Tuesday, March 12, 2013

Has Apple lost its "Cool"?

Few weeks ago, a parent asked my opinion on which tablet to buy for his son - Apple's iPad4 or Samsung Note. As an Apple user, I recommended iPad and also mentioned the advantages of 'parental control' features in iPad. But the young boy's heart was set on Samsung and I couldn't change his opinion. So a week later, his parents bought him a Samsung Note 10.1" tablet for his birthday.

I was there at his birthday party taking my daughter along for the party - watching him and his young friends play with the new tablet. I just stood there watching and hearing them drool over the new toy. The conversations among the young kids was an eye opener.

One kid made it very clear: "iPad is for parents and is boring, Samsung is cool." It was that statement which made me think of Apple in a new way and what I learnt after this incident was truly enlightening.

I tested out the same observation in my weekend class. I teach Computer Architecture to Master's Students at Manipal University. In a class of 37 students, all of them had an Android phones, 32 of them had Samsung, 18 of them had Galaxy S3. Not a single user had an iPhone or a Blackberry.

In India, carriers do not subsidize handsets, so users will have to pay the full price for the phones.  So price premium could be one of the reasons why users are migrating to Samsung, but the real reason is that Apple has lost its "cool" factor. Young users see iPhone and Apple as products for older people. Even at office, I observed the same behavior, only people over 40 are using iPhone - while all the young engineers are using Samsung or Sony or LG.

The change in consumer perception implies that the day's of Apple's dominance is coming to an end.

The Change is Real

For more than five years, Apple has maintained the same marketing strategy. The iPhone design has also remained the same, worse still - Apple makes iPhones in two colors only! Its almost like Henry Ford's statement: "People can buy a Ford Car in any color as long as it is black", In case of Apple one can buy an iPhone in any color as long as it is black or white. Customer can choose between iPhone 4S or iPhone5.

While the strategy of offering limited options was good five years ago, but not now. People want more options and Apple just does not offer that. In other words, Apple as a brand is not appealing to young users in India (and elsewhere in the world)

Eons ago, iPod was "cool". So when iPhone was introduced, consumers flocked to buy the next "cool" gadget. Apple had positioned itself at the white hot center. (see: Apple's Market Positioning) With passage of time, and death of Steve Jobs, people at Apple have maintained the same marketing plan and product designs. Consumer goods are highly perishable. With passage of time, Apple's marketing has become stake and Apple has lost touch with consumers and is getting bumped out of the white hot center and Samsung is claiming that center position.

Today, the consumers perceive Apple differently. It is no longer "cool" to have an Apple product. I tested this out with a group of college students and new hires - who recently joined work. I asked people to associate the following words with brand names.

Brand Names: Nokia, Blackberry, Apple, Samsung

Words: Cool, Old, Expensive, Cheap, Manager, Young, Hip, Stone, Boring.

The results of this exercise was not surprising. Blackberry was tightly associated with words Manager & Boring,  Nokia was associated with Cheap and Old.

Very few people associated Apple with Cool. The most common association for Apple was expensive, followed by Old and only 3 participants called Apple as Cool.

Samsung got the honors of being strongly associated with Cool, Hip, & Cheap.

This simple exercise was an eye opener for me. Though the results could have varied with a different sets of demographic groups. But then I selected the group which could afford iPhones or similarly priced smart phones. I would point out that not a single user in the group had a Nokia Lumia or Blackberry phone. There was only two users who had an iPhone - while the rest had Android phones from various manufacturers. (Samsung, LG, Sony, Micromax, Spice)


Implications of these observations are enormous. Apple could be on a verge of collapse in sales - but not a very drastic drop in sales as there are no other alternatives (other than Samsung/Android).
Apple's current user market is getting saturated, so the growth in incremental sales will fall to single digits (not counting the handset replacement market)

Younger generation do not see the value proposition in Apple iPhone or iPad. Consumers are not getting the value for their money, considering that they have to pay a premium price for an Apple product.

Apple's product management and product marketing has gone stale. Its innovation engine has stalled. Customers are no longer as excited or happy with Apple products as before. Apple's pricing and product changes - such has the smaller lightning adapter, which forced whole lot of older customers to send ridiculous amount of money for simple accessories, has started to alienate its customers in India and elsewhere in Asia.

All this implies that Apple will no longer be the king of Gadget world. Apple may maintain its dominance in the US market for some more time, but in India and elsewhere in Asia, Apple is at a point of losing its customers for good - and that is bad news for Apple's investors and shareholders.

Closing Thoughts

No company can maintain an above the industry average returns for long, no company can maintain its industry dominance for long. Apple's long reign at the top is now coming to an end - unless Apple can surprise and wow the world with breathtaking innovations.

In India, which is a very price sensitive market, Apple is losing and losing fast. Loss of mind share and brand value will have long term implications for Apple. Fortunately, for Apple, there are not many alternatives in the market - which gives Apple some breather to get its product strategy together and retain its dominance.

Also see:

  1. Apple's Market Positioning
  2. Why Are People Angry at Apple?
  3. Apple is Losing its Innovation Edge
  4. Apple loses its way with Maps
  5. Apple in India: a lost opportunity?

1 comment:

Arun Kottolli said...

Its now official:

Apple Seen Losing Its Innovation Magic by 71% in Bloomberg Global Poll