A Quick Response to a Particularly Dumb Analysis on Apple

Ok, I admit it. No I proclaim it. I love Apple products. Tell me you enjoy putting in a calendar entry. I do on my iPhone. And I love my Mac OS and yes I hate using your PC. But that's not to say that Apple is above reproach. The search warrant and seizing of property was more than a bit much. It was a douche move. Apple is leveraging it's dominance in the ecosystem to eek out considerable revenues. It's pushing out 3rd parties from intermediating themselves (Flash dev tools as an example), although I generally agree with controlling the quality of your distribution channel. It's a monopolistic threat and I worry that they may push too far. But so far, the products are great, and one of the key reasons is control. I think early markets should be controlled before they are opened up. Starting off as the wild, wild west can be problematic. But I digress.

My friend, Janet, sent me this article because I am an Apple enthusiast. She thought of me.

http://blogs.bnet.com/salesmachine/?p=10031


Top 10 Apple marketing mistakes, but man this guy is way off. Apple surely made mistakes. Pricing low in an emerging market in early PC days was one. But it is also why even though Apple has well under 10% market share, it has 80% margin share. Hard to argue on that one. But overall, his biggest analytical mistakes are in this writer's top 5.

#5 Sleeping With Microsoft - This guy is dead wrong. I would not have a mac if I could not run Word and Excel. Period. A laptop needs to meet a generalist purpose. A lot of startups I know run on Apple. None would without Office. Google Apps is only beginning to provide an alternative.

#4 Treating Journalists Like Cockroaches - Dead wrong again. Yes there is some journalist bitching, mostly from the recent search warrant. Before that, it was journalists bitching, but not in the consumer eye which matters. Overall, Apple has a mystery that makes it much more interesting and widely talked about than competitors. Did you know Microsoft is about to release a new mobile phone? Nope. Because no one cares. Apple's new iPhone in June? Bet you know the whole story. Mystery, exclusivity add to the brand value. I'm not supporting the search warrant, that was a douche move. But secrecy breeds intrigue. Even journalists who get the good scoop. Just ask Gizmodo.

#3 Pretending Their the Underdog - Man this guy is getting dumber with each of these. Mac's share in the PC market is under 10%. Ummm ... that's underdog in the PC business. Comparing it's overall valuation that's based on iPod and iPhone business is stupid. It's like saying Microsoft is pissed because it's marketing itself as #20 keyboard manufacturer even though it has a multi-billion dollar market cap. Different business. Apple has to challenge the "Why status quo?" Check out the market share trend since these commercials launched. Check out the improvement in brand identity. Check out customer loyalty. I'm Apple. I'm different than the mainstream people who just take what they're given.

#2 Censoring the iPhone - What you don't get is that there is a value at controlling the quality and identity of your marketplace. If iPhones and iPads are kid friendly, which device is going to be a kid's first device (hint: they will use the parent's credit card). Gaming and education will be huge on these platforms. The porn stand limits short term revenue in favor of long term penetration. Yes, I said penetration when referring to porn.

#1 AT&T Exclusivity Agreement - Ok. That's it. This guy just reached my idiot of the week status. Apple just turned the entire mobile industry eco-system upside down. Walled gardens. Control of deck. Using the mobile carrier infrastructure. If Apple didn't grant exclusivity, they would have no grounds to make demands. Their amazing product is the sole reason for AT&T's increase in market share (look at the stats). They used their superior product to negotiate a superior business model that now every carrier has to adopt to play with the most popular consumer device. They couldn't have done this without exclusivity. What's that? A billion apps sold? An iPad platform for next generation tablets where they control media and software distribution? Treating the carriers like a pipe. Apple got everything for a couple years of exclusivity. In one market.

There are many reasons to be wary of Apple flexing it's muscles and stifling innovation. Right now though, they are the most innovative company in mobile.

Loyalty and the Emotional Side of Customer Retention

I just finished SmartMobs (a recommended read) and came across a wonderful little anecdote. In Tokyo, one of the busiest intersections is Shibuya Crossing, where there is a bronze monument to a dog named Hachiko. Hachiko followed his owner, Professor Eisaboru Ueno, every day to the subway station and awaited there again that evening for his return. Professor Eisaboru died in 1925 and never made it back, yet Hachiko faithfully waited for him there every evening until 1934. Nine years, or sixty-three in dog years. It’s a touching story about loyalty.

And while the story pulls on my emotional heartstrings, it also leaves me in wonder. What made Hachiko come back every day for so long, hoping for a different result than the previous day? Is that just foolish? What made Hachiko so loyal in the first place?

On the web, I would argue that few things are more valuable than loyalty. With the breadth of services offered out there, you can buy books from someone else than Amazon, shoes from somewhere else than Zappos, movies from other services than Netflix. Often, it makes sense.

But the services that matter bring users back consistently and often without competitive consideration because of brand loyalty. And that’s what builds lasting value. It’s easy to buy traffic, just a click of the mouse. It’s really hard to build a service that people care about. If I were valuing a web company, the first thing I would ask for is repeat visits (visits per user per month, member retention/attrition, etc.).

So what builds lasting loyalty? There is utility and feel, the intellectual and emotional.

Apple has it through products that feel better. I don’t know if the roll wheel calendar on my iPhone is more efficient, but it’s more of a pleasure to use. I don’t think that the magnetic power cord in my Powerbook actually functions much better than a plug in, but the moment I connected them and the power chord literally jumped into the socket, I knew I was an Apple user for life.

FourSquare is another app that feels good. Its point system gives me that Pavlovian feedback, that slight burst of serotonin that makes me keep checking in. Intellectually I know it provides me no value. At the same time, I checked out Lewis Goldberg’s badge page and was actually kind of sad he had more than me. What do I really care about badges?

Now Apple provides me real utility. I am writing this on my Macbook Pro right now. FourSquare’s utility not so much, and I feel its hold waning on me. The gaming aspects have grown a bit old. I want more badges. New things unlocked. Feel can get stale. But if you mix positive feel with utility, maybe not even differentiated utility, then you get long-lasting loyalty. With every thing I do that’s helpful, I see it, more I feel it as a little bit more. A reinforcement of that initial joy, that satisfaction of a good product and of making a good choice. And that momentum gets a customer coming back for life.

Will I be using Apple products in 9 years? Who knows? But my stock portfolio is making a big bet for now that I will be.