Monday, August 16th, 2010

Steve Jobs and the Star-On Machine

Steve Jobs and the Star-On Machine
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Want an iPhone 4 in Canada? Well, you aren’t getting one… at least not without a long, long wait in perhaps one of the nerdiest lines one can imagine. That is, until tomorrow. My source says this Tuesday marks Apple’s “real” launch date for the iPhone 4, up here in the lovely, “great white north.”

The folks at Apple need to get their supply chain under control

Now, perhaps I just don’t understand the logistics surrounding the launch of a new technology. Scratch that; I don’t know anything about such things. So, you’ll have to bear with me, and my attempt at some rather plain contemplation surrounding the current “state of the iPhone.”

As I look at these strange congregations of sheep framing Apple Stores across the country, I imagine two distinct possibilities. The first, is that those in Cupertino’s executive suite have “goofed” royally, and simply cannot manage the company’s supply chain effectively. This could be the case. Perhaps they were caught off guard; thought they’d “go conservative” this time; or, were just waiting to see if anyone actually bought the thing. Who knows?

Considering the source, though, all of this seems unlikely. Let’s keep in mind that this is a company notorious for a rather severe need to control almost everything. I find myself reluctant to believe they’d take any chances with this launch—besides, didn’t they learn anything after the iPad “shortages” they faced a scant couple of months ago?

No, something tells me they know a thing or two about how to prepare for a product launch, as well as the appropriate number of units to “keep in the back.”

The Cupertino Theatre Company

The other thing Mr. Jobs and Co. have exhibited time and again, is a flair for the dramatic. In their world it’s not quite enough to be “good”; instead they speak of being “insanely great.” Rather than boring mission statements, they tell us about, “putting a dent in the universe.” I don’t think I’m going too far by saying that their product launches are highly orchestrated, leaving little to chance.

I further this train of thought with the suggestion that by deliberately limiting supply, they’ve found a way to extend their story and build increased (even frenzied) demand for their products.

In spite of hopes that more of us would be disinclined to fall for such trickery, these methods do, in fact, “just work.” Weeks after the launch, tweets abound with thoughts on how to get access to one of the few available units, while others use this platform to outright beg Apple to increase supply. Media outlets scurry to retail shops to “report” on these new product releases, as though documenting this sort of occurrence might somehow resemble legitimate journalism. And yet again, a great many are caught up in that same discussion that begins with, “are you upgrading to the new one?”

It’s hard to imagine more compelling marketing. It’s even more notable when you step back for a moment and remind yourself that all this frenzy is ultimately about a phone boasting higher resolution and a pretty good camera, but apparently loses signal strength if you hold it the wrong way.

By the way: for as flaky as my “source” is (he’s a fellow at a local cell phone outlet), I did find some validation in his comment last week. He explained, “I have a few more units coming in tonight, but you should just wait until next Tuesday or Wednesday. That’s when they really start to ship.”

Are all other marketers just doing it wrong?

My guess is that whatever business you’re in, you’re not particularly discriminating about who, what, or how much of it you sell. If a new prospect is a little out of your target market, you’ll likely make an exception. If they ask for added features, you’ll look into meeting their needs. Similarly, if someone orders more than you have, you’ll just add capacity to meet demand.

In most respects, this approach is sensible enough: sell to whoever is buying, act on customer feedback and suggestions, and produce whatever the market demands. Look around and you’ll see lots of this. Customers ask for lower prices, so, we reduce them. Buyers talk about features, so, we add them—and lots of them. And you never say “no” to a customer, or an opportunity for new work.

Apple’s curious, and seemingly contradictory, methods seem quite distinctly in contrast with all conventional thinking surrounding how to “woo” customers. They don’t go after every market. They’re slow to add features customers ask for—often appearing bullheaded and snobby in their approaches. Additionally, they continually release insufficient amounts of product—albeit for very short time spans—and subsequently create rabid fervor amongst a devout, and increasingly mainstream, following.

This form of enticement isn’t so much traditional marketing, in which the advertiser espouses the value afforded by a given product. Instead, it’s more like playground dynamics, in which, “the toy the other kid has,” becomes increasingly more desirable to other children. I suppose it’s that, in addition to the strange sense of comfort that comes from making the same choice as everyone else. (Who chooses the nightclub without a line over the one with?)

Apple has effectively found a way to tap into our desires on a multitude of levels, seducing us with this thing that few can get, but everyone wants, that is—each and every time—the greatest thing ever made… until the next version is announced.

Rants, capitulation, Sneetches

Yes, yes, yes… I know, I know, I know… I’m always carrying on in some way about Apple and my associated conspiracy theories. Worse yet, I’m the hypocrite who ballyhoos in this way, only to go on and buy as much Apple product as anyone else. Truth of the matter is that Apple leaves me loving, hating, reveling in, and distrusting them, all at the same time.

On the first point, they do make quite fine products. When I think “design + technology,” I can’t immediately imagine another company that so carefully considers each and every detail. On the second, their closed and monopolistic approaches concern me, and leave me feeling that we’re all better off if Apple remains one the underdogs. I like them as a “challenger” brand that serves as a kind of catalyst for innovation. Meanwhile, I feel better about them not having quite enough power to do things they probably would, if they were larger. (I just can’t shake the feeling that, given the opportunity, they’d turn into a bully awfully quickly.)

Moving forward, though, my shifting emotions of excitement and distrust, are the ones that I find most interesting. For the sake of this post, they are also the most relevant. While others are pitching for business, offering special deals, and wasting time on feature lists and “Musical Chairs” marketing, Apple makes everyone else look like they’re marketing in the stone age. They’re playing an altogether different game, and few of their competitors do anything more than poorly imitate them.

Perhaps Steve just paid more attention than the rest of us when his parents were reading Dr. Seuss books to him as a child. When I look at Jobs’ recent masterstrokes, I find myself returning to that story of Sylvester McMonkey McBean who so deftly used the Sneetches’ prejudice and greed to dupe them out of every dollar they had with his Star-On and Star-Off tattoo machines.

While Apple’s strategies don’t seem to be defined by these two specific human foibles, their approaches do seem to underscore some kind of need for meaning and distraction felt by the rich part of our planet.

This one got away on me

You’ll have to forgive me. This post began with a rather clear direction in mind but somehow I got carried away with ruminations about Apple’s true genius: the manufacturing of (irrational) desire. This sort of thing happens to me all the time, and I apologize for being so unable to resist tangents like these.

In my next post, I’ll come back to my original topic and contemplate scarcity and how it can be leveraged to create demand for your products/services—and perhaps even help us become more environmentally sustainable. For what it’s worth, I think this will be a much more interesting area to dive into, but I bet the one you’re currently reading will result in more discussion.

For now, though, I’ve got to wrap this up and see if I can get an iPhone. If I have enough time afterward, and a few bucks left over, I might even check how long the line is, in front of the Star-On machine.

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Comments & Trackbacks

  1. Thanks for the interesting post. I'm curious though - is it possible to mail order an iPhone? It certainly is the most reliable way to get one here in the Bay Area.

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  3. Apple has worked long and hard in order to position themselves so that these kind of brilliant marketing tactics can bear fruit. They can intentionally leave out features in certain products because they know people will buy them anyway. I can't think of another company off the top of my head that could get away with that.

    "If I'd asked people what they wanted, they would have said a faster horse." - Henry Ford

    I think that about sums Apple up.

  4. Darren says:

    Steve Jobs could secretly be sitting on a massive stockpile of new iPhones, cackling madly as fanboys line up and then tweet about their purchases - or it could simply be a case of supply outstripping demand. 

    Why is the latter so hard to believe?  This isn't a web page,  is a physical good - it needs to assembled from components from multiple sources and shipped across the world.

    Fix the supply chain you say.  But it's not that easy - you can't just spin up a new factory like an EC2 node and shut it down when the load subsides. You need to forecast demand over the whole year, and build your supply chain accordingly. Apple knows they will sell (say) 1.2 million iPhones over the next year, but the demand curve is front loaded - in six months you'll be able to walk into any Apple store and buy a phone no problem.  

    Unfortunately, this means that at a new product launch more people want to buy iPhones than there are to purchase. A solution to this would be to sell the phones via an auction mechanism and let the market determine a fair price. Anyone who wants a phone bad enough can get one, no lineups.  Apple gets more profit, since the price will be much higher than it is today.   Win win, right? 

    Me, I'd rather wait a few weeks and pay the listed price. 

    Finally, while the extra marketing that comes from word of mouth and newspaper reporting on lineups is nice, I'm sure that Apple would much rather have the phones in store to sell. If you walk into any phone store today and ask to buy an iPhone they will say no, and steer you to purchase a lovely Android or RIM phone that's "just as good".  You and I would sniff and wrinkle our noses at these "inferior" phones, but for many people a HTC EVO is close enough.   

    I'd wager that lack of inventory has cost Apple more than the word of mouth has gained them.  

  5. You certainly could be right here Darren. My position is admittedly a little “conspiracy theory-esque,” nevertheless, there are a couple of points that leave me unwilling to believe that Apple isn’t using this to their advantage.

    The first is the launch date. Admittedly, I understand very little about the logistics about such things, and yes, Apple likely sees a surge of device sales around these dates that likely isn’t matched by the release of any other mobile device. Nevertheless, they set this date. I have to ask why (given their existing experience) they wouldn’t set that date to afford some added time to build up supplies of the product.

    Perhaps this has something to do with releasing batches in order to live-test products and addressing concerns like the antenna issue, prior to larger-scale production. That would seem like a sensible enough reason for phasing in a new product.

    The bigger question I have is why this occurs so rarely. While I understand that the Wii and PS3 have struggled with capacity, I don’t hear about such shortages particularly often. A little googling brings up some recent reporting of chip shortages resulting from manufacturers scaling back during the recession. Meanwhile, there do appear to be issues surrounding smartphone parts this summer (specifically related to screen production). More info here: http://news.cnet.com/8301-30686_3-20010336-266.html

    Still, though, I have yet to hear a single person say, “I’m going to camp out all night to get the new HTC Evo 4G.” Admittedly, this is largely anecdotal thinking, based on my personal experience. Thing is, though, as you reflect back on Apple’s launches over the years, you see the consistent scaling of fandom around Apple products. What other company can release a product and make headline news? (Sure Win95 did pretty nicely for Microsoft, but I don’t believe they’ve been able to parlay such coverage as consistently as Apple has.)

    Your observation that some will likely switch to other devices as a result of the shortage seems to initially be supported: research indicates that users are more loyal to carriers than devices. My thought, though, is that this is different from one country to the next. In the U.S. one is stuck with AT&T (and its ”not so great” reputation) if they want an iPhone. In Canada, on the other hand, the iPhone isn’t limited to a single carrier. My personal feeling is that this changes the dynamic, and that most here choose based on their device preference. And, for what it’s worth, I think that while most devices are somewhat interchangeable for the average buyer, those who have emotionally committed to buying an iPhone will not switch to another device. They’ll just wait a little longer to get the new iPhone.

    My feeling, then, is that the value of the press gained by Apple is huge, and that having some wait for the iPhone doesn’t damage sales so much as it further whets the appetite—and keeps the PR machine running. Consider that a search for the iPhone 4 on Google News serves up 11,700 results, whereas, a search for the BlackBerry Torch only yields 1,933. (The HTC Evo 4G results in only 550.) My strong bet is that HTC and BlackBerry management would happily forgo a few immediate sales in order to gain that sort of press. (I do admit that the shortage is only one part of the reason why Apple commands this sort of attention in the media—they are brilliant marketers and build good products.)

    Back to capacity, though: Apple is expected to ship 9 million iPhones this year. As impressive as that is, it still only accounts for 2.7% of the mobile market. Meanwhile Motorola, RIM, Sony, LG, and Samsung will all individually ship more mobile units Apple, yet, we rarely hear of people waiting in line due to supply issues for their products. Note that Nokia’s expected production this year is expected to be 10 times that of Apple’s.

    We’ve seen a lot of evidence of Apple’s desire to maintain control of every aspect of production, design, and the user experience. With this in mind, I find it more difficult to believe that they can manage so much else, yet, not be able to meet capacity for these launches.

    But—as with any of my opinions—I certainly could be wrong. :-)

  6. Darren says:

    I don't buy the Nokia comparison - the majority of their phones are about 3 generations behind - it's easy to ship high volumes of something you've been making for 10 years. Did you watch the iPhone 4 manufacturing video? Apple is pushing the boundaries of materials science in at least 5 different areas glass, battery, processor, antenna (oops), displays. It takes time to tool up the factory and people to make something truly new.



    HTC EVO opening weekend sales: 150,000 (http://bit.ly/bk1r2z)

    iPhone 4 opening weekend sales: 1.7M
    (http://bit.ly/9HmtU0)

    Note that HTC sold out on opening weekend as well. Is this a conspiracy by HTC to promote their phone? Poor supply chain management? But wait -- the press didn't cover this story - clearly there's a counter-conspiracy by the Apple owned media!

    Or maybe we should put down the tinfoil and recognize that the iPhone is just a better phone and lots of people want it.

    Bottom line is that Apple could have had 10M handsets on hand for a worldwide launch and they'd still sell out.



    I think the real issue is that Eric wants a new iPhone RIGHT NOW and he doesn't have one, so he's grumpy.

  7. I don't know Darren. It's not that your points aren't valid, but I sometimes get the feeling you too perhaps, "drank a little of the Kool-Aid." Weren't you one of those folks in line for an iPad at the Apple Store when you could have pick one up across the street with no line (but also without the spectacle)? ;-)

    I'm not inferring that the media is "Apple owned"; I'm just proposing that the folks at Apple are very shrewd when it comes to such optics, and have a keen ability to make the media work for them. And if it's working, why not? Should I be in their position, I too would do whatever it took to enhance the desire for such a product.

    Yup, lots of people like it, and it does seem to be a good phone. I won't argue any of that. I also say that crowds attract crowds. I don't think it's really that great of a leap to think that a good marketing team would use such opportunities to their advantage.

  8. Héctor Muñoz Huerta says:

    It is a marketing strategy for high status - high end goods, there can only be very few competitors using this strategy on ever market place.

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