Has Apple lost its Brand Relevance? The world is waiting for a breakthrough technology killer app!

Irénée Dondjio & Hans G. Hoekstra

May 2019

In a recent post Apple announced its streaming news service. A few months earlier it read: “Apple plans lowering iPhone prices as sales drop”. Where are the days when an Apple launch event, especially in  the “… oh yes…one more thing ….” section, would send a shockwave through the world with yet another breakthrough device? Has Apple lost its capacity to truly innovate? Is the brand beginning to lose its relevance?

When Apple said it would lower the retail price of their iPhones in China, it was “… to compensate Chinese buyers for the effects of increasingly unfavorable exchange rates … “ And that sounded like a viable excuse. Competing in China against China-made smartphones, priced in local currency, would indeed bring an element of unfairness when only retail prices of iPhones were to go up. And yes, sales would be affected. But, we say, since when did Apple show any concern about competition at price point level? Has Apple not always represented so much brand relevance to its targeted customers that they were, as David A. Aker would have it, stay out of brand differentiation battles? Are this retail price drop, this turn towards streaming news and entertainment services and now the introduction of an NFC-based pay card, signs that the Apple brand is beginning to lose some of its relevance? Some of its sustained competitive advantage? Where Apple was once able to ‘cross the chasm’and bring in customers that could be described as Early Majority, it now begins to look like they are shifting towards the Late Majority category of their global market segment. And, as it seems, they may at the same time be losing some of their loyal, Early Adopter and Innovator type of customers. No longer does the launch of a new Smartphone version block web shops or cause traffic jams around Apple stores on the day of release. Which may well translate into: no longer are customers willing to pay the price premium for something that is not bringing them a premium user experience. 

So has Apple’s seemingly untouchable Product Leadership position begun to crumble? In any highly competitive business arena, each company should possess a few  competitive advantages, a certain uniqueness, to appeal to customers. Where David A. Aaker calls it Brand Relevance we would rather label it The Winning Competitive Strategy. Based on an analysis of the markets it operates in and on an analysis of its own strengths and weaknesses, a company should be able to  determine a strategy how to successfully approach the market, making the best possible use of a truly differentiating factor. This will then help the company to define its business model and its competitive positioning. This may be quite challenging because firms will always have to keep adapting to an increasingly changing and turbulent business environment. In that process, companies should however not hesitate to apply any technology that can enhance their uniqueness and that can raise the value they deliver to customers.

At the same time, as authors such as Hermann Simon explain, the company must keep a certain focus and not divert too much from its original combination of needs-addressed and solutions-offered, or technology applied.

Apple had been doing this quite well ever since their earliest days. Based upon their unique innovative competency they were always able to take ‘technology’ in its broadest meaning, to include many means of ‘delivering solutions’ to the well-assessed needs of well-defined targeted customers. For Steve Jobs and Steve Wozniak it was all about ground breaking forms of design and user interfaces. “In everything we do, we want to challenge the status quo’’, Simon Sinek famously quoted them. And indeed that was the ‘WHY’ they started out with and indeed it was their vision that using a computer, or indeed any technological device, should be fun and easy. And once they had succeeded in bringing that message across, both through their products and their marketing communication (‘Think Differently’) they perfectly applied it to new solutions, satisfying new needs of both existing and new brand fans: iMac, iPod, iPhone, iPad and even something as diverse from their initial competencies as iTunes. Brilliant. Until now, or so it seems.

Consumers are still closely following all Apple’s moves but no longer with the same high level of enthusiasm as in years past. In fact, according to Statista, after peaking with the iPhone 5, global interest for iPhones has been falling since 2012. Citi analysts also noticed the same shift over time: “…. we suspect this is because of a slowdown in innovation and the saturation of iPhone in the addressable market ….” We tend to agree. We do think it’s both. And we do think they are connected. 

It may well be said that since about 2012, the novelties applied to new iPhones have been mostly ‘incremental’ where they once were ‘breakthrough’. And the rather late introduction of a connected watch — after Google and Samsung already launched theirs — may have been another sign that Apple is no longer the innovation leader. Interestingly, while skepticism at consumer side began to develop, Wall Street went the opposite direction by making Apple the first company in the world to be worth $1 trillion. 

How can a company that is supposedly losing its innovative edge get such a high valuation? Is it perhaps that analysts believe that Apple can maintain its business model and levels of earnings when they progress through the adoption cycle towards mass markets? They might, but then only if later adopter categories are willing to pay a premium price too, just like earlier adopters were before them. And, yes, only if at the same time new products or services, cleverly integrating breakthrough technologies will continue to attract Innovators and Early Adopters who keep the brand in high esteem. With every launch that misses out on these aspects, Apple’s problems seem to just grow bigger.

Irénée Dondjio & Hans G. Hoekstra

May 2019