Friday, 16 October 2009

Apple: turning 'cool' into dollars




Apple is not the biggest maker of computers in the US. In figures just released by IDC, Apple Macintosh (Mac) sales grew 11.8% in the 3rd quarter of 2009, as Apple took a 9.4% U.S. market share, maintaining its position as the fourth-largest U.S. PC manufacturer. Apple sold an estimated 1.64 million Macs in the US over that period, up 11.8 percent from 1.47 million in the same period a year ago. Although it’s not the biggest, Apple may well be the coolest. And remember Apple also invented the iPod, iTunes and the iPhone.

This post is about Apple; the first 33 years. Many would describe Apple as currently the "coolest tech brand on the planet". To understand this achievement we must of course consider the contribution of Steven P “Steve” Jobs; co-founder, CEO, charismatic leader, presenter and front-man; a key part of the Apple brand for most, but not all, of this period. Such is the strength of his personality and his powers of persuasion that he has been described as being endowed with a “reality distortion field”. In a land that famously values salesmanship (and to be fair, all around the world) he has many fanatical fans. A recent leave of absence, while he had a liver transplant, following his earlier pancreatic cancer, sent the Apple Inc share price plummeting. Now he's back. A survey by Junior Achievement, an organization that educates students on matters related to future employment, found that the Apple boss is the most admired entrepreneur among teenagers.

With Jobs at the helm, its range of desirable gadgets and its (in recent years) booming stock price, Apple has accumulated an army of passionate supporters among both consumers and investors. Most would agree it has earned the epithet ‘cool’.

What makes a brand cool? Well it helps if it looks good. And works reliably. And consistently spending millions on clever, creative advertising also has an effect. Of course there are no guarantees. As my old Maths teacher might have said, these are ‘necessary but not sufficient conditions’ for coolness…People have to deem your brand to be cool and it’s important not to appear to be trying too hard. Andrew Keller, co-executive Creative Director of Miami Ad agency Crispin Porter + Bogusky recently said : “to try to be cool is not to be cool.” He should know - he’s recently had a hand in creative work for Mini, Virgin Atlantic, VW, Burger King and, most recently, err… Microsoft.

CoolBrands is an annual initiative to identify the UK's ‘coolest brands’. The list has been compiled by Superbrands annually since 2001; the 2009 results were recently published. The survey seeks the opinion of independent experts and thousands of consumers. They claim the coolest brands of 2009/10 are:

1.iPhone
2.Aston Martin
3.Apple
4.iPod
5.Nintendo
6.YouTube
7.Blackberry
8.Google
9.Bang & Olufsen
10.Playstation

Notice Apple has 3 out of the top 4 'cool' brands.

Now let’s look instead at the 2009 Interbrand annual survey of the world’s most valuable brands...This is the list of the ‘best’ global brands based on estimated financial value. It looks a little different. Tech brands again feature but not in the same order:

1.   Coca-Cola
2.   IBM
3.   Microsoft
4.   GE
5.   Nokia
6.   McDonald's
7.   Google
8.   Toyota
9.   Intel
10. Disney
11. HP
12. Mercedes-Benz
13. Gillette
14. Cisco
15. BMW
16. YSL
17. Marlboro
18. Honda
19. Samsung
20. Apple

Notice that in this list, Apple just makes it into the top 20, well behind the (these days) rather less ‘cool’ IBM (No. 2) and Microsoft (No. 3). Several other tech brands feature above Apple.

Clearly, ‘cool’ is not just another word for ‘profitable’ or ‘successful’.

So what exactly is this thing called ‘cool’?

Dr. Carl C.Rohde (‘worldwide reputed trend watcher’), claims that what makes something cool is its ability to impart "confidence on a physical and psychological level".

Rohde has identified 'seven themes of cool empowerment' to categorize cool objects and cool people:

  • Wellness -- Chai lattes, yoga classes and charitable activities ... anything that makes you feel healthy and happy as an individual and a member of society.
  • Masculinity for confused males -- Fashion, sports-related products, grooming materials ... any product that can help men overcome their confusion about how to be a domesticated partner while still being a virile man.
  • Femininity for women on the rise -- Any image or product that acknowledges a woman's femininity while recognizing that she's also claiming her place as a power player in society.
  • Celebrities -- Anyone with a story to tell while still being extraordinary in a way. Examples: Nicole Kidman's tale of divorce, 50 Cent's hard-knocks life, Susan Boyle .
  • Cool personalization – In any form, be it a service, a brand or something done on an individual level to make a person feel unique by "putting their own imprint" on objects.
  • Technology -- Mobile phones, high-tech outdoor gear, gadgets ... things that help you navigate your life better. (see where this is going yet?)
  • Cool branding -- Products that make consumers believe that their lives are better for using them. Examples: Nokia, Puma and yes, iPhone.
Let’s take a look at how Apple got where it is today.

It started out as a rather quirky Silicon Valley tech firm but has risen to its greatest heights in the years since Steve Jobs returned as CEO and took it to places beyond the desktop. Apple Computer was founded in 1976 by Steve Jobs and Steve Wozniak. It was one of a number of tech firms - including Atari, Radio Shack and Texas Instruments – who sought to transform the digital computer into a home appliance. Alone of that first personal computing generation, Apple and the charismatic Steve Jobs have consistently found a way to ‘touch the Zeitgeist’.

In 1979, Jobs made a now legendary visit to Xerox’s Palo Alto Research Center, where he viewed a prototype personal computer - the Alto. This inspired a range of ideas about computer design and graphical user interface (GUI) which led Apple to develop two families of computers, the Lisa and the Macintosh. Steve Jobs aimed to make Apple’s products “insanely great,” and he was convinced that they could create ‘personal computing’ and so change the world.

Although the Lisa failed commercially, the Macintosh succeeded, reshaping the computer industry over the next decade. The Apple Macintosh (complete with an impressive 128K of memory and price tag of $2,495 ) was introduced on January 24 1984; it was the first commercially successful personal computer to feature a mouse and a graphical user interface (GUI) rather than a command-line interface. It is hard for us to understand today what a breakthrough this was. The ‘Mac’ rapidly became the industry standard for typesetting and design (try asking a creative e.g. an advertising Art Director to use a Windows PC).

In 1985, before Mac had really taken off, Steve Jobs, was forced out of the company by his appointed chief executive, John Sculley, whom he had poached from Pepsi. Apple struggled in the late 80s and early 90s as Microsoft's Windows operating system became the desktop computing standard. Things really began to unravel when Apple placed a large bet on the arrival of the hand-held computing market. When Apple’s Newton failed commercially, Sculley was himself forced out in 1993.

In 1997, Apple’s current era dawned as Steve Jobs returned after more than a decade away. At that time, many analysts gave him little chance of resurrecting the company, which had largely been written off by the computer industry and analysts (Michael S. Dell, who had by this time built his own PC empire, was even quoted as suggesting that Apple’s smartest move would be to “shut it down and give the money back to the shareholders.”) Starting with the title of Interim Chief Executive, however, Jobs systematically rebuilt the company’s Macintosh franchise by adding an operating system he had developed while ‘in exile’. And then there were the new products…

In 2001, Jobs introduced the iPod music player, to an unsuspecting world. offering '1,000 songs in your pocket'.  And the size of a deck of cards. (thanks to its 5 GB ‘ultra slim’ hard-drive). This was a stunning proposition at the time and it set the company on its current course as a major player in consumer electronics.

Other iPods followed the ‘Classic’ (Mini, Nano, Touch, Shuffle). Apple has sold over 220,000,000 iPods worldwide. There is no competitor in sight. The iTunes Music Store, created to enable users to fill the device with audio and video content, has made Apple an important force in the music industry.

Then, in 2007 Apple did it again as Steve Jobs introduced the iPhone, a convergence of entertainment, computing and communications that has stirred up the entire telecoms industry. To be fair, the Apple TV set-top box has had less impact, but it signals the firm’s continuing interest in the living room.

For now at least, Apple appears to have a comfortable lead in the simmering smartphone battle. Since 2007 it has sold more than 37 million iPhones and iPod Touches, and these devices have become its most profitable product category.

On June 8, 2009, Apple offered its devoted fans a new version of the iPhone, the iPhone 3G S. This third model iPhone looks physically identical to the last version but includes internal hardware and software improvements. Among the changes, the iPhone 3G S has a three-megapixel camera which also records video, an internal digital compass and voice-control features that let owners use spoken commands to make calls and play music.

Advertising has always been a key component of the ‘coolness’ of the Apple brand and its sub-brands. Under Steve Jobs, Apple has consistently launched ‘game-changing’ products with ad campaigns to match.

Jobs and the LA agency TBWA\Chiat\Day go back almost right to the beginning. In fact it is rumoured that every Wednesday, Lee Clow, the creative director of TBWA\Chiat\Day, travels from Los Angeles to Cupertino, Calif., for his weekly meeting with Steve Jobs . They started doing this years ago and have created ads that are both stylish and indeed ‘cool’. In the early 1980s, Clow helped to create Apple’s ‘game changing’ '1984' television commercial introducing the Macintosh. The ad’s simple message was that buyers of the new machine would be striking against the ‘evil’ IBM, portrayed as Apple’s Orwellian foe. Jobs allegedly struggled to persuade Apple’s board to run the ad, which was directed by Ridley Scott (who had released Blade Runner the previous year without box office success!). Lee Clow was similarly adamant when his boss, the late Jay Chiat, tried to shelve it. The ad was unveiled during a time-out in the 3rd quarter of Super Bowl XVIII.

More recently, in a battle reminiscent of Coke Vs. Pepsi, Avis Vs. Hertz or American Express Vs. Visa, Apple took on Microsoft head-on. The 'Get A Mac' campaign ('Mac Vs. PC'), again by TBWA\Chiat\Day Los Angeles, depicted PC users as sad, unattractive nerds, compared with the ‘cool’ (but interestingly never cruel) Mac. Jobs and Clow have substituted Microsoft for IBM as the ‘Evil Empire’ in these Mac ads. And there were even several tailored to the UK sense of humour.

In 2008 arch-rivals Microsoft, to the surprise of many, appointed uber-cool Miami ad agency Crispin Porter + Bogusky and hit back with their own campaign: 'I'm a PC'. The series first appeared in September, 2008. They followed up with ‘cute’ Kylie and ‘laptop hunters’.

However many commentators, techies and consumers felt that Microsoft was unconvincingly trying to prove it had a sense of humour; clever, ‘cool’ ads just didn't suit it. Apple already owned ‘cool’. So: bad luck CP+B!

Right from the launch in 2001, the iPod was an adman’s dream: a product with a genuine competitive advantage which was beautiful, simple and, well, ‘cool’. TBWA\Chiat\Day didn't disappoint: the advertising fitted it perfectly.

Also check out:

iPod Classic commercial
iPod walkie-talkie man
iPod technologic
iTunes now for Windows

The original iPhone was introduced in the US on June 29, 2007 followed by 3G and 3G S versions .

With  this product, Jobs and his agency seem to have concluded that the device is so beautiful and pleasing to use that it is sufficient just to demonstrate it close up in order for it to sell. So far 21 million people appear to agree.

So what makes Apple so cool? In my opinion four things:

Original ideas - not stolen (or ‘borrowed’)
Good product design/ packaging
User interfaces which are well thought-through and easy to use
Control of hardware manufacturing

Well-designed products are a pleasure to use and enhance the user’s life. Apple makes products that both work well and look good. At a price most (OK not all) can afford.

Apple has always been rooted in Design. Indeed Jobs famously accused Microsoft of ‘having no taste’ (i.e. of being clumsy unattractive nerds as opposed to Apple’s 'Designer chic geeks').

But can Apple remain cool? Over recent years, Apple has created sky-high and possibly unrealistic expectations from enthusiasts and analysts. It has set the bar high. Apple's strategy – epitomized in the iPhone -- has come to depend on a steady stream of hit devices that are viewed by consumers as being so far ahead of the competition that they are worth paying extra for. (Note that Macs have always been more expensive than PCs). How long can this go on? The reality is: not everyone loves Apple .The company has been satirized and criticised for high prices, for tying iPod users into iTunes and even for being ‘elitist design snobs’. In many of its markets, the competition is now catching up and it will be fascinating to see whether Apple can continue to innovate so effectively and thus keep on selling units and increasing its stock price. After all it’s not cool to be a loser; as Jobs himself has said, ‘real artists ship’. We can’t wait to see what Steve has up the sleeve of that black mock turtle-neck next time he gets up on stage to the rapturous applause of the assembled Apple Worshippers.

But whatever the future holds, no-one can deny Apple’s success over the last 33 years. They have made technology stylish. Apple products are admired for their form as well as their function. The combination has enriched many lives. As a result they have made a lot of money.

As the Man says (frequently): "Pretty cool, huh?"

6 comments:

Julian Clayton said...

Great post Mike.

Yes we all love the ads.

Well done Stephen P. But as I've said before, Who's next? Steve is apparently a sick man; hasn't he earned his retirement? Jonathan Ive and Tim Cook are probably itching to take over; Steve can be Chairman Emeritus or something.The Apple brand is much too dependent on one man.Go figure Steve!

Anonymous said...

You take us to the main point - Apple is using 'cool' to defy price/value gravity. That's not stable - I'm not buying Apple shares. When belief in the magic wavers the price will fall like Bugs Bunny from the cliff top.

Julian Clayton said...

Agree 100%. At least Bugs was always OK in the next frame. The whole Apple thing is like a house of cards, sustained by Jobs' BS.When they inevitably lose their way and screw up ('Lisa','Newton' and the 'G4 PowerMac Cube' spring to mind) the sheen will go off the whole Apple brand. Actually I bet Jobs will retire soon and do a Tony Blair; ie take the money and run before the share price starts dropping!I'm not saying he'll invade Iraq mind.

Joolz

Anonymous said...

haters...

Anonymous said...

Watch out for Ubuntu Linux ('Ignorant Iguana' ?) - Shuttleworth - "I think the great task in front of us in the next two years is to lift the experience of the Linux desktop from something stable and usable and not pretty, to something that's art,". Then what price a Mac ?
- Guy

Mike Berry said...

Agree; one thing Apple has always got right is Design; right from the start they understood that aesthetics make a real difference to the user experience; people feel good about owning and using their products. Which helps justify the premium price. For now...