Marketing Apple: Secrets of the World's Best Marketing Machine

The Halo of Marketing

Microsoft announced that yesterday was the "biggest day in entertainment history" with over $170 million worth of Halo 3 sold for XBox in the first 24 hours, beyond even movie blockbusters like Spiderman or books like Harry Potter.  Granted, a copy of Halo costs nearly $60 but the announcement points to a successful marketing strategy.  That strategy is known as "platform exclusives" and it can make or break a new product.  Many Mac diehards cringe when Halo is mentioned...it is the one clear example of Microsoft out-marketing Apple.  Here is the short story:

One of the best games ever for the Mac was a little product known as Marathon from a little company known as Bungie.  Keep in mind that Steve Jobs did NOT want the Mac to be a gaming system for he feared it would not be taken seriously by business users who were the target audience way back in 1984.  As a result the Mac suffered (and continues to suffer) from not having great games, and very few exclusive games.  But, at the MacWorld 1999 tradeshow during his keynote, Steve Jobs introduced the follow up to that Bungie hit, another Mac-only game simply called Halo.

It was a ground breaking demo - the effect being that the Mac had the power to redefine the PC gaming experience.  However, Microsoft was watching the keynote and they were searching for a breakthrough platform exclusive for their yet-to-be-released system, Xbox.  So on June 19, 2000 Microsoft acquired Bungie and in one fell swoop killed the Mac version, got the killer app they were looking for,  transferred  the buzz into interest in their system, blocked the Mac from encroaching on the PC's territory as a gaming system, and stuck it to the Mac faithful who were waiting for Halo for more than a year.

Now Halo eventually got ported to the Mac, but that's not the point.  This is an example of drafting the momentum of a rival, and it is fair game in the sales and marketing world.  I'd like to hear from readers about other examples they know about - either done to them or by them.  If I get some good responses - say 5 or 6 - I'll use my next few posts to tell you another true story about Apple getting outfoxed that has never been told before...

Apple's New High

Apple hit an all time high today (stock: AAPL) after analysts upgraded the stock after looking at demand, not for iPhones and iPods, but for Macs.  And I can tell you, after my personal experience this weekend that this is just the tip of the iceberg.

So I'm presenting onstage at the DEMO conference in San Diego this week and I needed the fastest Vista laptop I could find so our software would demo the best.  I ended up with a new Sony Vaio with dual 2.4GHz Intel Core Duo processors and 2GB of RAM.  But it came with so much junk on it I had to spend about 8 hours just uninstalling things I would never use to make it as fast as possible.  Here's the clincher.  Our software kept crashing on it thanks to some new hybrid hard drive and hybrid video card technology we've never seen before (and Sony doesn't even document.)  I spent another day trying to get it to work.  Luckily (I thought) I paid an additional $29 for pre-made Vista restore disks from the Sony Store where I bought the laptop.  But here's the next clincher.  They didn't work.  So now I have a $2500 paperweight.

In the meantime I got my MacBook Pro running Boot Camp going as a backup.  Then I started configuring another Vista laptop (another Sony) but it didn't have video drivers that work with Vista.  So I can't bring that.  Finally, I decide that I'll buy another PC in San Diego when I arrive.  So I pay a cab driver $80 to take me to Circuit City where I purchase another Vista laptop, this time an HP.  And you guessed it - it crashes  running Vista - choking on just the software it came with!  I never got to install our software.

So now this demo will take place this Weds. at 8:55 am PDT and I'm planning on using the MacBook Pro I'm writing this post on.  Once again the Mac comes to the rescue. 

This isn't just a rant against Vista.  It's a recognition that even an unsupported configuration (Boot Camp beta) running on a Mac is a better machine than the best laptops that money can buy.  The analysts are just starting to realize this.  The rest of the world will take note soon.

Where did the iPod and iTunes come from?

Matt asked a good question a few posts back.  I made the comment that the iPod and iTunes were never expected, or designed, to be what they are - a huge success that catapulted Apple to the leader in consumer electronics and music. 

In fact, the story there is the iPod was "invented" by a new hire from another company first and then shown to senior management.  iTunes was actually SoundJam, acquired from Casady & Greene (along with programmer and now iTunes stud Jeffrey Robins). Putting them together was a means to an end: make it doggy ducky simple to get music into your pocket. 

There was no plan at that time to dominate music or provide online music or video downloads.  No concept of Apple TV or video iPods.  When you look at it now you must think those were always in the cards.  But try to imagine someone drawing that out on a whiteboard in Cupertino in 1998...no way. 

Funny thing is, the iPod was arguably the first computing device to require another (a Mac with FireWire) to use.  Yet in spite of that hurdle, and initially being Mac-only (original intent, and the current intent of all the other iLife apps was sell more Macs), the power of having ALL your music with you ALL the time changed people's habits.  This is not marketing driven or market driven innovation.  This is what I call Eureka Marketing - once you tried someone else's iPod you knew you wanted one - an "a ha" moment that all at once feels natural and like it was always waiting for you right under the surface.  It is like finding gold - one taste and you are hooked.  Chapter One in my free eBook says it all.  iPod user...imagine going back to a CD player that played only 12 songs and hung on a rope around your neck when you went jogging.   Hard, huh?

A great time to be a Mac user

So I don't know why Apple doesn't harp on this more in its marketing. If you are an Intel Mac owner (I guess everyone who bought a Mac in the last 6 months qualifies) and you want to run any modern software program: Mac, Windows XP, Windows Vista, etc. all you need is an inexpensive piece of virtualization software that transforms your Mac into what is basically a universal PC.

The Universal PC. Let it roll off your tongue. Only the Mac can do this.

I've been using both Parallels Desktop and VMWare Fusion since they both hit the streets. And let me tell you - my MacBook Pro is the envy of the office. Even though my company makes Windows-only software (right now, hint hint) I can still run any and all programs in the office. Our web development team is using Macs and virtualization software to check all the various browsers for compatibility. I can even improve my productivity by using Keynote and outputting into PowerPoint (yuck) and PDF. And these programs are getting better all the time. No need to reboot, just launch the program and pickup where I left off. Much faster - and cheaper - than having two laptops.

I recently purchased a high end Sony Vaio for a demo I was doing for Walter Mossberg. Guess what? The Mac was more reliable and easier to configure. So I gave the demo on the Mac. Running Windows.

The point being that Mac users used to live on a tiny island. Mac software required a Mac and vice versa. Now the Mac runs anything. And it does so beautifully. We don't live on an island anymore but the view is still breathtaking and the air cleaner. So hold your heads high and breathe deeply. You own a Universal PC.

This just in: now the Mac is finally a gaming system. EA stakes a claim on the Mac.

Surprised and delighted?

UPDATE: Perhaps this is what was keeping them busy - here are the details about the iPhone $100 iPology rebate

Folks, I  noticed some strange issues with Apple over the last 6 months 
and I'm beginning to wonder.  First, our friends in Cupertino introduce 
iPhone 6 months before it is ready (they almost always aim for 
immediate availability after a major product announcement.)  This 
leads to uncontrolled hype that no company - not even Apple - can live 
up to.  Then they announce they will sell 10 million iPhones by the 
end of 2008 BEFORE they sell a single one.  One would think they 
would give the product a few weeks on the market before making such 
claims (they really have nothing to gain but now a lot to live up to.)

Finally they release the iPod touch yesterday and one of the key 
features - WiFi music downloads - isn't working.  In fact we're seeing 
that even the ringtones in iTunes seems to be broken.  How 
uncharacteristic for a company who has a history (as I mention in my 
free eBook available on the right of this page) of surprising and 
delighting its customers.  Right now many of those customers are 
asking "what's going on?"  Surprised for sure. Delighted, no.

In my next post I'll give you my answer - what's yours?

What market is Apple in?

I'm reminded today, courtesy of Apple's announcement of Logic Studio (a tool for professional musicians) that Apple really has three major customer segments.  Apple appeals to:
- early adopters who think different (that's the creative types who like to stand out),
- late majority consumers who want something easy to use that just works (customers of the iPod and iLife products) and,
- professional content creators (authors, musicians, artists, filmmakers who want tools that free them to focus on their art, not the technology)

Do you think Apple can excel at all three market segments at once?  Again, Apple has a unique ability to appeal to the first 2 groups because of the shelf space they've carved out for themselves:  Apple makes hard stuff easy.  That is what Apple is all about - and it why they are often cast as the complete opposite of say a Microsoft.  It's no wonder Steve contrasted the Media Center PC remote control when he showed the Apple Remote (hey, how come I never hear of anyone using Front Row...do you?)

But winning in professional markets often means the opposite.  These are pros.  They expect complete workflows.  And they expect their vendor to keep improving and updating the products they build their business on.  It's pretty easy when you build a new product and attack an entrenched competitor (say when Apple came after Avid in the video editing business) but then your ability to innovate slows down as you focus on more arcane and less sexy components of the business.  Apple really never has shown the staying power in pro markets, and I wonder if they plan to continue pursuing them. 

That said, now that Apple has a complete iLife suite with direct publishing connections to iTunes and even YouTube, are we witnessing the birth of a new age of semi-professionals (that's you and me) who can produce and distribute media without the need for such high end tools?  A bunch of you contacted me to tell me you were surprised that I could create my eBook entirely in Pages 2.0.  And iDVD produces better looking menus than DVD Studio Pro with far less work.  Regardless, we have Apple to thank for giving us tools to pursue our passions at whatever level we fly.

Does market share matter to Apple?

We're witnessing an interesting transformation of Apple.  For most of its life, Apple has been content to capture less than 5% of the market for its products.  When I worked there, we used to compare ourselves to BMW or Volvo - great brands with little market share but fiercely loyal customers. 

But now Apple has huge success with the iPod and iTunes (two products - by the way - that we never envisaged to do for the company what they are currently doing) and suddenly they are the market share leader in MP3 players and digital music.  That success leads everyone to expects Apple to be a huge hit in any market it puts its sights on - especially mobile phones and a market ten times bigger than music.  But that's not in Apple's DNA.  Those expectations put tremendous pressure on the company to innovate at a faster rate and to focus more on market share than it ever has before.  That explains the rapid price drop on the iPhone.   The strategy seems to be working for now, but is it sustainable? 

Funny thing is, most people identify with Apple as the underdog - and most (Apple and their  loyal customers) like it that way.  Would your perception of the company change if you woke up tomorrow and Apple was the undisputed leader in music, movies, mobile and computers?  Stay tuned...

One Million iPhones Sold

Apple announced today it sold it's one millionth iPhone.  That 1,000,000 phones in 74 days.  It took them one week to sell one million songs at $0.99,  two years to sell one million iPods and about two months to sell one million iPhones at around $500 average (remember, they didn't sell many of the 4 GB iPhones - rumor had it that 90% of the iPhones were the 8 GB model which is how I did my math above). 

So I'm curious. Are you more likely to buy an iPhone now that it seems a lot of other people have or did today's announcement not sway you at all?  The results of this informal poll are important - it sheds light on Apple's marketing: are they making this point for investors (the ones who sold the stock when it seemed like not that many people were persuaded to buy in the first 2 days) or to entice the late-majority customers to jump on the bandwagon today, especially combined with the new $399 price point.  Just add your comments below and let me know if you're more likely, less likely, or unaffected by Apple's press release today.

The iPology

UPDATE: Here are the deets on the iPology $100 rebate.

Okay, it's been a pretty good week for the marketing folks to point out what good marketing can do for you (if you are in marketing you know how hard it is to convince some execs how much good marketing can do for you when paired with good design). 

A few weeks ago Apple generates tons of free publicity just by announcing a special event (no news, but get ready for some news) then most of the news of the revamped iPods leak out (including photos and names, rare for Apple) and then they drop the price of the most heavily hyped product in our lifetime, the iPhone.  But all that gets dwarfed by Steve's apology for cutting the price and undercutting his early adopters - so much so that MarketWatch's Tom Bemis invents a term for it, sure to be taught in business schools everywhere - the iPology.  And all this does is ensure that Apple doesn't have to spend a dime on its traditional marketing when the popular press does it all for them, at much greater reach and value.  In fact, by my calculation the value of the free advertising Apple received (this blog included) is greater the cost of the $100 rebate times all the iPhone sold to date.  Folks, you are living through what has to be the Golden Age of marketing and Steve Jobs is its king.  Enjoy the ride.

The desire to stand out

Apple has achieved a very clever balance of zealous early adopters willing to pay anything (and go through anything) to be among the first to get their hands on Apple's stuff - witness the iPhone craze - AND they've figured out how to get the late majority to lust after their products as well.  That is amazing and rare.

One of my earlier posts was on the desire to fit in.  People who buy iPods fit in.  They are part of the in crowd, the so called iPod generation.  People who buy iPhones stand out.  And both like it like that.  Chapter 1 and Chapter 3 in my eBook discusses how Apple has made this happen.

P.S. some people don't want to do either...they are closet iPod users.

BTW, my eBook is only 8 pages long so it's worth the read and won't take much of your time - perhaps I should have called it an ePamphlet.