New Product Markets – Create & Master Them Apple Way!

When it comes to creating and dominating new markets, you can learn a lot from how Apple took on Sony … and won. Here’s the story of Apple, told from a strategic marketing standpoint.

1997: Apple’s turning point

In 1997, Apple was in shambles. That was the year Michael Dell, building on a brilliant distribution strategy and a boom in laptop sales, declared that if he ran Apple, he would shut it down and return the money to shareholders.

In 1997, Sony had by far the best reputation for innovations in consumer electronics. Sony had the talent in product, marketing and engineering, as evidenced by a legacy of runaway successes in consumer electronics. It was already in the PC market, as well as the entertainment and content markets through Sony Entertainment. Sony had unsurpassed global distribution and their marketing and advertising were simply brilliant.

In 1997, two totally unrelated events were taking place. The Asian financial crisis was in full swing and Steve Jobs was once again leading Apple, through the acquisition of NeXT from Apple, after a 12-year absence from the company he had co-founded and was now failing. Apple noted the strategic implications of the downward spiraling Japanese economy and how they would affect the world’s darling of branded consumer products: Sony.

In the style of Jobs, he opened Apple’s corporate doors wide to innovative strategic thinking and brilliant execution. He rewarded him with programs like Apple Fellows. In addition, Jobs did what few CEOs can do … drive innovation toward a clear and broad goal. In Apple’s case, the goal was to create and dominate a profitable segment of consumer electronics and related businesses, while the rest were turned over to hopelessly entrenched competitors like Sony.

Since the return of Jobs, Apple has outperformed conventional thinking time and time again, creating and maintaining astonishing value for consumers around the world. Here are just a few brilliant marketing moves, that any business can replicate in any industry. These moves transformed Apple into what Fortune magazine tells us was the world’s most admired company in 2010. As in 2009 and 2008.

Apple Marketing Strategy

From a strategy standpoint, Apple noted that Sony was unable to decouple its innovation engine from its legacy product freight train because it was forced to offer incremental innovations to continue to sell money-losing products like televisions, CD players and others just to retain the volume of distribution and manufacturing. . Sounds familiar?

At the time, large retailers required consumer electronics manufacturers to have a broad and varied product line for retail differentiation, plus upsell and upsell. The resulting complexity of the product line was like a cancer, constantly devouring the profits of volume addicted manufacturers like Sony, Philips, Thompson and others. All of these publicly traded companies were heavily dependent on volume, and any significant loss of distribution would cause those business models to collapse. Jack Welch recognized these money-losing wives early on and abandoned consumer electronics.

Additionally, as the Japanese economy continued to decline, Sony was becoming more entrenched and bureaucratic, putting it at a competitive disadvantage in tackling new trends.

Apple’s great ability to strategize

Recognizing trends, even when your competitors aren’t, is just the first step. With few exceptions, it takes creativity to visualize what the trends mean for a target market or industry. After that, it takes focus and carefully applied effort to generate profit from those implications. Apple’s secret sauce was its ability to think through the implications of trends that anyone could have seen at the time.

Specifically, Apple noted that no other competitor was addressing product reliability issues created by combining hardware, software, and operating systems from separate companies to create a PC or laptop. With the goal of simplifying the creativity of innovative users, Apple built a moat around its new iMac by becoming the only PC manufacturer with its own hardware, software and operating systems. The iMac was introduced in 1998 and the OS X platform in 2001. Apple then went to work on profitable product line extensions and profitable satellite companies orbiting the iMac.

A key trend that Apple noticed was a growing preference for customization and that the microchip, data storage, and entertainment industries were running in parallel. The company responded by introducing the branding and people-oriented strategy. Apple introduced the iPod and the Apple Store in 2001. iTunes followed in 2003. The Apple Store ushered in an entirely new manufacturing strategy and other profit-enhancing platforms. Still in the center was the iMac.

Apple noticed a growing trend in consumer audio and video production. The company introduced iMovie in 1999, followed by Garage Band and iPhoto in 2002. All three were optimized by the iMac. Apple noticed that technology trends were combining PCs, laptops, mobile devices, and consumer electronics. The iPhone and Apple TV were introduced in 2007. Apple also saw the potential of mobile computing, introducing the App Store in 2008 and the iPad in 2010. Once again, they all orbited around the iMac.

Customer loyalty: creating the Apple tribe

At a time when Sony was making missteps in marketing and advertising, Apple started hitting home runs. In addition to the success of one product after another, Apple continually grew its tribe by:

• Partner with archenemy and brand powerhouse Microsoft to introduce Microsoft Office for the Macintosh and allow Microsoft to invest $ 150 million in non-voting Apple stock.
• Partnership with the global powerhouse of the Intel chip brand. By 2006, the entire Mac product line had moved to Intel microprocessors.
• Collaboration with leading peripheral, photography, entertainment and software companies to make iMac products compatible.
• Encourage Mac tribe fanaticism with conferences, Mac user groups, and other ways to connect the growing group of loyalists with each other and with the company.
• Create smart advertising that continually positions the company as anti-mainstream, appealing to Apple’s target market of early adopters, innovators, and mainstream defectors.

Fortune Names Apple World’s Most Admired Company

It seems that Sony should have invented the iMac, the iPod and the giant of innovative products and distribution. Since then, Sony has reinvented itself and had several successes. However, he still plays a distant second fiddle to Apple. Apple’s market capitalization is ten times that of Sony.

Sony is a great example of a hugely popular company that had it all but was handcuffed by product strategy or too distracted by noise to pay attention to trends and trend drivers.

Today, although Apple’s revenues are lower, its market capitalization is greater than that of Walmart and Microsoft. This tells us that investors are investing a lot of money in innovation, not size.

Apple keeps hitting the long ball. Apple employees thrive on the company’s rare culture of trend-driven strategy and brilliant product and distribution innovation.

The result is that Apple has an innovative and focused business model that eagerly searches for trends, understands them, and responds quickly. In the near future, this will practically guarantee a new continuous stream of innovative new products, markets, partnerships, distribution, and more.

Investors see this and are betting money on Apple’s ability to keep creating new markets. The return has been healthy.