One very important issue that I don’t see raised too often in the Apple Against The World battle that rages in online media is the notion of product differentiation.
We hear Android is Winning! We hear that iOS vs. Android OS is merely another chapter of Apple’s epic struggle, Mac vs. Windows. From there, critics begin to pile on with silly argument after argument of Apple’s impending demise. Those invalid criticisms tend to overlook both business fact and principles.
In this case, the facts are numeric. When it comes to profits, the lifeblood of product development and sustainment, Apple reigns supreme in the smartphone and tablet market segments. Of all Apple’s competitors, only Samsung is profitable. Everyone else is losing money in smartphones and tablets.
So, why is it that the future looks bleak for Apple?
It does not, and this useful business principle will display the reasons why Apple will remain both competitive and profitable for many years to come, regardless of the competition.
Apple upended the smartphone industry with a unique new interface and ecosystem which customers could not get from the competition. The end result was a dramatic shift in profits. Apple is estimated to command about 75-percent, while Samsung makes up the rest. I’ll say it again. Everyone else is losing money in smartphones and tablets.
While cell phone manufacturers have copied some of Apple’s iPhone and iPad interface and designs, whatever improvements they brought to the public are either differences, or incremental, but not the huge jump that differentiated the iPhone from other so-called smartphones. The iPhone was such a huge improvement in the standard that competitors have only recently begun to catch up, but have not created a huge improvement to overshadow Apple’s success.
That’s what I call the differentiation clause of product marketing.
For a new product to unseat an industry leader requires certain basic efforts. Same features and benefits, much lower price. Or, same price, but much improved features and benefits. iPhone’s competitors took the former road, while the iPhone upended the industry with the latter approach.
Even with similar functionality and a slightly lower price, Microsoft, Nokia, BlackBerry and Google’s plethora of Android devices, sans Samsung, haven’t been able to crack Apple’s dominance, and continue to lose money in the process.
Defeating Apple won’t be easy in the current industry atmosphere because competitors haven’t figured out how to create an Apple-like iPhone competitor for substantially less money than an iPhone, and haven’t figured out how to create a dramatic improvement in smartphone and tablet design that can take market share and profits away from Apple’s iPhone.
What Apple did with the iPhone and iPad has caused serious damage to smartphone and tablet players– Microsoft, Nokia, BlackBerry, Amazon, and Google’s Android OS crowd. The dramatic shift in profits and wealth from former industry players to Apple is not likely to reverse course any time soon. The damage has been done.
Amazon and Google have resorted to selling tablets and smartphones at manufacturing cost in the hopes that flooding the market with inexpensive devices which could gain them revenue via media sales. That’s an unproven business model that, even if it works, probably won’t damage Apple any time soon. Why? Apple makes even more profits on media sales than Amazon or Google combined.
What of Microsoft, Nokia, BlackBerry, and the Android OS crowd? They’re bleeding cash by the billions and are desperate. They’ll say anything and do anything to unseat Apple from the perch of profitability. It just won’t happen until they make a much better mousetrap. Build it, and they will come. They just haven’t built anything better yet.