Apple at the Crossroads

By Gregory Yankelovich | Small Business

As many products and services are becoming more agile by design, even the best-designed products have shorter and shorter time to enjoy superior profit margins before competition starts to catch on. Patent protection and brand recognition do help to extend this time, but the clock keeps accelerating.

Apple’s iPhone provides a good case study for this phenomenon. Ever since its initial introduction by Steve Jobs, the iPhone was the gold standard for the smartphone product category. It became a status symbol of Silicon Valley technocrati and every new model was greeted by millions of lined up fan boys and girls. Apple bestowed the honors of selling it to a chosen few channels and demanded handsome subsidies in return. The reason for this success was the iPhone’s superior customer experience, designed into the product, that exceeded any other one in that category by a wide margin. Well, this margin finally shrunk.

Last week’s financial news show that hegemony of iPhone may be over. Make no mistake, it is still a great product, but competition has caught on in creating a customer experience as good or better than Apple’s. People bought 31.2 million iPhones last quarter, but their experiences were rather underwhelming. Not because there is anything wrong with their iPhones, but because their expectations were too high as many new customers came to Apple for the first time. As Samsung, HTC and Nokia customers have “upgraded” to iPhone, they do not find the overwhelming difference they expected.

These scores may not likely match company-sponsored survey results, as they are extracted from sentiments customers express reciting their experience in unsolicited reviews they share online, often anonymously. However, what these scores say is that only 6% of iPhone 5 customers (Net Promoters) would actively put out a Word of Mouth to promote the phone, compared to 18% for Galaxy S4.

The differences are even more pronounced when iPhone is compared to Blackberry Z10, HTC One or Lumia 928.

Out of 25 attributes of customer experience that are most important to customers of these smartphones, Apple still dominates in one – Design, as customers rate it 28% above the group average. Details are available on request.

It appears that marginal improvements introduced in the last two iPhone models – 4S and 5 – failed to separate the brand from the pack. In Apple at the Crossroads image NPS trend by model 300x176Apple at the Crossroadsaddition, US carriers started to experiment with unbundling handsets from services, and the subsidies to the manufacturers like Apple are threatened. At this point the category shows signs of maturity. In the past, Apple’s market researchers were able to discover and exploit latent needs of increasingly demanding consumers. Is today’s Apple capable of inventing a new category of products to march on as the industry leader?

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