Inside the Business Genius of iPhone
James Wei, Dartmouth Business Journal
Apple effortlessly topped Forbes Magazine’s 2016 list of the world’s most valuable brands with a net value of $154 billion, almost twice that of Google in second place. In fact, the total revenue of Apple is so big that it is larger than the GDP of Hong Kong. With the iPhone as the company’s leading money maker, Apple made more than $18 billion in the first quarter of 2016, the most any public corporation has ever made. But how did Apple achieve its unparalleled degree of brand loyalty, and what business strategies made the iPhone so successful?
In 1972, Steve Jobs was inspired to focus on design by a calligraphy course taught by Robert Palladino at Reed College in Portland, Oregon. Today, Apple’s best known traits are its simple aesthetics and attention to detail. Although very little is known to the public about the company’s design process, it is apparent that design is Apple’s top priority in creating any product, especially the iPhone. According to Mark Kawano, founder of Storehouse and ex-senior designer at Apple, the reason that Apple products are designed so well isn’t that Apple has the best design team in the world, but that everyone at Apple cares about design, not just the designers. It is with this design and attention to detail that the iOS user interface, focused on creating a natural consumer experience, sets the iPhone apart from its competitors by creating an iconic, cult-like branding.
Looking at a few of the many examples of the iPhone’s small design features can show some of Apple’s meticulous attention to detail; in fact, many of these features are so naturally integrated into the operating system that they go unnoticed by the average iPhone user. For instance, on iPhone’s iOS 9 home screen, the older arrow button and slider are removed and replaced with a more minimalistic design of using “slide to unlock” text instructions that actually shine in the direction that the screen slides in. On newer iPhone models, many owners have noticed that when receiving a phone call they are presented with either accept and decline buttons or a “slide to answer” slider. The slider only appears when the phone is locked so that phone calls aren’t accepted or declined by accident.
With the newly released iOS 10, Apple further demonstrates its ability to keep up with current trends while remaining true to design by adding drawing and music sharing capabilities to their messages app through an expanding icon bar; this keeps the initial text box clean and simple. In fact, Apple’s simplistic design and extreme attention to detail have become so iconic that even the process of unboxing an iPhone is engineered with a series of arrows and stickers to please the consumer by slowly revealing the iPhone.
Similar to the iPhone, Apple’s stores and website are just as iconic. Apple is able to not only make a consumer-oriented iPhone experience, but also a consumer-oriented iPhone purchasing experience. For example, a simple look on the iPhone 7 website reveals how all of Apple’s selling points for the iPhone 7 are focused on the consumer experience. Apple advertises the iPhone with phrases such as “best performance and battery life,” “advanced new camera” and “brightest, most colorful iPhone,” all of which don’t necessarily use technical jargon to brag about the new features of the iPhone, but appeal to the large majority of consumers by using words that are universally understood. Instead of mentioning competitors by comparing how the iPhone is superior to alternative smartphones, Apple advertises the iPhone as if it is the only phone in the world, comparing its statistics to the previous iPhones using phrases such as “2x faster than iPhone 6” and “longest battery life ever in an iPhone.”
Using this clever advertising technique, Apple is able to market each new iPhone as an improvement to previous iPhones, generating constant sales for every new iPhone release. As for the iPhone 7, there has been controversy at the time of writing of this article regarding the lack of the headphone jack and Apple’s failure to release initial sales figures. Though Apple may be hiding the fact that the new iPhone may not be as profitable as the iPhone 6, its sales are still significantly higher than those of the best-selling android phone, with Ming-Chi Kuo of KGI securities estimating 70 million shipments of the iPhone 7 in the last quarter of 2016 compared to 13 million for the Samsung Galaxy S7 Edge for the first half of 2016.
Looking at the design of Apple stores themselves also provides insight on how Apple brands the experience of purchasing an iPhone. With massive floor-to-ceiling windows at the entrance of each store, Apple stores are made to stand out with generously high ceilings, a clean modern look, copious walking space and, according to online expert averages, an average of $315,000 worth of iconic wood furniture per store. Apple is able to make shopping for an iPhone an experience that is truly enjoyable for the consumer. Their store design closely resembles their product design philosophy, creating a pleasantly predictable experience for consumers. Essentially, Apple has made the iPhone more than just a smartphone, but an integral part of consumer’s lives, and perhaps even a lifestyle.
Incorporated in the iPhone’s simple and detail-oriented design are multiple mechanisms that ensure that anyone who purchases an iPhone becomes an iPhone user forever. According to Slice Intelligence, 85 percent of 5,703 shoppers who bought the new iPhone 6 and iPhone 6 Plus on opening weekend had previously been using iPhones. Apple’s gradual changes in design, though viewed as a nuisance by some critics, create incentives to upgrade to the new iPhone, and its use of applications such as iCloud, iMessage and the App Store, which are exclusive to Apple devices, create preventative barriers to switching smartphones.
The iCloud connection between iPhone and Mac devices makes it tough for users to switch from iPhone back to another smartphone. With the newest iCloud features allowing consumers to sync Photos, Notes, Calendars, Contacts, and Documents on both their iPhones and their Macs, these users are discouraged from switching either their computer or smartphone devices to other brands since the iCloud features are unique only to Apple products.
In addition, Apple’s release of iMessage, an Apple ID-based messaging system that sends texts through Apple’s servers, has made it even harder for iPhone users to switch to other smartphones. Since iMessage can also be connected to Mac computers, Apple is able to further integrate its devices as consumers can send iMessages from Mac computers to other iPhones. In fact, the iPhone has become so popular that according to CEO Tim Cook, Apple’s iMessage system sometimes handles up to 200,000 messages per second. When compared to competitors such as Google’s “Hangouts,” iMessage retains the business edge by remaining exclusive to Apple devices, while Hangouts can be used on any web-browsing device. The high volume of communication exclusively between iPhones discourages users from switching to other brands and effectively creates a barrier to entry in the smartphone market.
With Apple’s clever business model and commitment to detail, it has become one of the most profitable companies ever. Its aesthetic, consumer-friendly products such as the iPhone are able to hold large profit margins and appeal to a broad customer base. The success of iPhone goes to show that businesses can make a lot more money by focusing on design and consumer retention.