Brands That Lost Their Way: Apple
“How do you like it?!”
The stranger’s face lit up with excitement as I pulled my 2006 MacBook out of my bag to place in the security checkpoint bin. This was a few months after its release and my sparkling white polycarbonate laptop naturally drew the gaze of this random traveler.
Before the iPhone, Apple Watch or AirPods, the MacBook (and iPod) were the first devices that made non-technical people excited about tech. For example, the Mac’s built-in iSight camera allowed for my wife and me to hold video calls with our cross-country families. The Intel processing chips seemed lighting fast compared to anything else at the time. It made work feel like play and it enabled countless creators to bring their art to life.
Following their string of hardware advances, Apple seemed like the greatest brand in the world.
Today it feels a bit different.
Yes, they regularly rank among the top brand value scores in the world.
Yet, to me, Apple is a brand that has lost some of the magic that got them to this position in the first place.
Great products. Meh services.
Their slide can best be seen in their gradual shift from products that delight to services that underwhelm.
Their last earnings report showed their ‘24 fiscal year with 25% of their $391B annual revenues coming from services. That’s up from under 20% just two years prior. During this two-year period product revenue is down 7% while services revenue is growing 23%.
The reason for Apple to make this shift is driven by shareholders. Services have a lower cost of sales (25%) for Apple than hardware that costs Apple 62 cents on the dollar. Indeed, Apple’s share price is up 62% over the same two-year stretch as they have made this transition.
So shareholders are happy. Great!
But what about customers?
Slipping customer service metrics at apple
Apple still enjoys an excellent Net Promoter Score. (NPS is a standard measure of a customer’s willingness to recommend the company, product or service). Yet over these last two years, their NPS has fallen from 72 to 61. 61 is still an excellent score, but it’s a significant drop (15%).
So let’s summarize: Apple is making more money from services and less money creating new products. Customers are less thrilled with the company than before, but shareholders are doing great as Apple rakes in subscription revenue from App store purchases and Music subscriptions.
But it doesn’t have to be this way.
Apple’s product / service hierarchy gets inverted
In the past Apple services like the Genius Bar were created to support their product lines. Now the products are seen as vessels for service delivery. Phones and tablets lead to app and music purchases. Computers sell iCloud and AppleCare subscriptions.
Steve Jobs reportedly wanted to launch his own network for the iPhone, in part because he hated the customer experience at cell phone companies.
I had a personal experience that illustrates the Apple / cell service provider divide on customer success.
Shortly after getting my first iPhone in 2007, I needed to make a change to my plan. I called Apple customer support but the change required me to speak with Cingular (now AT&T). The Apple rep patched me over to the Cingular rep directly (something I can’t imagine happening today) and explained the situation to the Cingular person. The Apple guy said he would then hang up. I proceeded to try to get the situation resolved with an unhelpful Cingular rep. After about 10 minutes of going in circles, the call was interrupted by the Apple rep who had never left the call! He was lurking in the background like my big brother ensuring that I got what I needed.
Now compare that to a recent call when my wife discovered years or unknown credit card purchases for kids games my kids didn’t use on an iPad we no longer had. It took us hours to even find where the proof of the purchases existed as it was buried on a kid’s iCloud account and not the credit card holder’s account. When we called Apple, the best they could do was credit us for two months. Here, in support of low-cost services revenue, they royally annoyed loyal customers.
What does this mean for you as a business owner?
Chances are, you aren’t running a publicly traded company that is responsible to shareholders.
As such you have the freedom to build your company the way you want. I recommend these three steps to building long-term customer value:
Follow your customers.
Be weary of chasing “share of wallet”
Tell better stories.
Follow your customer
This part is simple. Call your customers. Ask why they pay you. Then go find more customers that want the same thing.
Great products and service should be the basis of your marketing program.
I once spoke with a business executive who wanted to sell more of a particular service. My advice was to follow that simple recipe above. He told me he didn’t want to do that because some customers might not know that they were actively paying for the service and he didn’t want to queue them to leave.
Talk about value-creation! I don’t want to speak with my customers because it would remind them they are paying for my crumby service!
It goes without saying that you can only improve and maintain your brand value if people actually want what you are selling.
Don’t mindlessly chase share of wallet
Cross-selling to existing customers is much easier than acquiring a new customer. So there is a tendency among vendors to look for every avenue to squeeze dollars from the customer.
While this is tempting, it can actually backfire.
When considering how to sell more to existing customers you should ask, “If they pay me this marginal dollar will it create more marginal value than the last one they spent?”
Again, Apple has a positive case study in their product history. The Apple ecosystem (iOS and the aforementioned products work well as a closed system). Yes, you can pair another set of bluetooth earbuds with an iPhone, but nothing is as seamless as the AirPods. Your phone syncs iMessage with your MacBook. Etc.
In that case, the next marginal purchase makes the whole package more valuable. This is when cross-selling works.
But if you sell something less valuable on top of a valuable product or service, the less valuable clouds and dilutes the whole consumer basket.
In short: don’t disrupt a happy customer by making them angry.
Tell better stories.
Finally, if you need to acquire more customers, you need to better package the value that you are already creating for others into a meaningful narrative. Take the results of what you have learned from your customers’ experience and the types of things they want to see from you and build on that. Spotlight the customers' stories so that other prospects see themselves in this journey and highlight that in your marketing.
Reach out to Kasvaa
Need help with your own marketing? Give Kasvaa a shout and we’ll build long-term value together. My email is Stephen@kasvaa.co
