Whom Apple Pleases

Premise #1: Apple’s Number One Priority Is To Make Great Products

[pullquote]It is key to understand that Apple puts the experience first. Everything else flows from that priority. ~ ßen ßajarin (@BenBajarin)[/pullquote]

“The most profound contribution that Steve Jobs made was in demonstrating a radically new way of a running a company: the goal of the firm shifts from making money for the shareholders to delighting the customer. As Jobs said: “My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It’s a subtle difference, but it ends up meaning everything.” ~ Steve Denning

Apple has restated this priority over and over and over again.

I’ll tell you what our goal is. Our goal is to make the best personal computer in the world and to make products that we are proud to sell and that we would recommend to our family and friends…we just can’t ship junk. ~ Steve Jobs

Sure, what we do has to make commercial sense, but it’s never the starting point. We start with the product and the user experience. ~ Steve Jobs

We have never worried about numbers. In the market place, Apple is trying to focus the spotlight on products, because products really make a difference. You can’t con people in this business. The products speak for themselves. ~ Steve Jobs

[pullquote]Apple tries to make the useful enjoyable. Sometimes they succeed. ~ Ángel Lamuño (@AngelLamuno)[/pullquote]

The goal of Apple is not to make money but to make really nice products, really great products. That is our goal and as a consequence if they are good, people will buy them and we’ll make money. ~ Jonathan Ive, Apple’s design chief

Our goal isn’t to make money. Our goal absolutely at Apple is not to make money. This may sound a little flippant, but it’s the truth…Our goal and what gets us excited is to try to make great products. ~ Jony Ive

Our north star is to make the best product. Our objective isn’t to make this design for this kind of price point, or for this arbitrary schedule, or line up other things or have X number of phones, it’s to build the best. ~ Tim Cook

For us, winning has never been about making the most. Arguably we make the best PC, we don’t make the most. We make the best music player, we wound up making the most. We make the best tablet, we make the most. We make the best phone, we don’t make the most phones. ~ Tim Cook

Our objective has always been to make the best, not the most. ~ Tim Cook

We believe that we’re on the face of the Earth to make great products, and that’s not changing. ~ Tim Cook

Premise #2: People Who Are Willing To Pay For Quality Make The Best Customers

People who buy expensive phones that are sold on quality and UX are generally the best customers. Shock. ~ Benedict Evans (@BenedictEvans)


Premium products attract high value consumers; for Apple, remaining highly profitable and driving revenue from its entire ecosystem is of greater importance than market share statistics. ~ Tim Coulling, a senior analyst with Canalys

Premise #3: The best customers — not the most customers — support the best platforms

Beleaguered Apple reports biggest quarter ever. ~ Kevin Fox (@kfury)

iPhone ASP/volume clearly shows that it remains strong among their most valuable customers, but is losing their least valuable buyers. ~ Sameer Singh (@sameer_singh17)

FACT: Apple’s customers willingly pay higher prices.

Apple doesn’t slash prices of slow sellers.

There is no point in addressing unprofitable segments and no point addressing segments that do not enhance the platform.

FACT: Apple doesn’t target bargain hunters.

If the iPad was losing sales to competing tablets, Nexus 7 sale wouldn’t be tiny. ~ Benedict Evans (@BenedictEvans)

FACT: Apple generally dominates the premium portion of the sectors that it targets.

Apple has 0% market share of those paying less than $400 for their phones.

FACT: Apple does not target that portion of the market that is least capable of sustaining its platform.

No sign of large-scale switching (from Apple). Quite the opposite. ~ Benedict Evans (@BenedictEvans)

I don’t see Apple’s valuable, identity-driven customers going anywhere. Less profitable ones, not so much ~ Sameer Singh (@sameer_singh17)

FACT: Apple’s customers are extremely loyal.

More & more time on Apple earnings calls is on painting a clear picture: the goal is 2 win the ecosystem war not just the smartphone battle. ~ carolina milanesi (@caro_milanesi)

FACT: Apple’s customers are best able to support the best ecosystem.

In 2013 Apple passed 1bn cumulative mobile devices sold (1056m iPod, iPhone & iPad). ~ Benedict Evans (@BenedictEvans)

In a few years, annual smarpthone sales will be close to 2bn. Apple’s % share of that is not terribly interesting. Share of value is aim. Benedict Evans (@BenedictEvans)

(Apple’s) current high-end position is secure and only pricing will drive a change in growth. ~ Benedict Evans

Talking about market share of smartphones is essentially meaningless at this point. Phone share, rev share, engagement share mean far more. ~ Benedict Evans (@BenedictEvans)

I’m unconvinced an ecosystem w/ 400m users and $10bn annual sales would collapse if there’s another one with more users and less revenue ~ Benedict Evans (@BenedictEvans)

FACT: Apple’s customer base is large enough to be self-sustaining.

Jack Benney once quipped: Give me golf clubs, fresh air and a beautiful partner, and you can keep the clubs and the fresh air. I suspect that Apple could equally say: “Give me the best client’s, the best profits and the best ecosystem and you can keep the market share.

Conclusion: Whom Apple Pleases

There are two kinds of companies, those that work to try to charge more and those that work to charge less.

We will be the second. ~ Jeff Bezos

Apple will be the first.

Apple has never, and never will, try to please everyone. That’s a PC and Android behavior. ~ Ken Segall

The primary motivation of Apple is to make the best. They cannot accomplish that unless they both sell their products for a premium and sell their products to premium owners.

If you want the best — and are willing to pay the price necessary to obtain the best — then you are amongst those whom Apple pleases. On the other hand, if you’re not on that exceedingly short list, then you’re probably not pleased with Apple.

I doubt if they care.

Published by

John Kirk

John R. Kirk is a recovering attorney. He has also worked as a financial advisor and a business coach. His love affair with computing started with his purchase of the original Mac in 1985. His primary interest is the field of personal computing (which includes phones, tablets, notebooks and desktops) and his primary focus is on long-term business strategies: What makes a company unique; How do those unique qualities aid or inhibit the success of the company; and why don’t (or can’t) other companies adopt the successful attributes of their competitors?

27 thoughts on “Whom Apple Pleases”

  1. The reality is that with so much cash on hand, the biggest brand on the planet, and with sky high profits and revenue, Apple doesn’t care about Wall St. The reason there’s so much bad press, bad analysis, and ideological punditry with regard to Apple, is that those players are coming to realize their opinions and analysis don’t matter to Apple. They don’t matter intellectually, or materially. And they’re stoping their feet and throwing tantrums at this point.

    The analysis of Apple has become nothing more than a media circus of uninformed opinions appealing to people who know even less than the pundits.

  2. I understand and appreciate your point. But did you see any problem on Apple growth?

    Apple 51m iPhone sale is a little bit disappointed for me. A simple math will tell the problem. Last year, the first weekend iPhone sale is 5m, and the total quarter sale is 47.8m. So the rest sale excluding the first weekend sale is 47.8-5=42.8m. This year, the first weekend sale is 9m, and the total quarter sale is 51m, so the rest sale excluding the first weekend sale, 51-9=42m, LOWER than the last year number. Note that this year, Apple had NTT Docomo join and has two new phones 5s and 5c. 5s achieves similar or better effect as 5 last year, and I would expect 5c will have blowout number, but looks like it doesn’t help and may get things a little bit worse. Also Tim Cook mentioned in the conference that 5c number is different than they expect, which means it is worse than expected.

    So I guess 5c is the real culprit for iPhone slow growth. At least it doesn’t attract enough buyers for mid-range phones.

    Another factor should be, high-end market is maturing. Looked at Samsung’s ER for this quarter, http://appleinsider.com/articles/14/01/23/samsung-whiffs-on-earnings-thanks-to-iphone-and-asian-rivals,
    the performance is terrible, the profit dropped compared to last year, net income dropped compared to last quarter. And Sumsung latest S4 only sold 9m this quarter. So the general growth for high-end market is questionable.

    So I would really like to hear your insights on Apple growth topic.

    1. Apple would like more growth, but you can only serve one master. They could have growth tomorrow simply by lowering the cost of their phones, but at the cost of margins. They could have growth by expanding to more carriers but at the cost of control over their phones. They could have growth by creating a lower cost iPhone but at the cost of quality.

      Pick your poison. Do you want Apple to chase dollars and end up like Microsoft, with lots of money and then no future? Do you want Apple to make every type of phone possible and end up like Samsung, with lots of growth and then no one to copy and nowhere to go? Do you want Apple to sell out to the carriers and pursue marketshare like Google? That works for Google because they are pursing eyeballs, but that would destroy the Apple’s platform.

      It seems to me that Apple has a plan that avoids the innovator’s dilemma. The tradeoff for not having their employees incentives tied to money is both growth and profits. It’s amazing that Apple makes as much as it does considering their internal incentives.

      They make great products. They’re viable. They’re self-cannibalizing and self-disrupting. They want to live forever. Will it happen? Who knows. So far, so good. But if you want growth, look at Microsoft from 2000 to 2012. They made all the money in the world, but their stock was flat. Apple’s trying a different path.


      1. -“They could have growth by expanding to more carriers but at the cost of control over their phones.”

        -” Do you want Apple to sell out to the carriers and pursue marketshare like Google? That works for Google because they are pursing eyeballs, but that would destroy the Apple’s platform.”

        After they sell the phone, it’s not theirs anymore… Or is it? 🙂

        Beyond that, exactly how much control are they exerting on non-Apple phones? You know, in cases where they lost the sale, which is the majority (market share). Those that are loyal to the platform will continue to play by the “clubs” rules, those that aren’t could at least be using Apple hardware. Might easing control increase sales and profits, without compromising the hardware?

        1. I think Apple is very concerned about every point that an Apple user will potentially experience issues and problems. I think this is entirely exemplified by their careful selection of carriers for iPhone. If Apple only cared about Apple hardware being in people’s hands, then yes there would be an increase in sales and profits, even without compromising the hardware. But it would compromise the total experience, which is what Apple really sells.

          Apple is already being blamed and has been sued for 4g issues that are beyond their control. I think this doesn’t just annoy Apple. I think this concerns Apple. They likely hate promising something they have no control in delivering and then getting blamed for it. This tarnishes the brand more than simply not being available willy nilly on any carrier who cares.

          I think Samsung mitigates this somewhat by actually being available everywhere. No single carrier accounts for a large enough portion of their user base. So complaints may exist beyond their control, but it is not significant, except potentially in aggregate if the problem persists across carriers. Samsung is actually playing carrier customer dissatisfaction better than Apple is, in this regard. Apple likely just wants to believe there is a better way.


          1. But some of the people currently not buying Apple (the vast majority, even in top line devices) don’t care about the “total experience”. Doesn’t mean they wouldn’t still buy an iPhone.

            Apple got sued because they advertised 4G in Australia, when the device wasn’t able to operate at those speeds in Australia. They didn’t include the correct bands. They should have known this.

            Now, to their credit, all these bands are a major pain…

          2. Everyone cares about the total experience; that’s true of all products. Some people are willing to (or have to) compromise the experience to lower the cost. Those are not Apple’s customers.

            Why is the BMW-Lexus-Mercedes-Burberry-LVMH-and on and on model so hard for people to grasp? The difference with Apple is that it sells a premium product at prices that a large proportion of the people in high-income countries can afford. But it is still a premium model.

          3. I think there a lot of different definitions and expectations of the total experience, both from the companies and their customers, too.


          4. Then there’s the segment that buys devices that are just as expensive, if not more so, precisely because they don’t want to be pigeonholed into the experience. They have a different value proposition.

          5. Well then, there you have it…
            Why should a potential customer need to adapt to Apple. Maybe, just maybe, that those who are amenable to that have bought in already. Not a bad position for Apple to be in, but it doesn’t support $700/share.

          6. I think it is a bad assumption to make that the only people who care about the total experience already own an iPhone.


          7. Perhaps, but it’s not growing as fast as one would hope. AT least the stock prices that keep coming up on these pages.

          8. “it’s not growing as fast as one would hope”

            In terms of the high end of phones, that seems to be true for Samsung as well. I do think there are a slew of people who will migrate upward (whatever a “slew” is) as they get used to smartphones and as applications (real and software) become more apparent and useful and as the user themselves (and not just “the market”) matures. There are things I appreciate more now that I am older and have used certain things more, than when I was younger. Not everyone or even most people start at the premium end of markets (and I really mean premium and not just luxury).


          9. Joe, interesting thought. I would say it this way: Those who buy Apple products and stay with them through multiple changes (e.g., upgrade their iPhones) probably do care about the “total” experience that Apple provides. I would think that people who buy an Apple product for the first time may have numerous reasons for doing so.


          10. Stew Leonard’s, a grocery chain in Connecticut, used to (probably still do) do customer focus groups. They would select people from their shoppers. They would select people who had two carts or whose carts were over stuffed. Those were the store’s customers. There were a lot of people who shopped there, but those were the only people they considered their true customers.


          11. “Apple got sued because they advertised 4G in Australia, when the device wasn’t able to operate at those speeds in Australia. They didn’t include the correct bands. They should have known this.”

            That’s not exactly the story in this case (which was not one of the cases I was thinking of). That’s not even an oversimplification. I suggest researching it a bit more.

            Or not.


          12. Well then, please clarify. I searched and the only other LTE suit I found was with Samsung, and I don’t know what part of that they didn’t control.

          13. I was referencing the Australian suit when I suggested more research. But it seems I must have been conflating the 4G (as in 4th generation) iPhone suits with 4g/LTE suits, or at least I can’t find what I remember reading (as a shareholder I zero in on those kind of articles pretty quickly to see if there is merit). I clearly recall a couple of suits along the lines of when Apple came out with 3g iPhones, people suing because they weren’t getting 4g speeds but basically in locations the carrier did not have 4g/LTE service. Not Apple’s fault.


          14. I would agree with you that they don’t control the radio bands a country uses. Yet, they marketed the device claiming the capability that could not be used in it’s intended market (it was claimed in Australia). They should have known about it and included the appropriate radios, or not claim LTE, or at least emphasize the countries it would work as LTE clearly on the box. It’s my understanding they were claiming LTE outright. As such, it was their fault.

            In the US, where available, they were getting LTE (4G) speeds. Here too, it should say “where available”. Products must do what they claim to do. If you don’t control it, claim it accordingly.

      2. “It seems to me that Apple has a plan that avoids the innovator’s dilemma.”

        What part of their plan protects against a low end disruption? Apple’s actions suggest it believes there will continue to be high demand for $600+ phones. While that market is still strong, Apple’s actions make sense. If that market weakens and Apple is not prepared to adapt, they will be disrupted.

        1. “Apple’s focus on user experience as a differentiator has significant strategic implications as well, particularly in the context of the Innovator’s Dilemma: namely, it is impossible for a user experience to be too good. Competitors can only hope to match or surpass the original product when it comes to the user experience; the original product will never overshoot (has anyone turned to an “inferior” product because the better one was too enjoyable?). There is no better example than the original Macintosh, which maintained relevance only because of a superior user experience. It was only when Windows 95 was “good enough” that the Macintosh’s plummet began in earnest. This in some respects completely exempts Apple from the product trajectory trap, at least when it comes to their prime differentiation.

          Indeed, it seems that Apple simply isn’t very interested in moats. They do what they think is right by the user, strategy nerds like me be damned. This kills them on Wall Street, but perhaps is the only possible route to avoiding stasis, and ultimately, disruption.

          This is why Apple is so fascinating.”


          1. I’m not even sure that a “good enough” Windows 95 would have done the damage to the Mac that it did if Apple had not been sadly adrift in the mid 90s. This was the catastrophic Spindler/Amelio era, when Apple was turning out indifferent hardware and worse than indifferent software. One thing we tend to forget is just how bad the last couple of generations of Mac OS were while the company struggled and failed to complete a modern operating system.

    2. Note: Apple sold 9 million phones over the first weekend in September – that was not the most recent quarter.

    3. I would disagree that general high end growth is questionable. I do agree that continued skyrocketing growth is questionable. I think people will start to figure out that the $150 smartphone that supposedly offers a “solid smartphone internet experience” will learn that is a lie and $150 buys you squat. Some may learn to live with it, some probably don’t even care. But there will still be those who aspire to a better device and experience.

      This will take time to play out as the overall mobile phone market moves entirely to a “smartphone” market (not that everyone wants or will use the “smartphone” part of smartphones) But I think there is still room to grow for both Samsung and Apple in the “greater than $400” smartphone market. I still hold out hope that Motorola, LG, or HTC can make some inroads and have a chance at survival.

      In other words, I do believe it is still too early to think that everyone is getting what they want with smartphones. And who knows, by the time that time rolls around, the next big thing will likely be here.


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