Friday, August 27, 2010

Apple's Biggest Branding Mistake

By the looks of the malls these days, it is hard to believe that we're still in the midst of recovering from a global recession.

This was the view of Yorkdale Mall today, which as I mentioned in my last posting has become the environment for some of the most interesting consumer behaviour I have ever witnessed. Here's some evidence of this strange phenomenon:

So why is this line-up of willing iPhone 4 buyers an immense branding mistake? The first problem is the control of their brand. I would suggest that Apple has lost control of what it truly means.

Apple is one of the few technology companies that has transitioned from a supplier of cool gadgets to status items. Not to stir up any controversy, but the new iPhone 4 isn't the most technologically advanced phone on the market (although Apple may want you to think differently). It's this status allure that has fueled international demand for the product, which has led to the sub-culture of grey-market distributors.

And where are all these iPhones going? From what I know personally; South America, East Europe and Southeast Asia. These are all markets which currently do not sell iPhone 4s (with the exception of Hong Kong). The grey market phones are trodden around by the wealthy and privileged; making a nice profit for importers and exporters alike.

So where does that leave Apple? In a position very similar to a luxury apparel brand. Their new product releases are scheduled like clockwork; slightly offset from Spring/Summer and Fall/Winter releases. Everything about the device is "beautiful", but not necessarily advanced. It would also appear that design is favored over functionality in Cupertino; haute couture anyone?

But why is this a problem? The profits in the electronics business is no longer in hardware; but media. iTunes's return on investment is miles ahead of the 100% direct cost margin on most hardware. Apple would be lucky to break even on their hardware when it comes to all the indirect retailing costs associated with a direct retailer. Selling music, magazines, books, applications and anything else software-based has been the sustainable source of revenue and profit for Apple since it launched iTunes.

Apple used to be the cool "Mac" guy. They used to be the counter-electronics culture; focusing on being different and unique, and definitely niche. And as they fail to reach this consumer and are by-passed by distributors who they allow to line up hours before the store even opens; they're alienating their most profitable customers.

It would appear that as time goes on, people aren't thinking as differently when it comes to Apple.

The second brand failure is leveraging the line-up. For those companies who are fortunate (and smart) enough to justify people lining up, it's baffling why they don't make better use of those whom are brand disciples or could potentially be one.

Line-goers typically left to their own device will entertain themselves only for as long as their iPad's battery will last. Apart from books, sleeping and arguing over what's the best feature of the new iPhone, there really isn't much to do for 10 hours while in line (from my experience). And yet marketers tremble at the notion of soaring TV commercial prices with ever decreasing audiences. Does anyone else see a gap here?

Why don't companies like Apple entertain these bored yet fanatic consumers while in line? Why does it even have to be considered a line? Why can't it be an experience? I can imagine there being free concerts (broadcasted to TV monitors around the world outside of stores), food, giveaways, webcams between cities and live discussion? If well-executed you could probably sell tickets. This is how Apple can start to shift its brand perception back to being cool and niche to sell profitable media in the long-run as opposed to fashion in the short-run.

But then again, the way people were lining up today for the launch of Victoria Secret today, you'd think everyone was walking around in the nude. They even needed bouncers at the front doors.

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