A new year is upon us, and usually at the onset of each new year, one of the big ticket items that consumers invest in with their year-end bonuses is an upgrade to their old mobile phone. And one of the biggest winners of this seasonal consumer trend is the new iPhone 13® which has undoubtedly helped drive up the market capitalization of Apple®.
Apple® recently made global headlines on the first working day of 2022 for briefly becoming the world’s first Trillion US Dollar company based on market capitalization.
According to Statista, the iPhone® accounted for 46.63% of total revenues of Apple® as of the fourth quarter of its 2021 fiscal year, largely coming from the Americas. Its total revenues for that quarter was US$83.4billion which represents an impressive 29% year-on-year growth despite the still ongoing global COVID-19 pandemic.
And without a doubt, the iPhone® leads the pack in driving up Apple®’s revenues and market value. As of February 2020, it is estimated that a total of around 2.2billion iPhones have been sold since it was launched in 2007.
Aside from the continued success of the iPhone®, obviously, there are many other factors behind this brand’s meteoric rise over the past fifteen years, ever since Steve Jobs launched the first iPhone® back in 2007.
And not least of these factors is its robust and highly focused product strategy.
In previous blogs on LEGO®, Netflix® and VEJA®, we featured the various product strategies of these brilliant brands and how these strategies contributed to their enduring success. We learned how product evolution of LEGO® and Netflix® allowed these brands to adopt while remaining consistent with their original brand positioning of ‘Play Well‘ and ‘See What’s Next‘, respectively. In the case of VEJA®, we learned how it consistently pursued its ‘project‘ of creating products which have a positive impact on the environment.
In this blog, we will revisit the concept of ‘product strategy‘. And in the case of Apple®, we will explore the concept of ‘Walled Garden‘ and how this multi-trillion US dollar company continues to apply this product strategy by increasing the height of its ‘walled garden‘ which has enabled the brand to further strengthen its USP and thereby further boosting its competitiveness and reinforcing its brand positioning of ‘Think Different‘.
What is a ‘Walled Garden‘?
In very simple terms, it refers to a closed technology ecosystem or platform that is controlled exclusively by its owner.
Back in the 1970s, way before the creation of major tech companies like Google®, Facebook®, or Amazon®, the best example of a ‘walled garden‘ was telecom providers like Bell System which was initially led by the Bell Telephone Company and later on by AT&T. Companies like these owned all of the hardware and had some control over the information that passed through their telephone lines.
In the case of Apple®, the iOS ecosystem that is a built-in feature of all its products is controlled exclusively by the brand. This enables the brand to fully dictate the consumer’s user-experience and also how applications operate through and between its products and services. It also allows the brand to provide applications and services which only work within its ecosystem. Some examples of these are the iCloud®, iMessage®, FaceTime®, etc.
In one of the maiden blogs here in Branding Nerd back in April 2021, we featured the bold move of Apple® to break away from its 15-year partnership with Intel®.
“Apple® has a long-term strategy of owning and controlling the primary technologies behind the products we make.”Tim Cook, Apple CEO
As we highlighted in that blog, Apple®’s move to replace Intel®’s microprocessors with their very own Apple M1® chips (which it was already using then for its phones and tablets) for their MacBook Air®, 13-inch MacBook Pro®, and Mac Mini® was a clear move towards taking full control of its walled garden.
“Apple Silicon is totally in keeping with the strategic goal of Apple to really control an entire stack,” said CCS Insight research director Wayne Lam, a leading industry voice on cellular technologies. “Now in computing, they own everything from silicon to the software to how the user moves the mouse around, so it’s tremendously integrated.”
iPhone®: Gateway to the Garden
Sapient Prince explains it very clearly in Geek Culture:
“In most cases, iPhone® is the gateway to this garden. It is just because it’s the best all-around phone with better hardware in the market. Then you buy other Apple® products and get deeply integrated into the ecosystem — ‘Apple Ecosystem‘. Apple has a lot of options when it comes to both hardware and software. They make iPhones, iPads, Macs, Apple Watches, Apple TVs, Homepods, AirTags, Airpods. They also have exclusive software products like Facetime, Airplay, Shareplay, Airdrop, Continuity, iCloud, iMessage, Fitness+, Apple TV+, Apple News, etc. So, once Apple® pulls you into the ecosystem by one of their devices, let’s say an iPhone for example, then they try to lure you to spend more on other Apple products. Because they work seamlessly with each other.“
In my case, the iPhone® was not my gateway to the garden but rather, the MacBook G5® which I purchased one year before the first iPhone was launched in 2007. My last non-Apple® mobile phone was a Blackberry® back in 2006, and ever since I switched brands and entered the garden, I have never left. From the various iPhone® models through the years, to the MacBook G5®, iMac®, iPad®, MacBook Air®, MacBook Pro® over the past sixteen years, the brand has managed to keep me, my wife and children in the garden because of the excellent user-experience and lack of friction between these products which are our personal and professional tools for a large part of our waking hours.
With Apple®‘s relentless efforts to keep its ‘walled garden‘ as high as possible through its various product initiatives, the brand has been able to create a consumer experience that is both ubiquitous and exclusive, a potent and unique combination, which only a brand which is as massive as Apple® can do. It is no wonder that its market capitalization quickly grew from US$1trillion as of August 2, 2018, then US$2trillion by August 19, 2020, then a whopping US$3trillion just a few days ago last January 3, 2022. The brand managed to triple its already immense market value in less than four years. Some say that if Apple® was a country, it can even be included in the G7!
This ‘walled garden‘ product strategy of Apple® is made even clearer through an article that I came across in The Wall Street Journal penned by Tom Higgins just yesterday, January 8, 2022. It was entitled: “Why Apple’s iMessage Is Winning: Teens Dread the Green Text Bubble“.
Higgins explained that, “From the beginning, Apple got creative in its protection of iMessage’s exclusivity. It didn’t ban the exchange of traditional text messages with Android users but instead branded those messages with a different color; when an Android user is part of a group chat, the iPhone users see green bubbles rather than blue. It also withheld certain features. There is no dot-dot-dot icon to demonstrate that a non-iPhone user is typing, for example, and an iMessage heart or thumbs-up annotation has long conveyed to Android users as text instead of images.”
In the US, where 87% of teens use an iPhone®, according to a recent study by BlueMatrix, the peer pressure is real. In the above article, there’s a Facebook study which was highlighted that aimed to explore why iMessage® and Snapchat® were the primary messaging apps for kids between 10 to 13 years old. The research focused on a popular game played through iMessage® called “Game Pigeon.” The third-party game, acquired through Apple’s App Store and designed to operate in the messaging app, illustrates just one of the ways iMessages connects with young people. The game consists of users taking turns playing games, such as checkers or word games, and allows for texting back-and-forth among players.
And here’s the catch: “Game Pigeon” cannot be played between iPhone® and Android users, only between iPhone® users.
And yet iMessage® is just one example of Apple®‘s robust ‘walled garden‘ product strategy’s hold on its ever expanding consumer market.
This brilliant brand leaves us with two key lessons on ‘product strategy‘:
First, a brand’s product strategy, when consistently applied to support its brand positioning, is a compelling and enduring pillar in the overall brand architecture.
Second, the USP of a brand through its product strategy is not built overnight. It is strengthened, expanded and deepened over time. And if done consistently and vigorously, can be the basis of a formidable position in the market which can withstand strong competition and market fluctuations.
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