Mark Ritson Columnist

Mark is an Associate Professor of Marketing at Melbourne Business School and is recognised as one of the world's leading experts on brand strategy. His clients have included McKinsey, PepsiCo, Donna Karan, Johnson & Johnson, Dom Perignon, Baxter, De Beers, Krug, Ericsson and WD40.

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Middle-age spread: Six signals that Apple is starting to slide

Published 27 February 2013 11:36, Updated 10 April 2013 07:32

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Middle-age spread: Six signals that Apple is starting to slide

When a founder dies at the helm, a brand loses its leader, its chief product developer, its CEO, CMO, its public face and its de facto head of investment relations – in one horrible moment. Tim Cook (left)may be doing a good job but only a founder can bring the kind of zeal that Steve Jobs (right) brought to Apple. Photo: Reuters

I know, I know – it’s hard to be even remotely negative when Apple is generating $156 billion in global revenue, has an estimated $117 billion sitting around in cash reserves and has a brand equity estimated by Millward Brown to be worth $183 billion. But all is not well in Cupertino. Apple’s once-rocketing share price has dropped from its peak of $705.07 to a more humbling $450 and there are subtle signals trouble is brewing.

Customer satisfaction:

We aren’t interested in revenue for revenue’s sake,” Apple’s chief executive Tim Cook told analysts last year. “The most important thing to us is that our customers love our products, not just buy them, but love them.” Cook will be unhappy with recent data from consulting firm Strategy Analytics, which shows a substantial decline in the predicted re-buy rates of Apple consumers. Only 75 per cent of European iPhone owners are likely to buy another Apple smartphone, down from 88 per cent only a year ago. It’s a similar story in the United States, where re-buy likelihood has fallen from 93 per cent to 88 per cent in a year. Clearly, these are still positive numbers which most Australian brands could only dream of achieving. But they are down, and down significantly.

Products:

When Steve Wozniak was recently asked to speculate on the decline of the company he co-founded, he was clear that a downturn in market share or bad marketing would not be the first sign that his former company was floundering. Wozniak suggested that you would know Apple was in trouble when it “returned to just milking its existing markets and not astounding us with new categories of products”. Many tech experts now believe Apple is doing just that. Despite its largest ever line-up of new releases, many of Apple’s latest products have sizzled rather than soared. The iPhone 5 has sold well but is deemed to be too incremental an improvement on previous models. The iPad mini with its lower-grade screen resolution was also deemed extremely “un-Apple” by some. As Dave Winer from Gizmodo put it: “Once you’ve shipped an iPad with a super high-resolution retina display, you can’t ask people to buy a new one that doesn’t have it. Steve wouldn’t have done it.” A rumoured iPhone “mini” scheduled for later this year is set to disappoint Apple fans and further undermine the brand’s reputation for disruptive excellence.

Death of the founder:

Losing your founder is a tragic blow for any big brand and it can have myriad long-term strategic consequences. When a founder dies at the helm, a brand loses its leader, its chief product developer, its CEO, CMO, its public face and its de facto head of investment relations – in one horrible moment. Typically, what follows next are a few quarters of success as the trajectory of the now departed founder continues to drive the company forward and then a gradual slowing. Steve Jobs died almost 18 months ago. Apple is entering the stage where the vacuum created by his loss will begin to take effect.

Ageing customer base:

A decade ago Apple’s renaissance attracted a young army of brilliant, technically adept trendsetters who became the brand’s biggest advocates. That army, by and large, remains intact but it’s now 10 years older. Middle-aged, in other words. It may be heartbreaking news for the creative directors and ad agency people who own iPhones and see themselves as cool, but the average age of an iPhone user is much higher than its Android competitors. Ask a 15-year-old which one she wants next and the answer is more likely Android than Apple – not least because of the associations of the iPhone with “old” people. This is not lost on Samsung, which is spending millions in America portraying Apple as the phone of your parents in an ad in which a young Samsung user keeps a place in the waiting line for a new Apple release for his trendy parents.

Serious competition:

A company’s performance is always contextualised by its competitive set. To put it another way, I always look thinner when I am out for a beer with my fatter friends. When Apple entered the phone category it was competing with Sony Ericsson, Nokia and Motorola, all fine companies but hardly world beaters. These days Apple must battle Samsung and Google and that tussle is proving trickier.

Google now has more apps than Apple and a software platform to genuinely match them too. Samsung launched 37 new smartphone variants in 2012 and more are expected this year. “We expect Samsung to slightly extend its lead over Apple this year because of its larger multi-tier product portfolio,” Strategy Analytics executive director Neil Mawston told Reuters last month.

Brand tracking:

Apple is notoriously secretive about its own survey data as its recent court case with Samsung illustrated. But third-party data supports the idea that Apple’s brand halo is dimming. Brand valuation firm Brand Finance recently lowered Apple’s brand rating from AAA+ to AAA. It’s a similar story from polling firm YouGov, which has been charting a steady decline in Apple’s brand buzz score over the past six months.

Apple’s decline contrasts with a rise in Samsung’s score. The two brands have been neck and neck on the YouGov index since Christmas. The era of Apple’s superior brand equity appears to be over.

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