What makes you choose one product over another? Price? Quality? Dependability? Needs? Wants? Status? Or, utility? Our reasons for buying what we buy wherever we buy it are as many and varied as members of humanity.
Apple is one of the 21st century’s greatest success stories. Why? Every year electronic components gain more capability– thinner, faster, lighter, etc.– but cost less to produce. How does Apple maintain such a large chunk of the industry’s profits? There’s a key often overlooked by critics and competitors.
Product marketing is comprised of many elements; manufacturing, design, materials, advertising and PR, target customer, retail or sales channel, strategy, tactics, pricing, and many more.
One of the key components is called differentiation. If a manufacturer designs, builds, and sells a product similar to products already on the market, how can it be successful? How can it make marketshare inroads against an established leader?
The iPhone is a good example. The smartphones of 2007 were horribly complex beasts that users hated to use. Battery life was abysmal, settings and configurations arcane at best, and indecipherable at worst. The iPhone came along with an interface that was instantly usable, and had just the right blend of obvious features. Cell phone, texting, email, browsing, and a few native applications.
Since then, the iPhone has evolved to become much more; a powerful computing device that fits in the pocket, complete with HD camera, high quality audio, and tremendous storage. So how does a competitor unseat Apple’s flagship product?
A new product must have the same capabilities and characteristics as the industry leader, but be priced less, otherwise, there’s no incentive to change sides. Google’s Android has succeeded in marketshare over the iPhone because Android smartphones are considered by many to be just like an iPhone but at half the price.
Unfortunately, half the price also means much lower gross margins, and even lower profits, so that explains why smartphone makers struggle to make a profit.
Or, a manufacturer’s new product could compete against the iPhone by providing a vastly improved user interface, substantially better features and functions, but would still need to be priced about the same as the iPhone; otherwise, again, why switch? There needs to be a compelling reason to leave the industry leader for a new product, and if it’s not price, it must be something else in the feature set.
Unfortunately, Apple is a moving target, upgrading the iPhone every year with improved functionality, which makes it far more difficult for a competing brand to leapfrog Apple’s iPhone feature set. Competitor products may have advanced features here and there, but customers buy the whole package, which means Apple defends its profitable turf very well.
Apple’s lock on industry profits (almost every industry it touches; retail stores, Mac vs. Pc, iPhone, iPad, and now Watch) means the company can afford new manufacturing techniques which reduce cost and improve quality while competitors struggle simply to match the feature set in each Apple product.
Nobody is jumping ahead to the future in a way the iPhone did in 2007, but the requirement is simple. Make a competing product better, but price it the same. Make it the same, but price it far lower to provide an incentive for iPhone customers to switch. Simple strategies are not easily accomplished, which explains why Apple’s products continue to improve, and why competitors have yet to make a leap in capability to outflank Apple’s products and gain some of the company’s profit shares.
Differentiation in product marketing isn’t just about design or color or even a feature list. It’s how all the elements of marketing are played together to create an impenetrable blend of function where the end result, the end product, is greater than the sum of the parts.