So, have you heard about the term being applied to Uncle Steve’s move last week regarding the iPhone? Yes, you could have guessed — it’s “iPology” 🙂 …. There’s some interesting insight on this whole overblown thing on a great new blog called MarketingApple. This guy (also named Steve) I think really sets the record straight. An excerpt from that post:
Folks, you are living through what has to be the Golden Age of marketing and Steve Jobs is its king. Enjoy the ride.
Then, a followup post yesterday on the same blog heralds the latest news that — you got it — one million iPhones have now been sold.
I was discussing this whole thing as it happened with my close colleagues — all of us huge Apple users and supporters — and I got a great summation from one of them over the weekend. He doesn’t want me to use his name, but he’s a very smart guy (serial entrepreneur), and I just have to share his recap and insights with you:
Jobs is the king of concept and design. It’s easy to market the coolest phone ever and the best MP3 player ever, but good luck conceiving, designing, and developing them.
By cutting the iPhone prices, Jobs created a problem, then conceived and developed a solution. Typical Steve Jobs.
When the first rumors surfaced about Apple getting into the cell phone market, people laughed and predicted instant failure. Before the iPod, the Diamond Rio had more than 50% market share, and they were dropping the price quarterly to meet new competition. Apple came out with the iPod (with a hard drive) at 3-5 times the price of the average price of MP3 players at the time and couldn’t make enough of them. Other MP3 players with hard drives came out shortly after at half the price, and those companies couldn’t sell the ones they produced for the launch, while Apple couldn’t make enough of theirs. Then, when you could buy flash MP3 players for $20, Apple released the Nano at $250 and the Shuffle at $150, and, again, they couldn’t make enough of them.
Steve jumped on 2.5″ and 1″ hard drive technology for the iPod and, later, on multi-GB flash, when they were both expensive, new technologies, and Apple’s volume alone drove the technology towards commodity pricing. Apple never dropped prices, they just come out with new models at the same prices with thinner designs and more storage.
They can’t release iPhones the same way, even though their prices have fallen, because they are using so much flash. It costs them less to make the 8GB today than the 4GB four months ago. They could drop the price to gain wider market acceptance, so they did. Adding more storage and making the iPhone thinner won’t be enough to release a new model. They need to bump up the speed, make the display as big as the case (40% larger), add faster broadband, and add a VoIP softphone. (Nokia has them and HP just released the new iPaq with more features and a VoIP softphone built in.) All the new cellular chips designs have WiFi embedded, so ALL new phones next year will have WiFi. The cellular carriers may block the SIP (the de-facto standard for VoIP, session initiation protocol) ports to disable VoIP, and there will be a new RTP (real time protocol) invented to transmit VoIP over any open port — maybe that’s what Steve is up to next? 🙂
People just keep laughing every time Apple does the unexpected, but their concept and design is so good that they become the market leader. I can’t wait for the iTV-LCD, the iDVR, the iCarStereo, and the iGameBox.
Now, does that nail the situation, or what? (And also raise some interesting new possibilites.) I told you I hang around with smart guys….
UPDATE: To correct a typo….sorry.
I’m deeply suspicious of the iPhone price cut/rebate maneuver, and I wonder if it wasn’t intended all along.
After all, look at what Apple got out of it at the end of the day: they charged $200 more to the large swath of early-adopters, after a marketing campaign geared towards having an iPhone early as a status symbol. Then they drop the price $200 when sales started to drop off, and when people got POed (as can only be expected), they gave a $100 APPLE GIFT CERTIFICATE. Which means all these people who blew a lot of money on a very expensive phone, now have an excuse to go back into the Apple store with $100 burning a hole in their pocket. And how many of them do you think spent more than $100 on that particular shopping trip? Even assuming they only spent the $100, how much do you think the manufacturing cost of the stuff they bought was? DVDs cost a couple of bucks at most. Let’s assume the worst case scenario — that all of these people only spent their gift certificate, and only on hard goods (iPhone cases, etc.), which had a manufacturing cost of $25.
So, at the end of the day, from each of those early adopters, Apple walked away with over $175 in net profit, not including the additional money they probably spent on Apple goodies beyond their $100 gift certificate. And the already loyal base is super happy, and feel like they got a great deal out of things.
Marketing/PR genius.