Apple’s brand engine ingenuity
So, last quarter Apple made greater earnings than any other company, ever. Quite a feat and today it is apparently the most valuable company in the world and bigger than many nations in terms of net worth, with a pure cash pile of over $170 billion.
Looking under the hood of the smartphone industry, this is even more remarkable. Apple sold 74.5 million iPhones in a single quarter, a staggering feat. Actually Samsung sold almost as many, so they are right up there too… except they’re not even in the same league.
Whilst Apple made a profit of $18 billion in the quarter, Samsung made only a billion on similar sales volume. In fact it was reported recently that in Q4 2014 Apple captured 93% of all the profit in the smartphone market. Now that is a brand story with aspirant loyal customers and more coming all the time, willing to pay the Apple premium. It’s a simple enough value equation - customers queue round the block and willingly pay more for the quality and consistency as well as buying into the aspirational signals the brand broadcasts.
Who’s making any money?
Apple is almost the only player actually making money in the smartphone market and the company’s success in China suggests that isn’t going to stop anytime soon. Samsung on the other hand is not only under attack at the high end from Apple’s compelling brand, it is also under attack from the cheaper Chinese producers such as Xiaomi.
The iPhone company
With numbers like these, no wonder Apple has become the iPhone company. The value of iPhone sales dwarf sales of Macs, although interestingly there are elements of the same business model at play in the PC market with Apple capturing an astonishingly high proportion of all the profit available in the PC space, punching way above its weight given its market share. One slip appears that iPad sales growth dipped significantly in 2014 along with the rest of the tablet market.
The genius of the Apple eco-system and the consistency of the brand right across every element of it, means Mac sales are up too. The Apple Watch, now due for an April launch, will add to the eco system - the beauty is how it all works together. Steve Jobs’ vision was always enabling the operating system and the hardware of everything they sell to all be made by Apple and it’s a distinct advantage over most rivals, with its beautiful, seamless integration. Start writing an email on your Mac and immediately finish it off on your phone if you’re rushing out the door. Try doing that between platforms and vendors.
Profit? There’s an app for that…
A recent report from App Annie confirmed that Google has now passed Apple’s App Store in the number of available apps to download with 1.4 million apps available compared with Apple’s 1.2 million. Yet Apple’s App Store makes way more money than Google’s, bringing in 70% more revenue.
Integrated in iPhone 6 and sure to be an important feature in the Apple Watch, Apple Pay is another key to the eco system, providing a mobile wallet and payment system. The proximity chip is already built in to the most recent iPhones and the Apple Watch will enable users of the iPhone 5 and 5S to pay too, using their Apple Watch linked to their handset. In the US there is already an impressive list of banks and retailers who are supporting the system. The Apple brand enables it to do this - no right-thinking big retailer will want to miss out. No doubt it’s hard work putting all this together, but from the outside at least it appears to be utterly seamless. From competitors’ perspectives, it must seem daunting. And for customers, compelling.
Apple CarPlay featured in the Ferrari FF at the Geneva Motor Show a year ago with a growing list of manufacturers saying since that they will make the infotainment system an option in future models.
With some high profile hires recently from the design and automotive industries, speculation is rife that an Apple car is moving up the to do list in Cupertino, something to rival Tesla. Either way, if Apple want to do this they have the cash to invest.
A project team of as many as 1,000 is reportedly already working on it. Given the years of speculation about the Apple Watch it may be some time before we see the fruits of this, but in order to survive and enable the brand to continue to do well, new innovations will need to come from Apple. The amazing results of the last quarter of 2014 might represent the high water mark unless the company can continue to innovate. It shows few signs of stopping at the moment. There is no better example of a brand with such innate understanding of the power it creates through consistency in its behaviour, evolving aesthetic and spirit.