Products can be differentiated by features, quality, price, value, usability, warranty, and many other items. Apple’s advertising slogan back around the turn of the century was, indeed, ‘Think Different.’ Here’s a look at how Apple manages to remain much different than any of the company’s many competitors.
Of Products And Profits
First, Apple executives and engineers and designers think that much of what the company does is an art form. Second, that means the company is proud of what they design and build, and products are priced accordingly.
Third, Apple has been burned a number of times in the past by over reliance on component vendors who do not have the company’s best interests in mind, so Apple has developed an internalized culture that wants to control the whole widget, from idea to distribution.
Apple started life with Motorola CPUs, then, to compete against the Wintel juggernaut (Intel and Microsoft’s Windows), Apple combined with IBM and Motorola for a new chip standard, the PowerPC. That alliance differentiated Apple’s products from Windows and Intel and kept the company competitive for years; until the group fell upon hard times as Wintel’s economy prospered and Intel’s CPUs pulled ahead in performance.
To Apple, Think Different may not be different thinking at all. Instead, the company relies more upon a unique blend of differentiation, usability, and control over all aspects of design, manufacture, and distribution that set the company apart from competitors.
Think Different Differently
Apple eliminated the disparity between PowerPC chips and Intel’s chips by adopting Intel for the Mac. Currently, Apple designs the CPU and GPU in iPhone and iPad which allows the company to meld software in the operating system, iOS, with internally designed hardware. The results have been stunning as iOS devices have longer battery life and greater performance than similar competitors.
That go-it-alone, do-it-yourself attitude gives the company more control over every aspect of product differentiation. Apple has opened and manages around 500 retail stores worldwide, which gives the company a highly visible venue for sales, support, and service. Can you name a company that competes with Apple on that level?
Product marketing is about differentiation. For a company to compete against the Mac, their PC must be different, but in positive ways. Price is one aspect, of course, and so is CPU choice. Where competitors fail to differentiate, even from one another, is operating system, dominated by Microsoft’s Windows, and that inability to make a product different from a competitor has forced pricing to the low end of the spectrum, which makes Windows the cheap OS choice.
Smartphone and tablet makers have similar issues with competitive differentiation. Android resides as the OS of choice on low end and premium devices, which means the only differentiation usually is price. Apple’s iPhone and iPad are differentiated by price, yes, but also by iOS, the Apple ecosystem, usability, quality fit and finish; all aspects of product migration which users aspire; they move from cheap to premium as their situation and experience demand.
The Perfect Storm
All those factors combine to create a perfect profit storm for Apple as the premium brand in every product segment. Competitors cannot create directly competing products because they’re shackled with Windows or Android as the basic operating system which then drives product value to the low end of the spectrum, while Apple basks as the only maker of premium products which have a gross margin sufficient to keep the company’s product build and quality high, and to make it easy for customers to get face-to-face support and service.
The only way that will change is if a competitor does what Apple does but does it for less. Low gross margins make that difficult as Apple is a moving target. Or, a company could sell a product for a similar amount, with similar gross margins, if it could build a product substantially better than Apple’s current product line. That, too, is difficult, again, because Apple is a moving target, always improving, always integrating more capability within each new product model.
Thus far, the only place on the product differentiation scale where competitors are allowed to thrive against Apple is the low-to-mid-range, where competition is intense and profits are rare. Until a competitor does better than Apple at Apple’s own game, that’s not likely to change.