{"id":2229,"date":"2013-09-12T10:41:45","date_gmt":"2013-09-12T05:11:45","guid":{"rendered":"http:\/\/teekhapan.wordpress.com\/?p=2229"},"modified":"2013-09-12T10:41:45","modified_gmt":"2013-09-12T05:11:45","slug":"by-introducing-cheaper-iphones-apple-will-lose-its-high-end-position","status":"publish","type":"post","link":"https:\/\/vivekkaul.com\/2013\/09\/12\/by-introducing-cheaper-iphones-apple-will-lose-its-high-end-position\/","title":{"rendered":"\u2018By introducing cheaper iPhones, Apple will lose its high end position\u2019"},"content":{"rendered":"

\"al<\/a>Al Ries<\/b><\/span><\/span><\/span>\u00a0is a marketing consultant who coined the term \u201cpositioning\u201d and is the author of such marketing classics (with Jack Trout) as\u00a0<\/span><\/span><\/span>The 22 Immutable Laws of Marketing\u00a0<\/i><\/span><\/span><\/span>and\u00a0<\/span><\/span><\/span>Positioning: The Battle for Your Mind<\/i><\/span><\/span><\/span>. He is also the co-founder and chairman of the Atlanta-based consulting firm Ries & Ries with his partner and daughter, Laura Ries. Along with Laura he has written bestsellers like\u00a0<\/span><\/span><\/span>War in the Boardroom\u00a0<\/i><\/span><\/span><\/span>and\u00a0<\/span><\/span><\/span>The Origin of Branding.\u00a0<\/i><\/span><\/span><\/span>In this interview he speaks to\u00a0<\/span><\/span><\/span>Vivek Kaul<\/b><\/span><\/span><\/span>\u00a0on why by introducing a cheaper iPhone, Apple will lose its position at the high end. And conversely, it won\u2019t sell very many inexpensive phones because of competition from Chinese and Taiwanese companies.<\/span><\/span><\/span>
\nApple has come with a low cost iPhone 5C to appeal to the price conscious consumer. Is it a strategy that is going to work?<\/b><\/span><\/span><\/span>
\n<\/i><\/span><\/span><\/span>Yes and no. The strategy will generate additional sales of the iPhone 5C, but in the long term it will damage the iPhone brand.
\n<\/span><\/span><\/span>You have been of the view that extensions tend to cheapen the brand. Will something like that play out in this case?<\/b><\/span><\/span><\/span>
\n<\/i><\/span><\/span><\/span>Yes, it will definitely cheapen the brand.\u00a0<\/span><\/span><\/span>
\n<\/i><\/span><\/span><\/span>Why do you say that? <\/b><\/span><\/span><\/span>
\n<\/i><\/span><\/span><\/span>Here\u2019s what normally happens when a new category develops. Apple pioneered a new category called \u201ctouchscreen smartphones\u201d with its iPhone brand. Initially, the new product was a big improvement over existing keyboard smartphones like the BlackBerry. This made the iPhone one of the most successful new products ever launched. At one point, it made Apple the world\u2019s most-valuable company. Then competitors entered the market, especially Samsung. Over time, the two brands (Samsung and iPhone) became quite similar, but consumers preferred the iPhone.
\n<\/span><\/span><\/span>Why?\u00a0<\/b><\/i><\/span><\/span><\/span>
\nBecause the iPhone is a better brand. Not a better product. The next development, a development that happens to every new category, is that the category divides into two categories. One at the high end and one at the low end. Any brand that tries to both ends of the market is bound to suffer.
\n<\/span><\/span><\/span>Can you give us any examples?
\n<\/b><\/span><\/span><\/span>Cadillac once was the largest-selling luxury vehicle in the American market. Then it tried to broaden its market by introducing lower-priced vehicles. Today, Cadillac is not considered in the same category as Lexus, Mercedes-Benz and BMW. These three brands each outsell Cadillac by a wide margin. It won\u2019t happen overnight. But long-term, we believe the same thing will happen to the iPhone. By introducing cheaper iPhones, it will lose its position at the high end. And conversely, it won\u2019t sell very many inexpensive phones because of competition from Chinese and Taiwanese companies.
\n<\/span><\/span><\/span>By launching a cheaper version of the iPhone, Apple seems to have started following Samsung’s strategy of having smart phones at various price points. If it’s a strategy that works for Samsung why can’t it work for Apple? After all Samsung has 31% of the smartphone market and Apple has only 14%.
\n<\/b><\/span><\/span><\/span>The smartphone market is only six years old. It\u2019s early on in the development of the category. IBM was the first company to introduce a 16-bit, serious personal computer. For several years, IBM had 50 percent or so of the personal-computer market. But because of line extension, IBM\u2019s market share gradually declined until it was less than 10 percent of the market. And so, IBM threw in the towel and sold its money-losing business to Lenovo. Will the same thing happen to Samsung? Perhaps. But it all depends on how smart the competition becomes. If competitors develop narrowly focused brands at the high end and narrowly-focused brands at the low end, Samsung will be the ultimate loser.
\n<\/span><\/span><\/span>Some analysts are of the view that a cheaper iPhone would cannibalize sales of the expensive models. Would that be the case? And even if that is the case isn’t it better that Apple cannibalizes its own sales rather than let someone else do it?
\n<\/b><\/span><\/span><\/span>Certainly some cannibalization will take place. But Apple could have used a better strategy than line extension. It could have introduced a cheaper iPhone with a different brand name. Take Toyota, for example. Rather than introduce an expensive Toyota, the company introduced the Lexus. At one point, Lexus was the largest-selling luxury vehicle in America. Currently it\u2019s the No.3 brand. When a category diverges, it is much better to cover the diverging category with separate brands rather than by line extending the company\u2019s existing brand.
\n<\/span><\/span><\/span>When I interviewed your daughter Laura a few months back she told me very clearly that \u201clong-term, we see Apple as the leader in the high-end smartphone category and Samsung the leader in the \u201cbasic\u201d smartphone category. Apple would make a mistake in introducing less-expensive smartphones. That would undermine its position at the high end.\u201d Do you see that playing out now? Or would that be too far fetched a statement to make?
\n<\/b><\/span><\/span><\/span>That was an astute statement, but apparently Apple management didn\u2019t take Laura\u2019s advice to keep the brand focused at the high end. A brand needs to stand for something to become successful in today\u2019s competitive environment. What\u2019s an iPhone? Is it a high-end phone or a low-end phone? A brand can be successful at either end of the market but not at both ends.
\n<\/span><\/span><\/span>A growing view seems to suggest that Apple has lost its ability to innovate after the death of Steve Jobs. Would you agree with something like that?
\n<\/b><\/span><\/span><\/span>Y<\/i><\/span><\/span><\/span>es. No brand can appeal to everyone. Steve Jobs famously said there are some customers he doesn\u2019t want. (He was commenting on why Apple wouldn\u2019t introduce a netbook, or inexpensive laptop computer.)
\n<\/span><\/span><\/span>Can you give us other examples where extensions have cheapened the brand?
\n<\/b><\/span><\/span><\/span>Motorola introduced a $1,400 cellphone called \u201cStarTAC\u201d that rapidly became a very popular high-end cellphone brand. Then the company introduced cheaper versions of the StarTAC phone which undermined its high-end position. (We worked with Motorola at the time and pleaded with them not to introduce the less-expensive StarTAC phones.) Today, Motorola is just another cellphone brand without much of a position. Mercedes-Benz used to be known as the world\u2019s leading high-end automobile brand. But the company keeps introducing low-end models that undermine its high-end perception. Today, BMW outsells Mercedes-Benz on the global market.
\n<\/span><\/span><\/span>On a slightly different what do you think of Microsoft taking over the telecom business of Nokia. Nokia has lost out on the smart phone market. Will Microsoft’s taking over help them in capturing a greater market share in the smart phone market?
\n<\/b><\/span><\/span><\/span>Microsoft would have to create a new smartphone category to kickstart the Nokia brand. (Much like Apple did with the touchscreen smartphone.) But that\u2019s incredibly difficult to do in a category that has had so money spent on research & development. Microsoft is unlikely to profit from its Nokia investment. But there\u2019s a larger point to be made. Every company needs a focus for the same reasons that every brand needs a focus.
\n<\/span><\/span><\/span>How do you explain that in the context of Microsoft?
\n<\/b><\/span><\/span><\/span>Microsoft is a \u201csoftware\u201d company. It should not be trying to get into the hardware business. That unfocuses the company and makes it very difficult to manage. Look at Apple, a company focused on selling hardware only. Sure, the company needs software developers to create its hardware products, but that\u2019s a different matter. Look at Apple\u2019s competitors in the American market. Both Dell and Hewlett-Packard are hardware companies trying to get into software and services. And not very successfully. Last year, Dell\u2019s profit margin was 4.2 percent versus Apple\u2019s 26.7 percent. And last year, Hewlett-Packard lost $12.7 billion.\u00a0<\/span><\/span><\/span>
\nThe interview originally appeared on www.firstpost.com<\/a> on September 12, 2013
\n(Vivek Kaul is a writer. He tweets @kaul_vivek)\u00a0<\/b><\/i><\/span><\/span><\/span>
\n <\/p>\n","protected":false},"excerpt":{"rendered":"

Al Ries\u00a0is a marketing consultant who coined the term \u201cpositioning\u201d and is the author of such marketing classics (with Jack Trout) as\u00a0The 22 Immutable Laws of Marketing\u00a0and\u00a0Positioning: The Battle for Your Mind. He is also the co-founder and chairman of the Atlanta-based consulting firm Ries & Ries with his partner and daughter, Laura Ries. Along … <\/p>\n

Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"qubely_global_settings":"","qubely_interactions":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13,14,33],"tags":[210,303,504,584,1806,2271,2375],"qubely_featured_image_url":null,"qubely_author":{"display_name":"Vivek Kaul","author_link":"https:\/\/vivekkaul.com\/author\/vivekkaul\/"},"qubely_comment":0,"qubely_category":"Branding<\/a> Business<\/a> Firstpost<\/a>","qubely_excerpt":"Al Ries\u00a0is a marketing consultant who coined the term \u201cpositioning\u201d and is the author of such marketing classics (with Jack Trout) as\u00a0The 22 Immutable Laws of Marketing\u00a0and\u00a0Positioning: The Battle for Your Mind. He is also the co-founder and chairman of the Atlanta-based consulting firm Ries & Ries with his partner and daughter, Laura Ries. Along…","jetpack_sharing_enabled":true,"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/2229"}],"collection":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/comments?post=2229"}],"version-history":[{"count":0,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/posts\/2229\/revisions"}],"wp:attachment":[{"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/media?parent=2229"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/categories?post=2229"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vivekkaul.com\/wp-json\/wp\/v2\/tags?post=2229"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}