I often feel public commentary on Apple’s hardware makes some flawed assumptions. The general one being that Apple creates hardware products and their goal is every one of their customers should own one. Case in point, the Apple Watch. While an important new category, most of the commentary around the watch makes the assumption it will penetrate deep into the iPhone installed base — now approaching or just recently passed 500m. I like the universe example because the iPhone is Apple’s sun, meaning it is the product, for now, which all other products revolve around.
The iPhone is, for the most part, Apple’s gateway to their ecosystem. It used to be the iPod. It was the halo product that introduced tens of millions of people to the Apple experience. For hundreds of millions of people today, that product is the iPhone. We know from research and data that, once a consumer lets a brand into their life, they are more willing to consider that brand for future purchases. This is why an Apple hardware universe is central. The direction a consumer goes to purchase other tech products as a part of their individual solution is entirely up to them. The key here for Apple is to cover the spectrum of options for that consumer now that they are in their ecosystem. I recently did a study with iPhone owners and asked them what other Apple products they currently own and use. This research was on a global set of consumers, but most were in the US and Europe. Here are the results.
At a high level, this is an insightful look into the specific penetration of the iPhone base. What is interesting about this data is how it confirms my suspicion of multiple product overlap among a good portion of Apple’s customers. Meaning, one customer does not own just one or two products but generally multiple examples. I know this because this question was a multiple choice question. For example, if we add the total of iPad versions, it comes to over 100%. We know the installed base of iPads only equates to around 35-40% of the total iPhones in use. Which means there is a portion of the iPad user base which owns more than one iPad and there is a portion of consumers who own an iPad and not an iPhone. The former is larger than the latter.
To follow up my suspicion, I also asked respondents to estimate how many Apple products are in active use in their household. While no single number dominated, household ownership of Apple products is fairly spread out.
When I analyze Apple’s hardware approach, what seems like an expanding product line, which many view as them moving away from their simple set of options, is expanding to cover the diverse needs of a growing user base. Things like the iPad Pro or the Apple Watch are designed to cater to pockets of Apple’s customers. The question we are faced with is, how big the segments are within their base Apple is creating products for. This is a better way to look at their hardware strategy than simply thinking everything they build is intended for every one of their customers. Some categories, like the Watch, may appeal to more people than something like the iPad Pro, but Apple’s goal is to make sure their first party hardware covers the range and evolving needs of their customer base. Essentially, Apple wants their customers to continue to be their customers even as they start looking at other categories.
If Apple can appeal to their own customers for health and fitness rather than lose that customer to Fitbit, then it makes sense for them to offer a product. Or, if Apple wants to make sure they have a product like the iPad Pro to keep those customers from going after products like the Surface, it is wise for them to do so. Similarly with Apple TV, why should Apple let customers go to Chromecast or Amazon Fire TV or Roku if this is a mainstream use case of their customer base? It makes more sense for Apple to offer first-party hardware to cover as many bases as possible. So long as they believe the base is big enough, it is worth covering.
From my math, Apple’s hardware installed base is nearing or over 800m at this point. Keep in mind, this is not a unique user number, as the 500m or so iPhone users is essentially the Apple installed base. The iPhone is Apple’s sun and each of the other hardware categories revolves around it. Even if other products like the Mac or the iPad act as feeders, it is ultimately the iPhone that is the strongest product to bring new customers deep into their ecosystem.