Apple’s Secret to Success is Hiding in Plain Sight

| Particle Debris

There is an American meme that cheaper is better. Who wants to spend more money instead of less money? Who doesn't enjoy Walmart or Costco? However, if a company understands why and when people want to pay more, it can succeed wildly. Like Apple. It's a secret hidden in plain sight.

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Earlier this week, there was a news item that intrigued me, so I did some analysis. "Facebook Ads Generate Staggering Profits on iOS, Loss on Android." In that article, I pointed to an interesting quote from Tim Cook:

There’s always a large junk part of the market. We’re not in the junk business ... There's a segment of the market that really wants a product that does a lot for them, [emphasis added] and I want to compete like crazy for those customers. I’m not going to lose sleep over that other market, because it’s just not who we are.

This philosophy is implicit in Apple's product designs. Apple intentionally designs products for people who have money to spend. (Read that again.) I wrote: "Apple does this by virtue of the product design, the confidence the user has in Apple, the ease of getting connected, the pleasure of using (thanks to J. Ive.) and the security of the devices."

This strategy works. It works because Apple products appeal to people who are accustomed to getting what they want by smartly paying for something valuable. Again, I wrote:

Its [Apple's] customers spend more money online because they believe that the products they use and apps they buy and services they engage will serve them in some helpful way. They have a vision of what they want for themselves.

These people are also those who have the means to pay for something that saves them time. They are, so to speak, eager to spend money to avoid the loss of precious time, better targeted for their personal and professional endeavors.

The Android Alternative

Because Android is designed to be more or less free and because it takes a very free-wheeling and relaxed approach, surfacing a lot of options and technology to the user, often by design, it's not possible, in general, to recreate the same user experience that Apple achieves. Accordingly, Android customers are different. Not inferior. Just different.

I think there are two kinds of Android customers. The first is the high-end geek who doesn't want to be part of Apple's ecosystem. The geeks perceive that, at every turn, money may have to be spent. Plus, this personality is a natural tinkerer and has plenty of free time. The reaction to a typical technical problem is, "Hey, I can solve this problem myself. There's no need to cough up money."

The other kind of Android customer, the majority, is the less technical person who isn't sensitive to the nuances and advantages of the Apple ecosystem and is also fearful that they'll be dragged into something expensive, even if the initial down payment to their carrier is the same. They just want a cheap, but fancy looking smartphone. They aren't, however, very good at exploiting it, so they aren't mindful of opportunities -- or technical enough -- to spend money on apps that are helpful -- those that fulfill a personal, technical vision. Their Internet use is sparse.

One analogy I can think of is the person who balks at the idea of buying a BMW 3-series for US$41,000 because they think that after warranty service will be too expensive. So they spend $41,000 on a nicely loaded Subaru sedan. They want to retain immunity from an environment that will cost them additional money, money that will provide a high level of excellence. A Subaru is good enough for a drive to Walmart. (Don't get me wrong. Subarus, especially the all-wheel drive versions that thrive in Colorado, are fine cars. I've owned one before. It's just an analogy.)

Apple's Target

Apple targets the first group above. If a company wants to make a lot of money, it builds products that appeal to people who are willing to spend a little more for perceived value. It's a fool's errand to go after the mass market where there is resistance to that, and, therefore, a fool's errand to go after market share.

There is another meme, but more myth, in America that a company can innovate, seize dominance, and crush the competition. Investing in such a company can make one very wealthy because the company owns the market and can grow without bounds, without much competition to hold it back.

However, as we've seen, through various means, Apple's competitors have been able to make products that look almost as good and operate almost as well. Second best. That aggressive competition, what Tim Cook calls the "junk market" scares investors. It suggests limits to Apple's growth -- and their own investment profits.

Apple, however, doesn't have to care (too much) about the profits investors make. It only has to care about its own success, and so long as it can continue to move forward, innovate, compete with themselves, and make the very best products money can buy that appeal to people with money to spend, a lot of money will flow Apple's way. After all, it's how Apple accumulated US$150 billion in cash and liquid assets.

Apple's marketing supports its philosophy: only the best.

This is not a big secret, but my take is that each and every day, this secret, hidden in plain sight, is missed by people who write about Apple and should know better.

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Tech News Debris for the Week of October 14

This week, I collected links to some of the worst articles that don't seem to understand Apple, but I''m not going to skewer the authors or waste your time. Instead, I'm going to stick to things that are worth talking about.

When we think about digital books, we tend to think about how cool they are on our iPads and how old-fashioned books made out of paper are. But, because digital books are big business, we tend to get drawn onto the business-side enthusiasm as if it were our own. But what should our own perspective be? We seldom think about our obligations to future generations. In this essay, "Neil Gaiman explains the worth and value of libraries." I know you'll appreciate his views.

By now, I hope you're regularly reading Jonny Evans over at Computerworld . However, if you missed this one, I'll send you over. "7 power saving tips for iOS 7." Come right back!

Heretofore, we've never heard of Windows Phone Phablets. The problem has been that Windows Phone OS didn't support the larger screens of Phablets, but now Microsoft is fixing that. Windows Phone 8 Update 3 does have support for larger displays, and perhaps this is Microsoft's escape route into small tablets that everyone loves. "Why Windows Phone Needs Phablets." What do you think?

The problem of drivers who become a danger to others by texting while driving (or even reading an eBook -- I have an eyewitness report) is serious. Brian S. Hall thinks that Apple should use its enormous technical capabilities to solve this problem, and I agree. "Holding Apple to a Higher Standard – Solving Texting While Driving."

For starters, Apple could use its mapping and GPS technology to make sure the user is on a roadway and not a train or plane. Then, use the iPhone speaker and microphone to emit ultrasonic pulses and create a sonar map of the interior. Make sure the user is not on a bus. If the user is in a car, on a public roadway, moving more than 10 mph, and is behind the wheel, then disable texting -- in accordance with state law. That's just my half-baked idea. Apple could probably do much better.

Finally, for comic relief and plain old technical satisfaction, I direct you to a wonderful tale of consumer protest and charming revenge against the routine abuses of privacy and dignity. "The retaliation begins: Google profiles get Schmidt-faced."

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Secret sharing via Shutterstock.

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23 Comments Leave Your Own

dtm1

“Apple’s Secret to Success is Hiding in Plain Sight”

You have nailed it perfectly.

vpndev

BMW 3-series vs. Subaru ??

Interesting question. Actually, quite a few people choose the Subaru not so much for the cost of service as the availability of service. Once you get out of large cities you’ll find not very many BMW dealers or repair shops. A few but not a lot. It’s easier to get service or repairs for your Subaru “out there”.

sflocal

I own a BMW.  I don’t necessarily compare Apple to being BMW luxury.

A big difference is that Apple’s products are well built and short of physical abuse, has great resale value, and continues working far after the warranty expires.

The only reliable thing about BMW is the warranty.  If an iPhone breaks down as often as my BMW did during (and after) the warranty, Apple would not be where they are today.

CudaBoy

I don’t know; there’s something cool about a $2700 RoadRunner (price new in ‘68) blowing the doors off a 427 Vette at double the price. The Nexus 7 is the RR IMO, Apple has no answer for it as of yet.  OTOH, I’m happy paying a premium for Apple’s professional hardware because there literally are no other options that WORK like Apple’s Mac Pros in the music and movie/video world.

MacFrogger

John,

Re: “Who doesn’t enjoy Walmart or Costco?”

With all due respect, there’s big diffs between these two businesses. One pays their workers a living wage and even provides company healthcare. The other pays as little as possible, skips out on benefits whenever it can, and even counsels their employees on how to file for food stamps and other public assistance.  I will shop at a Costco, but to answer your Q, no I don’t enjoy Walmart.  And I won’t shop there either!  Just sayin’...Cheers!

CudaBoy

Oh oh….better not go there MacFrogger as you don’t hear about Walmart employee suicides and $200 a month salaries as you do by and from Apple’s proxy employees at Foxconn.

MacFrogger

Well, I did go there CudaBoy, because there’s a big diff between Walmart and Costco.  And so since you brought it up, I’d really appreciate it if you’d tell me the diff between “Apple’s proxy employees at Foxconn” and “Sony’s proxy employees at Foxconn” (cuz they make the Playstation) from “Amazon’s proxy employees at Foxconn” (cuz they make the Kindle as well).

For that matter, it would also be great if you’d clue me in on how [Insert company name where indicated below: Cisco, Dell, Google, H-P, Microsoft, Motorola Mobility (e.g. Google), Nintendo, Nokia, Toshiba, etc]  “[INSERT] proxy employees at Foxconn” receive better pay/working conditions as compared to their colleagues making Apple products.  IOW, what are you comparing here?  Comparing Walmart to Foxconn is comparing….OK, I’ll say it: Apples to Oranges!

But - I don’t disagree with you that ALL Foxconn workers should be treated with dignity, respect, and a living wage. That includes those that make products for Apple and everyone else. Last I checked, Apple seemed to be the only company even remotely trying to do something about it (yes, they could do a lot more), as well as insisting on standards for THEIR ENTIRE SUPPLY CHAIN. Can you name any other company that is doing the same?

MacFrogger

And one other thing re suicides at Foxconn.  Yes, some employees have committed suicides, and any such thing is bad.  But if you employed tens of thousands of workers, if not hundreds of thousands, you’d have suicides among your employees as well. 

So yes, I will guarantee you that some Walmart employees have also committed suicide, and others will certainly do so in the months and years ahead. And it is tragic.

But even during the rash of Foxconn suicides (14 in 2010), two studies reported that the suicide RATE at Foxconn remained lower than the suicide rate for the Chinese population as a whole, and lower than that in the US.  I would love to know what the suicide rate is for Walmart employees.  Food for thought:

http://www.stormfront.org/forum/t576563/

MacFrogger

Apparently, even Walmart customers commit suicide - so I really don’t know how to interpret such data:

http://abclocal.go.com/ktrk/story?section=news/local&id=8986996

CudaBoy

Well like you said Frogger, there isn’t much in common between Walmart and Costco - one is membership and employs less than 1/10th the people of the other - the other being the largest private employer and largest company in the world. So your point about workers at one place not being as well treated as the other place as being your inner compass struck me as odd since you don’t mind buying Apple stuff from abused workers in China.  Obviously a job at Walmart would be favored over one at Foxconn any day, but we be way off topic.
All I know is Apple COULD make their stuff here in the good ol’ USA and help the bottom line but nooooooo.

MacFrogger

C’mon CudaBoy - you are capable of way mo’ intelligent responses than that!  smile

There is a lot in common between Walmart and Costco, starting with the fact that both are US-based retailers selling a variety of goods (from food to computers) that shoppers regularly patronize due to their low prices.  Both employ LOTS of workers; that one is 10x the other in size is really of no consequence to the issues being discussed (Costco is simply way behind Walmart in opening stores outside the US).  If I’m looking for low prices on food, laundry detergent, or whatever, I do have a choice of whether to go to one or the other - and I will choose Costco every time.  For all the reasons I mentioned above.

Truth be told, I’m actually in the market for a tablet right now.  Should I buy an iPad made by Foxconn?  Or a Kindle made by Foxconn?  Or maybe a new Surface 2…also made by Foxconn?  For that matter, even the Google Nexus is made in China (Acer, right?), and I somehow doubt that you will respond by telling me that Acer (or whoever) treats their employees better than Foxconn.  Tell me what choice do I have in buying a tablet?

For the record: Given a choice, I would gladly pay more for an Apple product made in the USA.  In the same way that I don’t mind paying a $95/year membership fee upfront (for my household of one) that allows me to shop at one discount retailer (Costco) over another (Walmart). The latter shifts the burden on me to provide public assistance for their employees while robbing them of their dignity, and yeah, unlike Foxconn and China I’ll bet the suicide rate for US Walmart employees IS higher than the rate for the US as a whole. (Though I can’t prove it - just a hunch!).

Moving forward, we may find out on October 22 that Apple will be making the new MacPro (Cylindrical Edition) here in the good ol’ USA, and I’m happy about that even though I don’t need a machine with that capability.  I wish they’d do more mfr here.  But since you raised the point - “Apple COULD make their stuff here in the good ol’ USA and help the bottom line but nooooooo” - I’m hoping you’ll tell me which other computer mfr is making their stuff here so that I might consider it for a future purchase?

nealg

I agree with DTM1. I think John nailed it with this piece. John is one of my favorite writers about all things Apple. Keep up the good work at MacObserver and please don’t go to Costco or Walmart wink.

That is why the 5c is not a cheap phone and the Mini is not a cheap 7 inch tablet. And that is why most of the writers and analysts will keep on talking about a cheaper alternative for Apple at the same time as complaining about margins. They never got Apple and never will.

Neal

Lee Dronick

  Moving forward, we may find out on October 22 that Apple will be making the new MacPro (Cylindrical Edition) here in the good ol’ USA

I hope so, other Apple products too. That doesn’t mean that Apple couldn’t have things built in several countries, but that for a number of reasons have domestic factories is a good idea.

Cuda, I couldn’t afford a muscle car. I had a ‘63 Impala convertable, later a ‘64 Tempest. My neighbor has a nicely restored ‘68 Chevelle, glasspack mufflers and all.

CudaBoy

Frogger, I don’t think we disagree.  Lee, R U Serious? I am die hard Mopar guy but even I would dig a bubble top ‘61 Ventura or Impala. The Tempest was ahead of the curve with the euro struts and ohv engines too. Nice.

And hey, I used to love my ol’ PPC Macs made in Cork Ireland; somehow that was/is cooler than an Asian sweat factory churning them out. Hell yes I’d pay more or at least pay the same and have a HEAP more pride about Apple if they made an effort to make the pads and phones here… can you imagine the apple logo in red white and blue?

MacFrogger

Lee,

Re: That doesn’t mean that Apple couldn’t have things built in several countries, but that for a number of reasons have domestic factories is a good idea.

They are making iPads in Brazil right?  “Making” of course being more accurately described as assembling a large number of components sourced from many countries all over the world!  Let’s not forget this does include the good ol’ USA, rather ironically too as all (most?) of the custom Apple-designed chips based on ARM architecture are still coming from the large Samsung foundry near Austin TX.

I’m reminded of the arguments about buying a Japanese car vs an American car that raged years ago.  Then half the American cos (Ford, GM) set up plants in low cost countries (like Mexico) to assemble their globally-sourced components while the Japanese cos (Toyota, Honda) set up assembly plants in the US to assemble THEIR globally-sourced components.  Frankly, I have no idea which is better for the American economy!  The world is a complicated place…

MacFrogger

Hey Cuda,

I remember my first Mac was built near Sacramento, and yes, I was proud to own it!  And yeah, I do suspect we agree more than disagree.  Cheers!

(Can you tell I’m home tonight and yeah…a little bored!  Thanks for keeping me entertained!)

CudaBoy

Jobs here trumps everything. Maybe. At least an employee here (even at Walmart) has options and some laws as opposed to ohhh say -  the new gag order on Foxconn employees that is a new wrinkle of bad news over there.
2 things; treat employees better and hopefully make more of those people American. We NEED those minimum wage jobs.

MacFrogger

Agreed - for all or problems here in the US, like you said even a Walmart employee is arguably better off than a Foxconn employee, no matter what they are building. 

All people/employees should be treated with fairness and respect. One of the great tragedies of Steve Jobs (too often overlooked in his deification by the True Believers) was that by all accounts he treated his employees like $hit. He even $crewed the Woz. 

Yup, not only is the world a complicated place, but so are the humans that inhabit this joint. Still, I can’t imagine any other place I’d rather be!

Lee Dronick

Yes, a metalic green ‘63 Impala convertable, 327.

True, even if Macs were assembled here we would almost certainly be reliant on components from other countries. My concern is trouble in the Western Pacific and that slowing if not stopping exports.

BradMacPro

While I think it would be rather easy to program a Messages (texting) or other apps lockout while the iPhone senses it’s in motion above say 10 MPH, this should be an option so passengers can use their iOS devices while the driver should not (of course). No doubt part of the the do-not-disturb part as a bluetooth paired iPhone should allow incoming calls. Outgoing could be a bit of a gray area as it requires in most cases more user interaction.

Lee Dronick

Brad, my wife and I have visor mounted Bluetooth speakers that work with Siri. Touch a button and tell Siri to call so and so. Yes, that is a distraction, but we almost always use it when stopped at a traffic light. I am well away that my reaction script is almost 63 years old and that I need to focus on safe driving. However, twice I have called 911 while on the freeway to report what looks like drunk driving.

We have been discussing vehicles and we are fixing to get ready for a new one that has iPhone connectivity. Either a new Ford Focus or Fusion.

gnasher729

Cudaboy: You don’t hear about Walmart suicide rates on Mac related discussion sites. Would be weird, wouldn’t it? However, if you google for “Walmart suicide”, you find plenty of results. But you can also find a lot of US statistics, and there is the horrific statistics that the rate of US retail employees being _murdered_ and the Foxconn employee suicide rate are quite exactly the same.

Two more things: Foxconn employees working on Apple products make a lot more than $200 a month. And Foxconn employees in China have the much lower living cost of China. Typically, people work at Foxconn for a few years and go home with lots of money in the bank. Nobody working at Foxconn needs to worry about getting state benefits to feed their family, unlike many Walmart employees.

hembreeder

The solution to text messaging while driving is to make it safe. You do that by using voice. First, you enable voice activation of voice messaging. Then you can use the voice messaging already available to send messages. You also enable a voice read back of incoming messages. The, messaging becomes as safe as conversing with a passenger. You could even assign various voices to messages from people you exchange messages with frequently.

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