Putting the bite back on

Apple plans to make the most of its new-found mass appeal with a high street presence.

Few brands are more beloved of workers in the creative industries than Apple. For the general consumer, however, Apple had largely fallen off the radar. But now, after years in the wilderness and a limited revival following the launch of the iMac in the late Nineties, the Californian computer manufacturer is again riding high after the surprise smash-hit success of the iPod, its digital music player.

Eager to capitalise on the iPod’s triumph, the company’s brand advertising has been restricted to the diminutive white music player. And to catch the eye of the high street shopper, Apple is reversing previous strategy and is now opening high-profile bricks-and-mortar stores around the world. The first UK store will open in London’s Regent Street in November, followed by another at Birmingham’s Bullring shopping centre (MW last week). Already more than 80 stores have been opened in the US and two in Japan.

The stores, claims Apple European director of communications Alan Hely, will “take the whole retail experience to the next level”. They feature a “Genius Bar” dispensing technical advice, a theatre for presentations about all things Apple, and, of course, the iPod and facilities to download music. The new, third-generation, iMac will also be promoted heavily in stores. Unveiled in August, industry commentators have not been slow to point out the stylistic affinities of the new desktop with the iconic iPod.

Apple of their eye

Clearly Apple hopes the halo of its iPod can be used to tempt consumers to invest in its computers, after sales of the iPod earlier this year overtook those of its supposedly staple desktops and laptops. In the UK, it has a paltry 1.7 per cent market share of the personal computer market for both business and consumer, according to research company IDC.

However, globally the iPod has grabbed 50 per cent of the digital music player market. And iTunes, Apple’s online music download music service, is the undisputed market leader with a 70 per cent share of legal downloads. But now Apple is facing an onslaught of brands fighting for their portion of this moveable feast. Microsoft, Sony, Virgin and Woolworths are only some of the big names throwing their weight behind rival and incompatible music download services.

Pundits have been only too quick to question whether Apple can sustain its lead in digital music, citing the company’s long history of failing to capitalise on its initial advantage in various product areas. Raphael Gomez, lecturer in marketing at the London School of Economics, says: “The problem that is usually highlighted with Apple is arrogance among its senior management. Sometimes it is better to have a slightly inferior product, but with greater inter-operability.”

Apple of accord

With the iPod, Gomez thinks the company may have learned some lessons. The iTunes software is available free to both Windows and Macintosh users, and Apple has signed a deal with Hewlett Packard (HP) allowing it to produce an iPod (marketed as “the Apple iPod from HP”), in return for iTunes being installed on its PCs at the time of manufacture.

It has also teamed up with car marque BMW in the US to offer iPod-compatible cars, supported by advertising, but European cars remain, for the time being, incompatible.

Apple has stubbornly resisted licensing its software to allow other manufacturers to make their music players compatible, forcing a showdown, which has been likened to the battle between the Betamax and VHS video formats.

TBWA/London chief executive Andrew McGuinness thinks the issue of whether Apple can consolidate its share is too static a question for so dynamic a market. He says loyally: “The degree of technological innovation required in the market means that no one can rest on their laurels and puts a company like Apple, which has innovation at its core, in a strong position.” His agency is responsible for all Apple’s advertising, originating from TBWA/Chiat/Day in Los Angeles.

Rumoured developments, following the disclosure that Apple was in discussions with Japanese camera manufacturer Kyocera, include iPods with imaging and video functionality. Apple is already working with Motorola to bring iTunes to mobile phones. On behalf of Apple, all that Hely says is “it’s not going to stop here”.

Shiny Apple people

Apple is a notoriously secretive company, and has spawned legions of “Apple watchers”, trading snippets of information about forthcoming launches and acting as an unpaid marketing army for the brand. Apple belongs to a select group of brands whose emotional pull attracts a consumer loyalty out of all proportion to its commercial success. Founding member and returning chief executive Steve Jobs is now a cult figure in his own right, off the back of his Apple brand. Alfa Romeo is another brand in this category, where figures from rival companies can profess their enthusiasm without being accused of disloyalty to their own brand, because they are simply so different. A senior Mercedes executive recently said his favourite car was an Alfa Romeo. Similarly, figures from rival computer companies fall over themselves to praise Apple’s design and innovation.

Interbrand chairman Rita Clifton unashamedly counts herself as an Apple fan, seduced by the romance of a company not simply after “macho” profits. She is full of admiration for its brand management, saying: “Apple is fantastically good at knowing what it is about and why it is different. It shows true understanding, not just a logo followed by ‘logo-cop’ policing.”

According to Interbrand’s own tracking measures, perception of the Apple brand has increased by 24 per cent over the past year, primarily because of the iPod. But the very success of iPod and iTunes is throwing up some challenging brand problems. Apart from some quality and supply problems with the iPod, there has been the issue of the personal safety of those wearing its distinctive white earphones, as they are an obvious target for would-be muggers.

But on a more fundamental level, it has been suggested that Apple is becoming the “Microsoft of music”. The observation will not be perceived as a compliment to a company that has long bathed in the glory of challenging the almost all-encompassing empire of Bill Gates.

This opposition is levelled from a variety of quarters. Independent music labels have clubbed together, protesting that Apple was stalling in putting its artists on iTunes. One of the companies affected is Chrysalis Music Group. Its chief executive Jeremy Lascelles says: “I would like to think it is nothing more sinister than Apple being under-resourced.” However, given Apple’s similar “indie” status in the world of technology, he finds the delays and unhelpfulness that he and other smaller labels have encountered “bizarre”. Lascelles says he now has contracts and hopes soon to enjoy his slice of the more than 100 million downloads made worldwide from iTunes so far.

Other software and hardware manufacturers also feel shut out, not least RealNetworks, which Apple accused of “hacking” after making its RealPlayer software iPod compatible.

Forrester Research analyst Josh Bernoff has predicted that Apple will get a “black eye”. In a recent research note, he writes: “Most consumers haven’t yet realised that by opting for an iPod and iTunes, they and their music are locked into Apple technology for the future. Apple’s happy, shiny image will get tarnished and iPod sales could ultimately drop as consumers question whether such lock-in is a good idea.”

Bad Apple

Apple is also facing a backlash after being accused of ripping off UK consumers. The Office of Fair Trading is investigating Apple’s iTunes pricing strategy after a complaint from the Consumers’ Association that it is breaching European Union competition law by charging UK consumers more than their counterparts in other member states – 79p per download compared to 99 cents (68p). Apple says it is working with the authorities and hopes to resolve the issue fast.

Apple’s move into music has also reignited a longstanding trademark dispute between Apple and the eponymous management company of The Beatles after it was felt the computer manufacturer was reneging on a previous agreement to steer clear of the music industry.

For some commentators it is not clear which direction Apple is travelling. FujitsuSiemens UK marketing director Nick Eades says: “Apple left Sony ‘reeling’ with the success of its iPod, but as a brand Apple occupies a niche and has yet to decide what to do with it.” He notes Apple’s recruitment is heavily biased to retail.

Forget the big Apple

Johan Jongkind, responsible for Dell’s advertising in Europe, the Middle East and Africa at DDB London, believes Apple is wasting its time with expensive flagship stores. “It should spend money increasing its presence in existing outlets and making sure these are in line with the Apple brand.” The flagship stores, he feels, will attract existing Apple fans, but not the mass market which would be better reached through existing distribution channels at Currys, Dixons, John Lewis, PC World and Selfridges.

Jongkind says Dell, which has risen to dominate the PC market on the back of its well known direct-only strategy, has also decided to open kiosks in malls in the US to allow people to physically inspect its products. Nevertheless, he says that Apple is “in a world of its own” and is not seen as a direct competitor. “Apple is quite elitist, often hyped in our industry, but not broadly accepted,” he adds.

Gartner analyst Ranjit Atwal agrees that it is wrong to see Apple as a direct competitor to other PC manufacturers, but thinks that Apple’s point of difference can be turned to its advantage in the newly matured market. He says: “People might think, ‘I don’t really need it, but I want one.’ Functionality isn’t that important, it’s a bit like having a sports car for the weekend.”

Atwal is unconcerned by Apple’s relatively paltry share of the market because it is still able to sell its products for a premium: “It has a lower market share but higher revenues per box.” This, he says, should not be underestimated in an environment where most PC manufacturers other than Dell are making losses as a result of a vicious price war.

Others are harsher in their assessment of Apple. “The question is not whether one or two per cent of such a large market is sustainable, but whether the company should be doing better,” says Gomez.

Much will depend on what is happening at Apple’s own, internal “Genius bar” at its Cupertino, California, headquarters, and whether it can continue to pull rabbits out of the hat. Apple’s latest offering, the ultra-thin iMac G5, is being promoted with the slogan “Where did the computer go?”. There will be many who hope that phrase doesn’t come back to haunt Apple.

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