519 - How Does Apple Do it?

Last year Apple made 40 billion dollars profit on 200 billion in sales. In the first half of Apple’s 2015 fiscal year their profits were $32 billion on $133 billion sales. No other American company even comes close. Yet Apple is not a technological innovator or even a manufacturer. Basically they’re a marketing company. Apple’s products haven’t been technology leaders since the early 1980s and they don’t develop their technology, they buy it, often from competitors.  Apples mainstream  products are suffering from loss of market share (iPhones) or shrinking sales (iPads and Macs). What the heck is going on?

Over the years Apple’s fortunes have been up and down like a toilet seat. Recently Apple has benefited from a perfect storm of circumstance. Call it Steve Jobs brilliant strategy or call it dumb luck but the truth is that Apple’s success today is largely due to Steve Jobs elitist personality and the creation of the Apple “Fanbois” cult. No company in the computer/communications industry has anything like the “Apple Fanbois.” They are without a doubt Apples greatest strength. The cult was born in the early 1980s and marks its rise to prominence from that iconic one minute Apple commercial at the 1984 Super Bowl. (Check it out on the WWW“1984 Apple Super Bowl ad”) 

Apple fired Steve Jobs in 1995 but Apples marketing strategy had been carved in stone. No longer would they try to compete head to head with computer technology. Instead they would target a niche market based on psychology. Their appeal would be aimed at those who felt different, special, a cut above the hoi paloi. Apple sought to fill an emotional need for those who felt the need to be part of something special.  The strategy was brilliant. Brand loyalty built on technology is fleeting but an emotional commitment is forever. Though the “fanbois” cult has never represented more than a single digit percentage of computer users, their influence far outweigh their numbers. They are passionate missionaries for Apple and blindly loyal. They don’t question Apple’s technology or price. When Apple releases a new product they happily queue up to buy it patiently enduring new product bugs and deficiencies secure in the knowledge that they are a part of something bigger and more important than technological excellence.

Another major factor in Apples success is that they control and reap the profit from the hardware, operating systems, content and applications employed in the products they sell. Contrast that with their competitors in PCs and mobile products. HP or Samsung can make money on the computer or smart phone but they must rely on Microsoft or Google for the operating system and other companies own and profit from the content and applications used by their products. 

Apple products use the same hardware technology as their competition. Apple products roll off the Foxconn assembly line in China beside Dell, HP and other “non-manufacturers”. Apple is unique only in the exterior design and the use of the iOS (operating system). Virtually all the rest of the smart phones and tablets use the “Android” OS and PC’s use “Windows” That means that while the rest of the industry competes among themselves with “me to” technology, Apple stands alone as an alternative. 

How does Apple blend the three factors, small but passionate “fanbois” cult, unique operating system (iOS) and total control over its products to create its present success and can it last? Tune in next week for the conclusion.