-X & Intel processors. Apple moved smartly to dump PowerPC processors in favor of Intel, and created OS-X, Apple's version of Linux kernel. With this bold move, Apple was able to throw away tons of legacy code and create a small, nibble & efficient OS for all its MAC computers. Till date, Microsoft has not been able to create a product like OS-X, Windows Vista failed in market as it was loaded with several tons of legacy code, which Microsoft could not throw away.

Step-4: Mac Air Book: Apple reinvented laptops with Air Mac Books. The ultra thin laptops was revolutionary in design and size. Even after 3 years of its introduction, competition has still not produced anything like an Airbook in terms of design. Only recently, Lenovo announced a competitive product & that's 3 years too late.

Step-5: iPhone: Revolution of Touch Screen Phones. Apple redesigned the cell phones with a completely new user experience, and with that Apple created a niche for itself. With a strong position in high end cell phones, Apple changed the business environment for the incumbents - Nokia, Sony-Erricson, Motorola. Apple created a whole new platform for its iPhone, and refused to reuse its OS-X for iPhones thus avoiding Windows CE like blunder.

Step-6. IPad: New paradigm of computing. Apple was not the first to introduce the tablet computer. HP, Nokia, Sony had experimented with that before. But Apple changed the computing paradigm with its multi-touch interface in iPhone & expanded that concept in iPad. Its been about 2 years since the original iPad debuted, but the competition is yet to introduce an strong contender in this space. Nokia is no where near with its Tablet, nor is Dell or Sony. HP & Motorola had a decent product but its not a substitution for iPad.

Market Position

To understand market position of Apple, one needs to look at the basics: Price, Product, Place, Promotion. a.k.a - Fundamentals of marketing.

Price:
Apple in general is positioned as a premium product. Apple products are generally priced higher than competition. This position has helped Apple a lot as it avoids getting into price war. Instead of competing on price, Apple can now compete on innovation and unique value propositions. This is a key element to be in the white hot center. This position of a premium priced superior product was once occupied by IBM and later by Sony.

Premium pricing strategy helps to make big profits without hurting the brand. Apple brand is the most valuable asset, bigger than all the technologies it controls. Having volumes at this premium pricing helps Apple make bold design decisions and force its supply partners to comply with its design decision.

To strengthen its premium pricing, Apple does not do any discounting on its products.

Product:
Apple simply wants to sell the best product in the class. No compromises in quality or performance. Here Apple had its share of manufacturing mistakes: Antennagate, iPod scratches, etc. But every time such problem was identified, Apple moved swiftly to solve it completely.

Apple has taken bold decisions when it comes to product quality: Delay shipments to get quality products out, rather than compromise on quality and get more products out to customers. Apple's positioning on quality has helped build trust & confidence of the market.

As long as Apple maintains its product quality, Apple can continue demanding premium prices and people will line up to buy Apple products.

Another good point of Apple's product positioning is that there are very few variants in each class of products: iPad is available in Black or White, 3G + Wifi or WiFi only in 3 memory sizes: 16GB, 32GB & 64GB, and 3G is available on Verizon or AT&T network. This limits the number of choices the customer has to choose from and it makes it easy for customer to decide and buy.
Similarly in its Mac Pro line as well, there is a spartan range of models to choose from. (see Product Management - Paradox of Choice)

No Substitute Positioning. Apple products are unique and does not have a similar substitute. A Mac can be technically replaced by a PC, but the user will never accept the substitute PC because of the user experience on a PC is totally different than on a Mac. So a replacement for a Mac is another Mac, replacement for an iPad is another iPad, iPhone with an iPhone.

Recently, I swapped a Dell for a Compaq without missing a beat, the user experience was the same on both laptops, but I tried Galaxy Tab - only to get back to iPad.

Place:
In the era of Internet sales, Apple moved boldly in the opposite direction and set up exclusive retail outlets, when its competitors closed retail outlets and moved to Internet based sales. Apple has been very selective in choosing the retail partners, has made big demands on how Apple products must be placed and displayed in stores and in case of company owned retail outlets Apple has gone the whole length to design the store as a boutique store aimed at giving the best customer experience. Apple stores are often located in prime retail places and that augurs well with its premium image.

Promotion:
Apple has been a though leader when to came to advertising, be it the 1984 super bowl advertisement or today's iconic iPhone 4 advertisements, Apple's advertisements have always stood apart from the competition.

Apple has been very careful not to give discounts to promote its product, instead it uses scarcity as a promotion technique, saying only 100 pieces are available & that makes people eagerly wait to get their hands on Apple's products. So when the product becomes available, people are readily exchanging their Dollars to get their iMac/iPad/iPhone.

The judicious mix of 4Ps has led Apple to create the right branding, & market positioning.

Branding

Apple has been building up a very big reputation and a very strong brand, I suppose that Apple is within the most expensive brands on earth. Everybody associates automatically Apple with innovation, design, quality, being different, etc. Apple cannot deliver products that are not innovative, well designed or top-notch quality, they would only destroy their own brand and reduce sales figures dramatically. Innovation and quality are related with high price, the high price guarantees the customer that he is buying an excellent product, this is psychologically as well as from the business side, a typical business model. The human psychology says that the higher the price, the better the product and otherwise. Cheap Apple products would mean low quality which would hurt the Apple brand in good times and maybe in a long term, be more dangerous than just trying to survive the hard times.

Take the case of Dell. Which had serious quality issues and that effectively destroyed the brand, and Dell lost the market leader position.

Positioning

Apple has positioned itself to be a lifestyle product for wealthy people, innovators and people with good jobs. Apple has become a desired product but not easily affordable. This premium positioning helps Apple in the long term. With inflation in wages, affordability, more people can afford Apple products in future, thus increasing sales by reaching out to a larger audience with time, and when people can afford to buy Apple products they do not haggle about price, price would be secondary and the image of having an Apple product is more important.

Four years ago, very few people could afford a smart iPhone in India, but today the situation has changed, iPhone is becoming part of mainstream market as affordability has increased.

Business Environment

Not all things at Apple was deliberately planned and executed by Apple. Few things happened in the business environment that really helped Apple along the way. Failures of Microsoft Vista, limitations of Symbian OS, Fragmentation of Andriod systems and importantly security threats on Windows - all this helped Apple.

Apple was able to pull other developers to develop applications on its iPhone/iOS platform, which led to creating a sustainable ecosystem for its business. With millions of users, third party developers are happy to develop Apple specific products.

In the back end, Apple worked hard with music label companies to create iTunes. Now Apple is building iCloud as well to create a right environment for the future.

Staying in the White Hot Center

Apple is in White hot zone, that it cannot afford to make mistakes. Customers are willing to forgive one rare mistake, but not too many of them. Apple has been able to execute extremely well all through the last decade, and has corrected several glitches, come out openly and admit the mistake and fix them.

Apple products are never positioned to be a low market products, its only in the premium segment mind share. Do not respond to competition in obvious ways, instead make the competition respond to your moves.

Apple works doubly hard to find out what customers want and then delivers on the key requirement. Once in execution, it must be a flawless execution.

How to stay in the white hot center:

1. Move with the customer.
2. Influence the customer to move in that direction. (Best way to be a leader is to find a group of people walking in one direction, and then walking in front of them)
3. Make no mistakes, when you make one, correct it ASAP.
4. Throw yourself at the audience as a thought leader in that field.
5. Always be seen with the winning horse. Always be associated with success and never get associated with controversies or losing propositions
6. Never take customers for granted - get the pulse of the market and move ahead swiftly & flawlessly.

Also See:

8 comments:

Serenity said...

This was a good study that helped me a lot to prepare my assignments thank you very much

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not2complain said...

finally someone who wants to get down to business ... I hope you feel the same about in-kind visits.

Abhijith Maney said...

@ serenity
Same here :)
Ty :)

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