[Let me preface this blog entry by admitting that I dislike products made by Apple Inc. A big part of the reason is probably because I have never owned any Apple products -- and have been proud of this streak. I was somewhat disappointed when I installed Apple iTunes on my computer for the first time...because Windows Media Player was failing me.]
Admissions of bias aside, I really admire Apple for its massively-profitable business. I am also grateful for its effect on the consumer electronics market, on both the software and the hardware fronts. This is especially true in the recent years. Cases in point: the iPhone and the iPad.
The former (iPhone) revolutionized the cell phones market -- widely perceived as the biggest "game changer" since the Motorola Razr phone of the early 2000s. Apple had numerous critics before the release of the iPhone and faced paranoia from its shareholders that the company was shifting away from its core business (in computers and software). Skeptics questioned whether Apple, a company with no prior experience in the cell phone market, could be successful in a very competitive industry. Moreover, it was about to compete with a completely new design of a cell phone: a multi-purpose device that was accessed primarily via the human touch (aka touchscreen). Cell phones until then had mostly been flip phones with tiny screens and limited to making and receiving phone calls.
The latter (iPad) received even more skepticism (read: ridicule), as just an upscaled version of the iPod Touch. Many people, me included, argued that there was no market for such a product. Even if there was a market, sales of the iPad would cannibalize those of the iPod Touch. In other words, it seemed like a losing preposition for Apple Inc. to go ahead and market this product.
Fast forward each described product a couple of years and we see that Apple not only proved its skeptics wrong, but has been enormously profitable. It has surpassed its rival Microsoft in market capitalization and still showing impressive growth. Reviewing Steve Jobs' leadership over the past decade, one can only be envious of Apple Inc. and its remarkable turnaround. A feel-good story for everyone but its competitors. The iPhone remains the hottest cell phone around, not due to its specifications but on the strength of its applications store (App Store) and its ease-of-use to most individuals. As for the iPad, it has proved to produce a similar effect on the market as its smaller brother. Namely, it has created a new market for tablet products and forced competitors to catchup its lead. There was no perceived market for the iPad because one could not anticipate how it would be used by businesses, consumers, schools, etc.
So what makes Apple so successful? It doesn't take a rocket scientist to point to Steve Jobs as the answer. Jobs has been visionary in his leadership of the company, a prophet able to foresee what products consumers want and able to profit off that future vision. But I applaud Jobs not for his visions -- because other CEOs in the past have been able to have streaks of developing wildly popular products. Instead, I applaud his solidarity and strong sense of self-identity to see through his convictions. He appears to be above the typical CEO: always worried about his/her job security and how to best increase shareholder value. Jobs seems to be separate to accomplish the latter without the former preoccupation. Critics may laugh at his standard attire of turtleneck shirt, jeans, and New Balance sneakers but cannot deny his success.
But I'd argue that Jobs is not central to Apple's success (he is instrumental in building this though). The keystone to Apple's success is brand equity, one unparalleled in the corporate world. Apple's brand recognition is superior to any of its competitors -- not even Google, Sony, and Coca-Cola can compete against it. How do I know this? The fanaticism of Apple consumers can be laughed off as the pinnacle of materialism but, oh boy, would I give anything to have that type of brand loyalty. These "Apple fans" are often loyal to the fault (to themselves, not to the company). They consider any products made by Apple as the must-have item and trust completely in its superiority. Therein lies the key: Apple products are often not the most advanced nor the most consumer-friendly (and they are downright expensive), but consumers trust in the quality of Apple's products and in their value without a second thought. The company's marketing may be polarizing ("I'm a Mac and I'm a PC", anyone?) but it is extremely effective at distinguishing Apple from its competitors. The marketing also serves to build upon this perception that Apple product-owners are trendy and always have the coolest electronics.
From a behavioral economics perspective, Apple is successful because it has no competitors for its products. There may be substitutes such as Windows and the Motorola Xoom, but these are imperfect substitutes at best. Apple builds its own software and hardware, both of which cannot be licensed. To the consumer, the lack of substitutes means they have nothing to compare Apple products to and thus unable to judge their prices nor their capabilities effectively. This in economics jargon, is known as "price anchoring". Because consumers do not have price anchors with which to compare, they are at the initiative of Apple to dictate the value and the capabilities of its products. For example, $500 is an enormous cost for the iPad: a tablet without multitasking capabilities nor the ability for office productivity. One can purchase a netbook for half the cost of an iPad. The iPad is largely used to play games, surf the internet, and watch movies -- all of which a netbook can do. But the iPad offers some differences from a netbook (e.g. touchscreen) -- differences significant enough to leave consumers at a loss about how to perceive its value. It should be worth about the price of a netbook but, given the uncertainty, it makes it easy for Apple to double the price without losing the double amount of potential customers. One can even argue that Apple wants to price its products relatively high due to the association with the "premium quality".
Aside from Steve Jobs and brand equity, Apple also has other things that most people may not consider. I read an article recently describing the effectiveness of customer service at Apple Stores, and a perceived generosity of Apple's protection plans. Apple customer helpers are apparently very willing to help anyone in need with a single caveat --as long as the product in question is an Apple product. When and where the product was purchased does not matter. The tenaciousness (read: helpfulness) of the helpers also creates a positive impression for customers. (I recall the article's example of a photographer coming to the store to complain about his MacBook's deficiencies and walking out very happy with a newer model...that he just purchased himself). So, Apple's customer service is often underrated. Another underrated area is Apple's control over its distribution channels and the ability to lock up inventory and suppliers. Its tight control over the suppliers is indicated by the rare leaks about its upcoming products and the lack of shortages over its products. Both of these effects have additional ramifications (of course).
Since the introduction of the iPod, Apple has gravitated away from a focus on devices with linear capabilities and into devices considered to be "jack-of-all trades, master of none". The beauty lies in the responsiveness of the populace to the latter. It seems people do not care much for the quality of a capability but their quantity. Makes sense in a way: would you rather carry three gadgets with specialized functions, or a single device that can do all three but maybe not as well? I think that unless you are an expert photographer or music professional (what is the probability? About one percent?), then you'd take the latter in a heartbeat. Slap on the that Apple brand and it's a OMGWTFBBQ moment for many.
