The secret of Apple’s success in selling premium tech as an affordable luxury

“Apple’s hardware designs, software, icons, marketing, retail strategy, and branding have all been closely copied by its rivals. One thing they aren’t copying is Apple’s vast, premium installed base of loyal buyers,” Daniel Eran Dilger writes for Roughly Drafted. “That’s the primary foundation of Apple’s wildly successful, global business that’s uniquely selling massive volumes of luxury-class, premium-priced products in markets where competitors fight over sales of low-priced commodity units with thin margins. Why can’t anyone else achieve what Apple has?”

MacDailyNews Take: There was only one Steve Jobs.

Steve Jobs“By focusing attention on the value of its installed base of users, rather than fluctuating unit sales of hardware, Apple is capitalizing on a unique strength: its ability to attract a vast, loyal following that’s incrementally growing globally while driving sales of replacement hardware and accessories and allowing Apple to launch entirely new product categories (like Apple Watch and AirPods) and subscription services (like iCloud and Apple Music),” Dilger writes. “Insanely, bizarrely, and to their own detriment– rather than successfully copying this, Apple’s competitors have largely ridiculed the idea of having satisfied users.”

“Everyone — even Apple haters — agree that Apple has attracted a different class of customer than Samsung, Xiaomi, Google, Microsoft or any other major tech brand. Those firms have even openly mocked Apple and its customer base in advertisements that ridicule Apple’s fans for everything from standing in line for the latest new product to simply being part of a large mainstream user base– such as having white EarPods,” Dilger writes. “A primary reason for the abject failure of Microsoft, Google, Samsung and Chinese producers (such as Huawei and Xiaomi) to replicate the success of Apple in building a powerful user base is that they have been coddled by the tech media into thinking that fawning media attention and an excited endorsement of misleading unit sales figures and ‘market share’ are valuable.”

Much more in the full article – recommendedhere.

MacDailyNews Take: Yup.

As we just wrote yesterday:

Apple sells premium products to premium customers at premium prices.

Premium customers have disposable income and the proven will to spend it on services such as iCloud storage plans and Apple Music subscriptions after the initial sale.

Chasing unit share for unit share’s sake is the errand of fools.

Apple doesn’t look to own the entire market, just the profitable top end. They leave low profit/unprofitable table scraps for the rest to squabble over.

“We can’t do it. We just can’t ship junk. There are thresholds that we can’t cross because of who we are… We don’t offer stripped-down, lousy products. Ya know? We just don’t offer categories of products like that.” — Steve Jobs, 2007

Articles that attribute unit sales totals to “success” and “failure” are written for dunces.

10 Comments

  1. Mr. Dilger is the most insightful writer on Apple in the entire media universe. If the Wall Street Journal was actually a real business publication it would have hired him years ago.

  2. Yeah, sure. Premium brand? Wall Street only knows Apple can’t sell iPhones to those billions of potential smartphone users in India. Apple is seen as a failed company in that humanity-filled subcontinent. Android manufacturers can sell ten smartphones for every one iPhone XS. Ask any analyst and they’ll tell you that much. Supposedly, Apple is absolutely terrified to tell those greedy big investors how many iPhone units are being sold each quarter.

    I doubt there is any big investor who wants to hear, “Apple sells premium products to premium customers at premium prices.” One look at Apple’s current share price will give great insight to those words of wisdom. I’m sure big investors would like Apple to sell junk iPhones to those poverty-class Indian consumers. After all, a sale is a sale and those Indian consumers will never be the wiser if they know absolutely nothing about smartphone build quality.

    The news media loves to write about how Apple is a dying company because their products are too expensive for the common man to purchase. Xiaomi is said to be the amazing company that will put Apple out of the smartphone business with their affordable, fair quality smartphones. Xiaomi is racking up that bad-ass market share percentage that Apple can’t seem to increase no matter what strategy Apple chooses. Oh, man… I hear 2019 is going to be even worse for Apple than 2018. Where is Steve Jobs when Apple needs him so badly?

  3. Oh, noes! Apple has lost key support again after big investors read my comment. Next stop… below $160. It was Apple that was once a trillion-dollar company, right? That seems like ages ago. So, Apple has only lost about 30% of its value in a couple of months. It’s only money.

    1. You are confusing two different animals. If your business is buying and selling stocks of Apple, you are in tough luck. But Apple is in the business of providing tools to improve quality of life for ever satisfied customers with ever growing product and services revenues resulting to outsize profits…that is the real score.

  4. “By focusing attention on the value of its installed base of users, rather than fluctuating unit sales of hardware, Apple is capitalizing on a unique strength”

    The problem with this strategy is that when the value or wealth of its luxury-purchasing “base” tanks with recession, depression and/or the trade war, they will no longer be so driven to purchase luxury hardware. And when the budget starts to tighten, the first thing to go is the nipple that service providers suck on.

    Hardware purchases can be delayed if need be, but eventually all hardware needs renewal. Services on the other hand can suck the life out of even the well-to-do’s bank account. And can be turned off on a moment’s notice.

    That’s the problem with being a luxury brand: you’re at the mercy of the market. On the flip side, even during economic downturns, Apple hardware (particularly Mac) weathered even the most brutal economic onslaughts. Once upon a time professional computer users looked at TCO (total cost of ownership) and discovered that the Mac was always a preferred choice over Wintel, especially during rough times.

    1. Except in a depression the first people to suffer are the poor and then the middle class (usually in the form of tax increases). The rich normally remain so. Perhaps it’s the budget phone makers that should be really worried.

      1. In a depression it isn’t who suffers first that matters. Recession then a depression plays out over decades.

        Where once we had trickle down, a depression leads to “trickle up”. Meaning the wealthy become less so. History tells us that the top 1% owned 25% of the country’s wealth in 1929. By 1940 they had lost half of their wealth. By the mid 70’s it was down to 7% of national wealth. Conversely, the poor and middle class (bottom 90%) doubled their wealth between 1929 and 1953 from 15 – 30%, peaking in 1988 at 36%.

        But given the logic of the luxury brand bandied about here, a depression will hit your luxury base disproportionately greater. Steve Jobs excelled at selling premium (not luxury) products to a professional base. That was Apple’s bread and butter that brought it back from the Scully/Amelio (and Cook?) disaster model of milking a great product for as much revenue as you can while the milking is good.

        What do they say about history? Oh yeah: “those who don’t learn from history don’t learn from history…”

  5. “By focusing attention on the value of its installed base of users, rather than fluctuating unit sales of hardware, Apple is capitalizing on a unique strength”

    Apple focuses on the value of its vision.

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