June 25, 2012

Lessons from the iPhone introduction

by Joy Parr Drach, Entira

A new customer is a terrible thing to waste. But that’s exactly what Apple appeared to be doing with the way it handled the initial iPhone introduction. We ag marketers can learn a lot from Apple about new product launches, or how not to do them in this case. It’s especially critical for us because, in most ag product categories, we’re simply not minting new customers so we can’t afford to alienate the new ones we attract.

I wasn’t an Apple junkie before the iPhone. Give me a tablet PC, and I’m happy. Yet, the iPhone looked too good to pass up. It has the best Internet browser I’ve ever seen, and its design is really smart. Since my reading time is at a premium these days, I listen to a lot of audiobooks, and it’s more convenient to carry one device instead of two. Plus, while I do my share of travel, staying in touch with all of you is important, and the iPhone makes that easier, too. Not to mention it makes my Blackberry look like a 1950s black-and-white TV compared to a big-screen plasma. The iPhone has my vote for product of the year. But its introduction and subsequent developments have left me cold.

If Apple had followed the Entira methodology Mike outlines in his article on customer segmentation, I’d probably be something like a “quick convert,” an early adopter new to the brand with the potential to become a brand loyal spender on Apple’s technology. Ideally the company would have reinforced my purchase decision, made sure I had a good customer experience with my first foray to the brand and targeted me for cross-sell opportunities.

Unfortunately, Apple failed at converting me — along with countless others — and alienated much of its existing consumer base at the same time. How? At the end of June in 2007, Apple introduced two models of the iPhone: a 4-gigabyte unit for $499 and an 8-gigabyte unit for $599. Then, in September of that same year — barely two months after the iPhone introduction — the company announced plans to sell only the 8GB unit and to cut the price to $399. Customer reaction was so negative, then Apple CEO Steve Jobs issued a big iPology along with a $100 Apple store credit for those of us who bought at the higher, original prices.

Sometimes, pressure from Wall Street makes companies do dumb things in the name of meeting or beating expectations, and Apple has a history of over-delivering on guidance to Wall Street. Apple started out strong, shipping 270,000 phones its first week. But Jobs had predicted 1 million units sold by the end of the first quarter. Many speculate that when the phone’s “numbers” didn’t look like they’d meet his expectations, Job’s lowered its price, explaining he wanted to maximize sales for the Christmas gift season.

The whole thing underscored a few valuable lessons for all of us:

  • A good pricing study pre-launch can go a long way. I don’t know for sure, but it’s hard to believe Apple overpriced the phone by 50 percent if it did a thorough pricing study. When we at Entira do one of these studies for a client, we create a situation as close as possible to what farmers and ranchers face in the real world. Then, we allow the prospective customers to “go shopping” to understand the choices they make and the value of various features in their trade-offs. This approach allows us to estimate sales and share at various price points so our clients can make informed decisions about pricing’s impact on profitability. This is important since farmers and ranchers have long memories, and getting pricing right the first time in ag markets is a must.
  • Co-create with alliance partners. Apple partnered exclusively with AT&T Wireless, yet it didn’t share enough information with its new partner. I didn’t want to wait in line for an iPhone, so a few days after its introduction, I called stores to find stock I could pick up right away. But my strategy only worked with Apple stores. AT&T employees were clueless about what was happening because Apple hadn’t given them any information. They didn’t have much product experience either. Apple hadn’t trained them until the day of launch! While it plays into Apple’s media hype to be secretive, in this case, it should have given its alliance partner enough knowledge to help customers.

    The concept of deeper partnerships is becoming increasingly important for ag marketers, as well. Although we’re all used to working through dealers and distributors, in the future, we’re going to see more exclusivity. Instead of carrying competing products from multiple manufacturers, the channel will make choices and partner with only a few companies. This will create opportunities to do business differently, but tighter coupling will also require more disclosure. Will manufacturers and channel partners be more transparent and willing to co-create new value?
  • Ensure your business processes are well-designed. Users activate iPhones online through iTunes and AT&T. These companies didn’t spend enough time working out kinks in the process, and I wasn’t the only one who ended up going to an AT&T store to fix activation problems.

    Many processes in the ag companies we help need to be redesigned to be customer-friendly. Look at your customers’ touch points and your processes from their perspective. In most cases, even a basic process redesign will simplify life for your customers — and your employees.
  • Don’t alienate customers in your quest to attract prospects. Before the iPhone release, the Apple promotion machine went into hyper-drive, and thousands of Apple fanatics lined up outside of stores to be among the first to get one. But hordes of non-Apple people stayed away. Marking down the phone by a couple hundred bucks may have sold more units to prospects, but what price will Apple pay for this ploy? Customer loyalty, if I’m any example.

I’m still smarting from the price the company made me pay for being an early adopter. And while I love the phone and should be Apple’s strongest advocate for peer-to-peer selling as well as repeat purchases, my experience has soured my opinion of the company. I won’t be buying more Apple products for some time to come.

Ag marketers need to be especially sensitive to how a betrayed customer feels. After all, we have a fairly small, limited universe of customers and prospects, so we must be careful to maintain customer loyalty while attempting to woo prospects. That way, our customers will have a positive opinion of our companies, and word of mouth will help sell our products to other existing customers and prospects alike. Remember, it only takes one bad “apple” to spoil the barrel, as Steve Jobs himself might find out very soon.

To learn more about how Entira helps companies successfully launch new products, contact Entira at info@entira.net.

This article appeared in the November 2007 issue of Strategic Agribusiness Review.