This article is by Ronald Goodstein, Associate Professor of Marketing, Georgetown University’s McDonough School of Business.
People waiting to purchase the new Apple iPhone 5S and 5C are reflected in the window of the Apple... [+]
When a company has positioned itself on the foundation of innovation, the idea of not innovating in a new product – and instead offering a price-play product – can become a commercial nightmare.
Despite the uptick in sales of the new iPhones, Apple should consider its long-term image and overall brand. Apple’s creation of the less expensive 5c threatens the brand’s equity by offering a price play just to acquire a secondary market. The phones’ taglines communicate this change – with the "Forward Thinking" of the 5s highlighting innovation yet the "For the Colorful” for the 5c suggesting a new market.
For the company that has consistently bet the house on innovation, and has a great winning record over the last 15 years, introducing a "me-too" product is against what they stand for. This is not to say that the quality of the new phones is less than their norm. Instead, developing a new product that is in violation of such a stated brand association is inconsistent.
Early results do not measure brand equity nor do they measure brand loyalty. Apple has now set the expectation that each new generation will include a "price-play" offering. Apple Addicts have never changed purchasing habits due to price, but Apple may be training them to do so.
The Apple Standard
Over the years, Apple has innovated markets and created new categories. Each new generation of their prior product lines has added some new feature that was innovative and of interest to customers. But when Apple comes to market with a new extension that has no wow, or is not innovative, its stock price falls. This fate will continue if Apple violates its own brand equity as seen when the iPhone map technology was not ready, and the company had to offer customers the Google map – not good for the stock price. This recent launch is simply a repeat of these same factors. In this way, Apple has become a victim of its own success as they have set expectations, positioned their brand as "the" innovator in the technology sector and are now judged relative to Apple…not other brands. They have failed to meet their established and publicized standard. The question of whether they will continue the innovation standard after the passing of Steve Jobs remains unanswered…no wow yet.
The Smartphone Industry
The release of the new iPhones should not cause alarm in the smartphone industry. There is still much that can be done to provide a "wow" in the marketplace. The issue is to find what the "wow" factor might be. Consumer research is needed. What do consumers wish they could do with their phones that no one in the marketplace currently provides? Companies could ask consumers what their dream phone would be able to do...and then create it. When the new innovations are technologies of little interest to consumers (e.g., the new underwater smartphone), then "so what?" and "who cares?" For example, the Sony Xperia – is there really a viable market segment that wants to have their cell phone under water?
The “Wow” Factor
There is always room for "wow." When a product wows the market, those features/benefits eventually become a "must have" for the industry. It only takes a little bit of time before all brands offer those same features/benefits – going from "wow" to the ante to play in the game. It is only through customer research that the next "wow" will be found.
This is not the typical questionnaire type of research. As Steve Jobs once said, “People don't know what they want until you show it to them.” So Apple, get back to the dreams.
