Apple: Building the World’s Most Valuable Brand Apple Inc. was ranked the world’

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Apple: Building the World’s Most Valuable Brand

Apple Inc. was ranked the world’s most valuable brand in 2016 (for the fourth year in a row), with an estimated value of $178 million. Interbrand creates these valuations based on experts ratings of seven key characteristics, including brand market leadership, brand stability, market stability and growth, geographic spread, trend, brand support, and brand protection. These rates form a multiplier that current sales are multiplied by to generate the brand’s future earnings (this is used instead of the discounted cash flow approach which projects future brand value and discounts back into present value).

How did Apple build such a valuable brand? The most important reason underlying all of its strategies is that Apple shows unwavering commitment to creating value for its customers. This seed was planted at the company founding by Mike Markkula, Jobs and Wozniak’s third partner, with a simple 3-point “Apple Marketing Philosophy.”

Empathy – We will truly understand their [customer] needs better than any other company.

Focus – In order to do a good job of the things we decide to do, we must eliminate all of the unimportant opportunities.

Impute – People DO judge a book by its cover. We may have the best product, the highest quality, the most useful software, and so on; if we present them in a slipshod manner, they will be perceived as slipshod; if we present them in a creative, professional manner, we will impute the desired qualities.

This founding philosophy has been reinforced by several key strategies.

Hire customer-obsessed, empathetic employees. Steve Jobs used a quote originally attributed to Henry Ford to describe why customer insights were so important: “If I had asked people what they wanted, they would have said faster horses”—illustrating the problem that customers may be limited to thinking only in terms of what they know, instead of what is possible. So Jobs and colleagues thought about the customer experience more deeply than the customer could.

Iterative customer involvement. This customer obsession made formal market research less important. However, it is no secret that Apple spends an enormous amount of time observing customers using Apple’s and other companies’ technologies. Participatory design or usability testing also ensures that Apple understands customer “pain points” and “opportunities” and in the design and development process.

Protect against scope creep and feature bloat. There were mp3 players before the iPod and smart phones before the iPhone, but Apple’s innovation was to distill those products down to their fundamental purposes (e.g., 1000 songs in your pocket) and then design them to be simple and interesting to use. As Jobs noted, “We make progress by eliminating things.”

Build compatible experiences. Customers want a streamlined, intuitive way to make their computing and entertainment devices work as a system. Apple understood this and conceived of its array of products as offering the customer first a “digital hub” and then an “entertainment hub.”

Enable customer discovery and differentiation through Apple Stores. A retail presence gave Apple another forum to flex its design prowess. Customers come into the stores to experience the aesthetics and ease of use of Apple products. They also see the larger “solution” that the array of interconnected products offers and interact with Apple’s carefully recruited and trained sales associates. The stores also personal customer support (the Genius Bar), creating yet another touch point. The result: the highest retail sales per square foot among U.S. retailers.

Build a moat. Apple has done this in two ways. First, Apple’s unique products are communicated to customers through novel and provocative advertising. The 1984 Super Bowl ad introducing the Macintosh is a perfect example. Apple vividly contrasted its independent philosophy with the tired and unimaginative computer industry establishment. Apple built on this theme of independence in 1997 with its “Think Different” ad campaign which lauded “rebels” and “the crazy ones” as the source of great ideas and inventions. The iPod, heavily advertised with silhouettes of people dancing to the beat of their own drummer, kept this brand image alive and well. Steve Jobs also contributed to this renegade, non-conformist image through press accounts of his demanding aesthetic.

Second, although Apple’s utilizes multiple branded partners for some hardware and software solutions, it has turned down co-marketing efforts (such as Intel stickers on its machines) that every other major competitor participates in with those same suppliers. This keeps customers focused on the Apple brand and not its component providers. Likewise, Apple limits non-Apple products in its stores to those that complement, not compete with its offerings.

Devise a business model that creates ongoing customer value. Generating customer value means building a business model that ensures this value is created repeatedly. Apple’s customer-obsessed employees and retail stores are a big part of creating value for customers. However, iTunes should also be viewed as an integral part of the business model. While not a big money maker for Apple, the iTunes desktop software and Music Store make Apple’s hardware even more valuable. This bundle of integrated device and content promotes customer loyalty and cross-category spending.

Cannibalize when necessary. Apple has done this at this least twice. First, Apple dropped its most popular iPod, the Mini, when it introduced the Nano. Second, although offering unique features, the iPhone is a potential threat to independent iPod sales because both play music. Many organizations might have been unwilling to build a product that would detract from its most popular product. Apple understood that if it did not do it, another company would.

Don’t try to be all things to all customers. Many companies fail by being unwilling to make tough decisions about which customers to seek and products to offer. Apple, on the other hand, made these tough decisions and adopted a strategy that focused on a limited number of product lines and limited offerings within each line. When he returned in 1997, Jobs slashed Apple’s 15 product lines to just four. This strategy holds today. With laser-like focus, Apple makes a few big bets that deliver customer value and stand out in the crowd.

Create an ecosystem that makes offerings valuable. The introduction of the iPhone was coupled with building an online App Store. However, the App Store only works if companies are willing to develop for Apple’s iOS platform. Apple created development tools that promote a simple, consistent experience for developers. This helps speed up app development and deepen user engagement—a win-win-win for developers, customers, and Apple.

Questions:

Take two of the ten factors contributing to Apple’s powerful brand and assess whether its actions over the last year support or dilute the brand?

Why is cannibalization such an important part of building an innovative brand?

Explanation / Answer

The two strategies out of ten that contribute to Apple’s powerful brand I have chosen are the Iterative customer involvement and ‘don’t try to be all things to all customers’. Apple’s strategy on iterative customer involvement has seen much improvement on recent years and they have given much importance to customer feedbacks and solving the customer issues related to the use of iPhone and iOS. It has taken steps to make the iOS platform more user friendly. But in the new version of iPhones including iPhone 8 and iPhone X, Apple has not given much importance to iterative customer involvement and it has tried to market the product based on design and appearance. For iPhone X, Apple provided early access to YouTubers including celebrities than technical columnists in order to promote the product before the reviews are out. In my opinion this action would dilute the brand because the customers buy Apple product with great expectations and if the expectations are not met then the brand name and recognition will be affected.

Through its strategy of focusing on limited number of product lines and limited products within each line Apple is able to deliver best products to the customers and the customers eagerly wait for their new product. Last year also Apple has adopted the same strategy and developed only few product lines which helped to increase the customer support on the brand.

Cannibalization refers to reduction in sales volume or market share of one product when a new product is introduced by the same company. While building an innovative brand, it is necessary to practice cannibalization because if some features are common to both the products it will affect the success of the new product and the innovation may go unnoticed. Hence to ensure the innovative product is getting much customer attraction cannibalization is important.

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