My father loves Blue Bunny ice cream. He also has a Windows PC. The correlation and irony is not lost on me. Windows PCs, by and large, are generic pieces of equipment, with little personality, and less to savor. Apple’s premium brands, from Mac to iPod to iPhone, are as premium to users as Haagen-Dazs is to ice cream lovers. An overriding question is, despite the premium status, “Can the iPhone become a dominant platform like the iPod did, but the Mac didn’t?”
A Matter of Taste?
There’s nothing really wrong with Blue Bunny ice cream. It’s a well known brand, popular, not the least expensive ice cream, but not considered a premium brand with a following as loyal as Haagen-Dazs (among others).
My father, like most PC buyers, goes for an established brand of ice cream that doesn’t really taste much different than any other mainstream brand in the super market.
My ice cream preference is Haagen-Dazs, and it’s been that way for about 25 years (since a thoughtful aunt explained the difference between Blue Bunny and Haagen-Dazs with a simple taste test). I’ve tried others, but everything else just doesn’t measure up.
On the other hand, my father will take a spoonful of Haagen-Dazs or other premium brands, but he never really tries it. He can’t tell the difference. It’s just ice cream to him.
Without question, Apple’s Mac line of computers is like premium ice cream. Unlike Haagen-Dazs, there are few premium brands in the desktop, notebook computing world, hence the Mac has an abnormal market share in PCs priced $1,000 and above.
The iPod is Apple’s market leading anomaly. While the iPod could be considered a premium player, it’s not the most expensive or least expensive, but certainly the most ubiquitous. I think of it as the Breyer’s or Dreyer’s ice cream of portable music players.
The Mac is a premium brand at a premium brand price. The iPod is a market leader among many competing brands. What did Apple do differently with the iPod line that it didn’t do with the Mac line? What does that mean for the iPhone?
iPhone as Haagen-Dazs
Among premium ice cream brands, Haagen-Dazs is well known, but certainly not without intense, almost fierce, competition. There are dozens of national and regional premium ice cream brands vying for a slice of the high profit segment of the ice cream ‘smartphone’ market. Some of us would be hard pressed to tell the difference in taste between the premium brands. The market is fragmented.
Apple faces a similar problem of smartphone market fragmentation with the iPhone. While many of us consider the iPhone as the best smartphone platform, it is merely one of many, ranging from BlackBerry (Ben and Jerry’s) to Windows Mobile (Blue Bunny) to Android to Palm Pre (Frusen_Glädjé) and many in between.
A comparison between Palm’s Pre as Frusen Glädjé and Apple’s iPhone as Haagen-Dazs is apt. One is the ubiquitous darling of the smartphone market, the other a wannabe. One is a market leader, the other is no longer available.
Does Apple want the iPhone to become a dominant platform as the iPod has been to date, or merely willing to have the iPhone take a highly profitable, premium brand role at a premium price?
Back to the Future?
The iPhone is not the iPod and it is not the Mac. The markets are different, though one begot the other which begot the most recent.
The iPod started first as a Mac-only portable music player with iTunes. That was leveraged into a Windows version of iTunes and the iTunes Store. The iPhone takes heritage from both the Mac and iPod via iTunes and the iTunes Store with the App Store, instant Windows compatibility.
Apple is not in any immediate danger of losing the premium Haagen-Dasz brand analogy, but what must the iPhone maker do to repeat the iPod’s success; dominant mind share and dominant market share?
Cut the price of the iPhone.
Depending on where and who you believe, an unsubsidized iPhone will cost $600 to $700. Even at the $99 price tag, buyers still pay a whopping premium for the older 3G model over the life of an AT&T contract. Apple’s iPhone market share will continue to grow, but not indefinitely because other smart phone makers have highly competitive products. The iPhone’s position as a platform of the future may be better than others, but market dominance will not come with such a premium price.
Though not an Apple’s to oranges comparison, the iPod starts at $79 and ranges to $399. That range in price allows the iPod to protect market share, even at the low end, while expanding the high end for premium products at even greater profit.
The only way Apple can expand the iPhone’s position to a dominant platform is with a broader range of products, and, entry level iPhones at a much lower price. Otherwise, the iPhone becomes the Haagen-Dazs of smartphones. Popular. Well known. Expensive. Tasty. But without a dominant market share. Apple must cut the iPhone’s price to expand the market.