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

The Retail Secrets of Apple

Hi folks.  Hard at work updating my new eBook about The Secrets of Apple’s Retail Success as a follow up to my existing eBook: MarketingApple, The 5 Secrets of the World's Best Marketing Machine. Expect to be able to download that here soon.  In the meantime, here is much of the first chapter.  Enjoy!

The Secrets of Apple’s Retail Success

by Steve Chazin

By any measure, Apple is unquestionably one of the world’s most successful retailers.

Even though Apple never sold directly to consumers before they opened that first store over ten years ago in a mall in Tyson’s Corner, Virginia, Apple boasts some incredible bragging rights for its retail channel. Apple operates nearly 400 retail stores which employs over 42,000 people and plays host to more than a million visitors every day. Apple’s retail operations generated nearly $19 billion in 2012. Amazingly, Apple’s stores average over $6,000 per square foot which is more than twice the former gold-standard Tiffany & Company. It is estimated that Apple’s Fifth Avenue store generates over $35,000 per square foot making it the highest grossing retailer in New York - ever.

Apple Stores are now the highest performing stores in retail history. 

It wasn’t always this way. Apple experienced massive failures in the 1990s when selling its products through retailers such as Sears and CompUSA. Its computers were muscled out of view and its brand so weakened that many retailers refused to properly market or stock Apple’s computers.

Even though Apple entered the retail business largely as a defensive move to gain more control of the customer experience, the climate then was anything but welcoming. Gateway was operating direct-to-consumer retail stores and failing fast. Apple had to learn how to do things differently.

Less than two years after Apple opened its retail stores, Gateway shut down all of its shops and laid off more than 2,500 workers. Three years later CompUSA shuttered its 23 year-old chain of stores. So while there was little expectation and no guarantee that Apple might succeed selling its own computers in this miserable retail climate, amazingly, somehow it thrived. 

But how? How did a company with no experience in retail become the fastest in U.S. history to reach annual sales of $1 billion during the worst financial crisis in modern times? How did a company with only four products become the most profitable retailer in history while creating an experience that is now the standard by which all others are measured? Why did a company that was losing money decide to enter the retail market against the recommendations of every expert and “where the only other retail strategy was going out of business?” How did Apple entice millions of people to visit their stores and pay full price when all their products are readily available at other retailers and even tax-free online at Amazon.com? Clearly the answer to these questions is that Apple had to think different about retail and make their stores more than just a place people go to buy things. They had to devise a way to enrich the lives of the people who shop at the Apple Stores and do more than simply deliver a transactional experience.

In short, they had to reinvent retail. 

Keep coming back for more.

 

Watch this.

Go to Apple.com today for a tribute to Steve Jobs, one year after his death.  Gives you an appreciation for what mankind is capable of when technology and liberal arts are combined.

Working for Steve Jobs: Part Two

One of my favorite Steve Jobs interactions concerning the iMac happened while we were working hard on the first of those five suggestions which helped turned Apple around: reconstituting the Apple University Consortium (AUC).

In the late 1980s, shortly after Steve launched the original Macintosh he faced a similar problem to the one we were facing ten years later. Very few developers were interested in building software for a platform that was much smaller than the standard at the time (in 1987 it was MS-DOS, in 1997 it was Windows). Steve’s answer was simple: encourage higher education institutions to build software for the platform and hook students on the Macintosh, which they would later bring to their jobs after graduation. The AUC worked exceedingly well then, and so I suggested to Steve that we rebuild a similar program, and he emphatically agreed.

We invited the CIOs or CTOs of 28 leading universities across the United States and Canada to the new Apple University Consortium. These representatives traveled to Cupertino every four months and met in closed-door sessions with Steve in order to secretly help us design and even build some of the software for the new computer. We knew that if we opened the kimono to these individuals, who had a real hand in creating the software, then they might commit to buying these computers for their schools. It was a great partnership as the education market had an unspoken vested interest in seeing us survive. Apple’s death would have been very challenging for many major schools like Dartmouth College (my former customer), who had not only standardized on the Mac but who would face a very tough and expensive (not to mention embarrassing) future if they would have to replace the Mac.

During one early morning meeting with the AUC members in our Executive Briefing Center in Cupertino, Steve arrived pushing a cart with a shroud covering a bulging object on top of it. Steve started by asking the audience about their ideas for the ideal computer for education (even though he already had a pretty good idea.) He asked a bunch of questions, and he let each one linger in the air before allowing anyone to respond.

    Would it need wireless networking?

    Did it need a handle to move it from lab to office?

    Did it need more than one headphone jack so that students could share language lessons?

    Did it need to be beautiful?

After dispensing with the warm-up act, Steve pushed the cart into the middle of the u-shaped conference room table, and he immediately pulled off the sheet to reveal a crude yet heavy Styrofoam model of an early iMac (known then as P1 or Prototype One). Then he did something that I’ll never forget, and in retrospect it was quintessentially Steve Jobs. He picked up the prototype, he refused to let anyone touch it, and he walked to the first person seated at the end of the conference table. Then he made an impromptu physical presentation exclusively to that person. He turned the model around 360 degrees; he showed the top and the bottom of it, and then he rotated it back another 360 degrees in the opposite direction as he described each intricate detail of his prototype. Then, while holding the model chest high and with its front facing out from his body, he took a half sidestep to his left in order to face the next person at the conference table, and he repeated the exact same presentation! There were probably 30 or more people seated around that conference table, which included some Apple employees, for whom Steve Jobs did that little dance.

He spent exactly the same amount of time, about 45 seconds, and he acted just like a proud father as he clearly showcased the merits of the product even though it was still a crude Styrofoam model. While he convinced all of us, it seemed to me that Steve was also convincing himself that this was the computer that would save Apple. It was an object with which everyone, even these staid IT professionals, could fall in love.

That was the beginning of the current age in which great design and great marketing can make computers, music players, and phones the objects of our lust and desire.

Working for Steve Jobs: Part One

One of the most frequent questions I get when presenting the secrets of Apple Marketing at keynotes and other events is "What was it like working for Steve Jobs?"  As we near the one year anniversary of the death of Steve Jobs, I thought it might be interesting to use my blog to share some of those recollections.  So here is my first installment, entitled "How Came to Work for Steve Jobs"  Keep coming back for more crazy, yet true, stories about Steve.

I first met Steve Jobs over two speakerphones, one in Cupertino, California and another in my Apple company car, as I was driving south of Manchester, New Hampshire at nearly seventy miles per hour.  Steve had only a few words to say to me at that time; he simply said, "You're absolutely right!  Come back to Apple and help me fix this place!"  I thought someone was playing a joke on me, yet my incredulous "Yeah, sure." response changed my life. However, I'm getting ahead of myself.

In the summer of 1997, Apple had a brush with death that was much closer than the world generally knows.  For more than 20 years Apple had defined, reshaped and cajoled the staid PC market with one innovation after the other.  It’s no exaggeration to state that the entire modern computer experience was either designed or perfected by Apple.  Yet, in the late 1990s, amid a huge worldwide expansion of computer and networking technology, Apple was staring bankruptcy squarely in the eye.  Apple’s products were suddenly overpriced, underpowered and desirable only to the most dire of fanboys. At the same time Apple experienced an epic defection of developers, who felt the future was on the so-called Wintel bandwagon. Apple did not have a product roadmap or a cohesive strategy to deal with the Windows 95 juggernaut, which had largely eliminated the decade-long Macintosh advantage.  Moreover, Apple had a new CEO, Gil Amelio, who was neither able to gain the confidence of customers, partners, and investors, nor was he able to intimidate competitors. The company recorded more than a billion-dollar loss, and it witnessed its revenue nearly cut in half in a single calendar year.

I had brushed up my resume because I could clearly see the inevitable truth: Apple was dying. To be completely honest, I was sitting on a job offer from Cisco Systems to do for them what I was doing for Apple; I was running a higher education sales territory in New England. However, before I accepted the offer, I asked my VP of Sales for an opportunity to do more than simply sell Apple's computers; I told him that I wanted to help invent them.  I believed that I had more to offer Apple in Cupertino, but Mike told me that I was lucky to keep my job because he was about to lay off two-thirds of the remaining sales team later that week.  That news was the final straw, so I gave my two weeks notice, I accepted the Cisco offer, and I rejected a severance package, which may have saved another employee’s job for a little while longer.

About one week later, I wrote an "AppleLink" (the name for our internal Apple email system at the time) to my soon-to-be former boss, and I suggested five ways to resurrect Apple despite my pending resignation. Just before I hit “send” I decided on a whim to cc sjobs@pixar.com, because I knew that Steve had recently rejoined Apple as a “special advisor” to Gil Amelio. I figured that I had nothing to lose by sharing my ideas with Apple’s co-founder, yet I quickly forgot the email as I explained to my customers that I was leaving Apple. A few days later, I drove to the AutoMall in Manchester in order to find a replacement for my company car, which I had to return to Apple on the following day. On my way home, my car phone rang. That is when I met Steve Jobs over two speakerphones.

After a bit of negotiating with Steve, I accepted the challenge to help him resurrect Apple (sorry Cisco), and I consequently became part of the fairytale turnaround story that business schools will teach for decades. Without new technology available to save Apple, we did the only thing we could do.  We stalled. We trotted out the now famous “Think different.” campaign in order to cleanse people's palettes. We washed away the multicolored logo (and by extension the memory of overpriced, underpowered, children’s computers), and we replaced it with a simple, solid black and white logo amid images of enduring heroes who had the passion, courage and dedication to change the world.  In short, we focused on improving Apple’s image while we treaded water and slowly built a better designed computer, the iMac, which would one day save the company.

Next up: what it was like to work with Steve Jobs building the iMac

Apple Retail Strategy

Getting ready to publish some new content related to Apple's retail strategy and I came across Carmine Gallo's Forbes' blog on the reinventing businesses the Apple way.  Thought I'd share.

Apple Marketing Strategy drives Apple stock price past Google

Following on to last week's post about Apple's retail strategy making them the most successful retailer - ever, comes today's news that for the first time, Apple's stock price is higher than Google's.

A pretty big milestone considering that Google hit $700 some 4 years ago and has not seen that level since while Apple as we know has grown from sub $200 share price to reach today's milestone.  Here's a handy graph for those playing at home:

 

Apple Retail Success

 

Even though Apple never sold directly to consumers before they opened that first store ten years ago in Tyson’s Corner, Virginia, Apple now boasts some incredible bragging rights for its retail channel:

• Apple operates over 360 retail stores which employs over 40,000 people;

• Apple plays host to more than a million visitors every day;

• Apple’s retail operations are on track to generate more than $20 billion in 2012

• Amazingly, Apple’s stores average over $7,000 per square foot which is more than twice the former gold-standard Tiffany & Company.

• It is estimated that Apple’s Fifth Avenue store generates over $35,000 per square foot making it the highest grossing retailer in New York - ever.

Amazing what great Apple marketing and great customer experiences have done for Apple...Apple Stores are the highest performing stores in retail history!

Just as Apple used these 5 secrets of marketing to become the world's most valuable company, Apple used 5 other secrets of retail to become the world's best retailer.  I may reveal those secrets here soon so stay tuned!

Apple iPad Marketing Innovation meets...clothing?

So I've been looking for a good way to carry my new iPad (once it arrives on March 16th that is) without wearing a backpack or carrying a bag.  I want to be able to ride a bike, walk to a park, hop on a bus, or even see a movie without the extra burden of being tied down to a bag...or worse yet advertising to everyone that I'm carrying an expensive toy.

So I Googled "iPad clothing" - and I discovered the Scottevest Transformer jacket.  While I haven't yet pulled the trigger on my Blaze Red XL purchase, it seems to me that this product is in need of some Kickstarter-type marketing love.  They are clearly Apple, Steve Wozniak and Steve Jobs fans (and even have a tongue-in-cheek "Keynote" presentation where their CEO tries his best to channel some Jobsian love) and it seems they are really trying to bring innovation to clothing.

I doubt the words innovation and clothing have rarely been used in the same sentence - but when was the last time you saw jacket sleeves attached by magnets? I know some people like Mark Cuban think Scottevest's patent for TEC or "Technology Enabled Clothing" is a joke - but it got me thinking that while more than 300 million iOS devices have been sold I doubt that the attach rate of devices to clothing is very high. But it seems to me inevitable that clothing and technology will one day fuse. 

I realize their CEO, Scott Jordan was recently on Shark Tank in an effort to get funding and/or free marketing (and some folks were really put off by his performance) but I think he's on to something. Pockets on our pants somehow predated the car keys, phones and wallets we have today and I'm pretty sure we're now all out of places to hold our tech comfortably. Perhaps some day we'll see a line of official Apple iClothing on sale in an Apple store.

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Apple iPad Marketing Has Begun

Photo taken at 9:10 PM PT on eve of iPad HD or iPad 3 launch. Apple Marketing rarely plays with colors in the Apple logo and in fact has strict branding rules against it.

This signals a potential hidden feature or app that could be huge. We will see in about 13 hours.

Btw, there are half a dozen satellite trucks parked outside ready to eagerly (and freely) spread the Apple marketing gospel!

Apple Marketing and the Education Opportunity

UPDATE: Video Link to iBooks Textbooks overview

When I worked for Steve to reconstitute the Apple University Consortium in 1997, it was clear then how passionate Steve was for the education market.  Not only did he believe (then) that technology could change the way students learn - but he also believed that the Education market could be an important foothold for Apple's business over time.  Get students excited about the Mac in college and they become lifelong purchasers and evangelists.

Yet Steve learned an important lesson over time (and his experience trying to sell NeXT exclusively at Higher Education cemented this belief): that technology alone could not change the way students learn.  Students - and teachers - needed more than just access to technology to change the world of education.

Apple has quietly been working with publishers and textbook providers to help them see this vision: while Kindle has helped some well-off consumers experience a better way to consume their New York Times Bestseller's fix, it has done nothing to help reduce the burden on average cash-strapped student wallet or back(pack).  Apple aims to change this.

While not for everyone, Apple's new iBooks Textbook platform will apply Apple's ease of use to a traditionally murky process: publishing ebooks or textbooks. Naturally Apple's solution will make it simple to publish directly to the iBookstore and is aimed squarely at students' iPads.  This becomes something of a virtuous cycle: faculty can easily publish custom books for their classes and require their students to use that book...which requires them to purchase an iPad. 

The economic are simple: just a few textbooks can cost a student more than an iPad and are likely to never be used again.  And the missing element is finally provided: interactive content that compels students to learn anywhere and everywhere.  Apple hopes this revitalizes the textbook industry with the iPad at its center - just as it put the iPod at the center of the rebirth of digital music.  Companies like Kno will give up building their own dual-screen tablet and instead focused on building great software with the iPad as their delivery tool.

If fact, this revolution already begun.

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