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"The Business of New Technology" OR "Selling Icemachines to Eskimos"
Evander
Disappointed FatherRegistered User regular
Disappointed FatherRegistered User regular
IN an attempt not to drag down other threads, I thought it might be worthwhile to create a separate thread to discuss how technology producing companies market their wares in a society where tech and gadget products are being increasingly mainstream, at a rate seemingly faster than the mainstream understanding of these products appears to be increasing.
The discussion is going to be starting off with Apple, simply because that is the company I am attempting not to derail a different thread with, but feel free to discuss any company in here, and what you think is positive, or negative, or just plain interesting about their business strategies, be they marketing to the niche group who understands them, or the big wide group who has no idea what they do, but know that they want one.
The discussion is going to be starting off with Apple, simply because that is the company I am attempting not to derail a different thread with, but feel free to discuss any company in here, and what you think is positive, or negative, or just plain interesting about their business strategies, be they marketing to the niche group who understands them, or the big wide group who has no idea what they do, but know that they want one.
Evander wrote:Evander wrote:admanb wrote:People aren't ignoring your arguments, they're disagreeing with your fundamental assertions. Your claim is that Apple's branding has created a bubble, our counter-claim is that Apple's consistent user experience and style has created a value that goes beyond technical specifications, and that the reason competing products stuff more tech (like 4G) and bigger numbers (like 8 megapixels) into their products is an attempt to bridge the gap in value that Apple creates between their products and every other product on the market.
Exactly. You AREN'T reading my posts, because I'm NOT harping on technical specifications.
I'm an economist, not a computer engineer.
My point is that the value adds that you are talking about Apple creating simply don't track with the same percentages of the population in other markets. I am NOT saying that there is no value in aesthetics or experience, what I am saying is that the portion of most markets that is willing to pay a premium for them is not as large as the following that Apple seems to have built.
You're an economist by trade, Evander? That's interesting.
Your point seems to be changing by the minute. Is it that Apple's business model sucks? Is it that their marketing sucks? Is it that their products are overpriced? Is it that their business model doesn't suck, but isn't infinitely sustainable? Pick an argument so we can have a rational conversation about it.
My point isn't changing, the points I'm being "attacked" on are.
My point is simply that Apple's current business model isn't sustainable. It isn't that the model "sucks" (or that Apple or any of their products "suck"), and it isn't that Apple is doomed to fail (changing a business model isn't the easiest thing in the world for a larger corporation, but it is still incredibly possible.) It is simply that Apple cannot continue to do exactly as they are doing forever, and if they want to maintain a larger marketshare at that point of unsustainability (as opposed to going back to being a niche product manufacturer) then they will have to make drastic changes to the way that they do things at that point.
edit: just so that I don't appear to be misrepresenting myself, I am an economist by training, but my job experience itself has trended more towards cost accounting and regulatory compliance matters, not that I don't have experience working in economic analysis, I just don't want folks to think I'm claiming to be an expert of all economics ever, my point was more about my utter lack of knowledge when it comes to technical specifications (that is to say, I am a tech hobbyist, not a tech professional.)
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1. All products have a certain inherent value. On top of that, most products have an amount of value-add.
2. Value + value-add = the most logical price point for the product.
3. However, the higher the ratio of value-add to value, the more niche the product.
Correct me if any of this is wrong. Here are my questions:
1. What determines whether something falls into the "value" or "value-add" column? Is it constant, or does it depend on market?
2. If Apple is depending so much on value-add to set cost, why are similar phones like the Evo 4G not able to undercut them?
i do not believe that you have demonstrated this. you've simply asserted it.
To say there is a "branding bubble" is giving the average consumer way too much credit. Like any drug, luxury consumer electronics turns otherwise reasonable people into zombies who will do anything to get their hands on it.
The PC as we knew it even 3 years ago will be unknown to our children. Apple is leading the charge in making that become a reality, and thus are in the seat of power. Their kung-fu grip on the hardware that their software gets run on ensures there are no "Vista" incidents, that shattered Microsoft in the eyes of home consumers.
It would take a cataclysmic failure to Apple to lose its prominence, or a success from a competitor that was 3 times more impressive than anything they've produced.
I doubt anyone will wake up in a year and say "maybe I shouldn't be spending $2500 on a laptop that really costs $1700" or "do I really need a cell phone that makes pancakes"? We're talking about a society that has produced Crocs and the Hummer.
we also talk about other random shit and clown upon each other
I think OSX occupying around 5% of the PC marketspace and apple sitting on as much cash reserves as Microsoft says a lot for apple's "business model," especially given how apple is positioned with respect to product release as compared to microsoft. Additionally apple has managed to make pretty incredible profit margins in the phone marketspace, an area which before they had entered, was basically commoditized.
I'm not at all sure of apple's success once Jobs is no longer around, but I think for this thread to be meaningful, things like "business model" or "sustainability" or even what metrics are being examined or what companies or industries apple is being compared to deem it successful or not should be declared or discussed.
The reason I disqualify that issue is that the extent and reason behind the problem isn't entirely clear yet. It is an issue, but it's a bit too early to debate on until the root cause is determined.
Well OS X is hardly even their business. There was a time when a future for the "Mac" brand was bleaker than it is now. And it's pretty bleak now. It doesn't take a Nobel laureate economist to notice that Apple didn't even mention OS X in their WWDC keynote, and didn't even have a category for OS X apps in their WWDC design awards, which caused a huge stink among OS X developers.
The Mac brand is surviving thanks mostly to sales leads generated by getting people in the door for the iPhone and the iPod, combined with aggressive pricing for their iMac base model.
Desktop OS install base is the worst metric to grade Apple on, if only because it factors in enterprise users, which Apple doesn't even care about in the desktop space. That battle has been lost. And it's an ugly, thankless battle to fight. They give lip service to enterprise with iOS, but they are still behind the game. Which is the big reason why RIM is still tipping the scale.
It's that "hahaha only 5%" sort of narrow view which is what has allowed Microsoft to get taken out behind the barn.
we also talk about other random shit and clown upon each other
There are three main things that make up the secret to Apple's success.
One of those things, are it's retail stores. You seem to believe (erroneously) that Apple needs to take advantage of people who are uninformed about their products or technology in general in order to capture a strong market share, perhaps in order to hide what you see as the shortcomings of their products.
Only a few things could be further from the truth. Apple would actually benefit MORE from having a well informed customer base.
When you walk into any Apple store, look around. What do you see? All the wares are there and laid out for you to use and touch as much as you want. And it's all presented in an environment that feels as welcoming as possible, with as little confusion as can be. You can run your hand along the smooth wooden surface of the tables and onto the wireless keyboard of a beautiful 27 inch Mac with an LED display, one of the best consumer displays on the market right now. And if you need help, there's always someone there to explain things to you and help you find your way around. If you haven't noticed, each product Apple makes is a portal to a user experience unlike any other in the world. That's really what Apple sells; an experience. The products are just portals. An Apple product makes a statement; it speaks to you. It tells you, "Hey, I'm clean, well designed, easy to use and I will never hurt you."
This is called Trade Show retail, and it's done more for the Apple brand than anything else. The best way to get people educated about your product, is to simply have them use your product. Sitting people down and making them read an article about your "cool" phone or going through a laundry list of features and comparisons is much less effective than actually putting the thing in their hands and letting them see and feel what it's like. Some products actually suffer from this, even though they sounded great on paper and in theory! But if Apple could do this with every single customer out there in the world, Apple would sell more stuff than ever before. Therefore, more educated and savvy customers means more sales for Apple.
Some people fall in love with the products within minutes of using them, others will take much longer to grind away their prejudices before they can open their hearts once again. Or maybe some people just learn faster than others.
The bottom line is that as long as people care about Apple, Apple isn't going anywhere. If they can sustain that, they can live forever. Businesses aren't about making the most money, or even about surviving. They are about taking care of your customers, and if you are taking care of them, they will take care of you.
Actually I think installbase is one of the more meaningful metrics. For OSX I don't think it's likely ever to go down. And iPhone is at 30% of handsets. IMO Apple OS's have better prospects then anything other then droid, though I gotta think increasing marketshare is pretty expensive for droid proponents (non-AT&T carriers, google, and droid handset makers).
Edit: Handset info was for U.S.
In 5 years I would not be shocked if a wing of the current Mac product line-up goes the way of where Apple TV is expected to go. A media PC with iOS app capabilities. OS X kept on there as "legacy mode" for power users.
I believe that Apple sees the desktop PC as a cul de sac. Everything about iOS is easier for them to manage and it suits the needs of their primary audience.
we also talk about other random shit and clown upon each other
Switch: 6200-8149-0919 / Wii U: maximumzero / 3DS: 0860-3352-3335 / eBay Shop
I have not implied this, you have inferred it.
The idea that a thing has an "absolute value" is fallacious. Different goods and services have different values to different individuals.
Now, I HAVE said that certain value-adds in Apple marketing are pushed on individuals who do not understand the market fully, and don't grasp the actual value of that particular feature or service (or are unaware that it is a standard feature among competition) THAT, I will admit to implying, because it is true. Apple is, for the record, NOT the only company that engages in this practice.
I didn't say anything about promises not being kept.
When I mentioned the "It Just Works" selling point, my point was that many people still need instructions, and even classes, to learn how to use teir Apple devices. The learning curve for Apple devices is no more or less than some of the other devices on the market. I am NOT calling Apple liars for marketing this point, but rather, pointing out that other devices "Just Work" to the same degree, even though they don't market as such.
Except that brand names seem to be mattering in terms of iphones more so than other luxury electronics.
Because you hear people discussing "iPhones", not "Smartphones", whereas you don't here the same level of discussion surrounding "Sony Bravias", instead people are content to buy whichever model HDTV fits their price range.
You are not incorrect, but there is an EXTRA level of importance being placed on brand when it comes to the iPod and iPhone.
anything is a value-add depending on frame of refference. Really, here, the marketing/branding is a value add
economics isn't a hard science. terms can be slightly nebulous at times.
Still, I have trouble with the "user experience" argument. User experience is INCREDIBLY subjective. That means that for users who do prefer that experience, then yes, there is value there, but the assumption that the experience will add value for ALL users is flawed.
Of course it is. Human reactions are always subjective.
The point I have been trying to argue is that the subjective value of the user experience is great enough to make the marketing/branding irrelevant. When long-term iPhone users (who are well past the new-iPhone-glow) handle an Evo and think "This is ugly, clunky, and designed by engineers" that is where Apple wins. That's not a bubble, that's not marketing, that's value.
And yes, there will be people who think "This does everything my iPhone does and it has widgets and the potential for 4G!" But you're claiming that those are educated consumers. I believe you are wrong: they're not educated, they're just different.
Which is happening with what frequency?
I mean, first off, I am NOT championing the EVO in here. I own a Nexus, personally, and I don't see the huge draw of the EVO. The "4G" isn't a real 4G, but rather, just a faster type fo 3G (as is the LTE that AT&T and Verizon are both working on) and the bigger screen just means bigger pixels. Just for the record.
But getting back to what you said, are you asserting that the majority of iPhone users are out there trying all of the different options (on different carriers), and coming back and deciding based on this that the iphone is for them? Because that is not really how individuals generally behave (if they already have purchased a product, people don't generally shop around for other competing products, since their need is already satisfied) and I also haven't seen anything else to suggest this anomalous behavior is occurring.
No. I'm saying that in order for Apple's bubble to collapse, something needs to draw their users away. I've heard no convincing argument, either from you or any other source, that that's going to happen in any meaningful quantity.
Bubbles ALWAYS burst. It is an economic law of nature. Much like gravity, I can't explain to you exactly why it is a constant, but I assure you that it is.
You seem to want to pigeon hole me in to calling doom on Apple. I am NOT doing that. They very well might see the burst coming and change their model in time. The fact is, though, that the current portion of sales that depends on the portion of the branding reliant on Apple being the one to educate consumers about the market in the first place, that portion of sales will falter when consumers receive more perfect information from outside sources, instead of getting their news directly from Apple/Apple press releases being repeated verbatum in the "press".
You're right. I should've said "in order for it to be a bubble." Because I still haven't seen a convincing argument.
And, again, all I've gotten from you is a pithy remark about how it's a bubble and bubble's always burst. And a few more remarks about how Apple users must be uneducated drones.
The only thing that's bubble-like about Apple's business is their stock price relative to their profitability. And by that metric, Google is the biggest bubble out there.
And aren't there actually more Android phones sold than iPhones? Of course it's not one single brand, but this was exactly the point of Android: Allowing competition to iphones from different manufacturers, but maintaining a compatible system which allows for a nice, big app market
Besides, I really have to ask a long time iphone user to try out the htc desire, I can't really think of anyone taking the stance that its user interface is ugly and clunky
This is a recurring theme in many of your posts; that if only people somehow understood "the truth" about Apple, the curtain would fall and their sales would suffer to reflect it. Again, you are making the assumption that perfect unbiased information will make Apple products less desirable, while simultaneously making the competition equally or even more desirable.
Dangerous.
How are we supposed to infer the meaning of any of your comments to be anything other than "People are buying Apple products at the prices Apple charges because they are ignorant consumers who don't know any better"? That's exactly what selling ice to Eskimos means.
If you're talking only about value-adds in this case, you're going to need to define what those value-adds are, and when exactly the uninformed consumer is paying more for Apple's product than they would a competitor. You're saying Apple overcharges to ignorant consumers based on value-adds which may not be worth the price paid, while I'm looking at a lineup of smartphones from different vendors with nearly identical pricepoints.
Your entire argument boils down to "Apple products are overpriced", with a facade of "which is why their business model will fail" over the top. If you want to argue the same stupid point that everyone on the internet has been arguing for years, fine, have fun. But you can do five minutes of googling to see that Apple products are similarly priced to competitors with similar product specs, and that there are other companies out there charging both more and less for those products.
No. There was a month or a quarter in which Android phones outsold iPhones, but overall both of their market shares are growing while everyone else falls.
Why does it always have to devolve in to "yeah, but this pother company ALSO does something..."? This isn't some kind of contest, it's a discussion.
Apple's marketshare in PMP and smartphone markets doesn't track with either it's PC marketshare, or with the general marketshare of other companies that create similarly design focused products AND/OR engage in prestige pricing models. Sony, for instance, could be said to be a company that is big on prestige pricing, and you don't see nearly the same level of popularity (even though everyone is aware of the sony brand) in these same markets.
THAT is where I see the bubble. Apple's products aren't differentiated enough from other products to warrant such a huge piece of the pie, and the fact that they have kept the share so long keeps this from being just a fluke. There is something going on to cause Apple's marketshare, and if it isn't the products (which, again, I'm sorry, just aren't different enough from anything else out there) it does appear to be the way that consumer are informed about the market BY Apple.
And before anyone gets defensive again, I am NOT attacking Apple, or calling iPods bad, or calling customers stupid. The quality of products and intelligence of customers is completely irrelevant to all of this, actually.
Actually, "ice to eskimos" doesn't mean that the eskimos are stupid, it means the salesman is just that good.
Saying that consumers have imperfect information isn't an insult, it is an observation on market conditions. It is the exact same argument that many Apple apologists make when they talk about the iPod.iPhone being great because you don't need to understand it to use it, actually.
Again, no one is under attack here, and we're never going to get anywhere if folks just try to nitpick every word I type looking for some secret attack that doesn't exist.
Versus companies which release products faster/slower? Yes.
-Hardware errors like that death grip thing; although this one is minor, a bigger one could very well destroy their image pretty fast. Public view can swing pretty fast.
-Steve Jobs leaving apple for whatever reason
Both are pretty unlikely to happen; The death grip thing has pretty much made it sure they'll test new revisions more thoroughly, and Jobs will most likely only leave the company right now if he's not breathing anymore.
They are producing high quality products which are pretty easy to use and have a cool factor. Sure, they're damn expensive sometimes, but it's not like they're EXTREMELY overpriced;
The hardware quality is usually pretty good (maybe even above average), the software is easy to use and the products often have far superior design to most of the competitors, both in the UI and exterior department. Which is kind of important but often overlooked.
I'm personally not a huge fan of the closed nature of apples systems, both in hardware monopoly and software control, which is why I'll probably newer get one of their products when I can have an alternative.
But while they are priced highly, they're not really priced badly;
At least as long as they're perceived as (and maybe are) of superior quality, both in hardware durability and software usability.
The problem is there isn't a good way to use one without switching based on faith.
You can try out an iPhone 4 at any apple store or AT&T store. Everywhere I've seen Android OS phones they're just shells without actual software installed on them.
And I want to try it out. Not because I'm looking to switch, I'm trying to be an iPhone app developer, I'm sticking with the platform, but I want to see how the other side lives.
Which is what you just did to my post. Good work.
it's because:
a) apple's entry into the media player and phone markets isn't a classic "prestige" entry. They offer competitive prices to other similarly-functioning smartphones and media players with (generally) slicker design and interface. This ain't Louis Vuitton handbags
b) the smartphone and media player market is relatively low-priced goods. if people see a cost gradient with the purchase of the iphone over whatever phone they would otherwise consider, it doesn't cost much (relatively) to scratch that itch (this is part of why apple is stuck at 5% in the computer market, the other part being that it doesn't even market to or especially develop for businesses/ enterprise). it's different markets/ different products. honda's market in lawn mowers is different from it's market in cars, and mitsu's TV business is different from their auto business.
c) i don't know what you mean that apple informs customers about the market any more than any other product. are you talking about those "buy a mac" commercials or something?
d) sony still maintains its (somewhat) prestige pricing but has lost the broad assumption of quality it enjoyed in the 80s, mostly due to increased competition, quality concerns, business decisions to heavily pursue proprietary interfaces and media even at the cost of other product fundamentals, and innovation in often the wrong directions. there might be some lessons for apple to learn in sony's decline, but sony did not represent what i would call a "bubble".
At places like BestBuy, the real popular phones may have shells out on display, but if you talk to the person manning the phone area they'll have a functioning unit for you to play with. Or you could go to Sprint store.
Go to cellphone carrier corporate owned retail stores. Those are the ones that have live demos (sometimes you have to ask if they aren't on the floor)
Using the iPod as an example, other mp3 player manufacturers tended to market to people who already knew what an mp3 player was, why an mp3 player is good to have, and how you go about actually using one. Generally they would do this by trying to convince such people that this mp3 player is better than that mp3 player.
Apple marketed the iPod by basically saying "Check this shit out, did you know you could carry all your music around on one thing? How fucking cool is that?" with a liberal helping of style on top. They then go ahead and make the means of using the thing day-to-day as streamlined and idiot-proof (note that I don't mean this pejoratively) as possible.
I'm of the opinion that at the beginning of the iPod/mp3 player boom, there were a lot of people who bought an iPod that wouldn't necessarily have bought an mp3 player of any brand if the iPod, and Apple's marketing of it, hadn't existed.