Apple stands on the edge of a parent trap

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You could probably teach a pretty good master’s degree in marketing based on the strategic decisions that Apple has made over the past decade. There would be courses on brand revitalisation, building brand equity, customer driven innovation, disruptive strategy and, perhaps most impressively of all, maintaining price premium. Apple is, quite simply, a phenomenal marketing operation.

And so it is with a heavy heart that I write of its imminent decline in the smartphone category. I can hardly believe I have written those last few words and yet the certainty that Apple is about to experience long-term problems with the iPhone grows ever more obvious. I still have only scant data on the issue, but so strong is the anecdotal and observational data I now feel compelled to share my thinking with you.

It’s clear that an enormous competitive war is brewing between Apple and Android. As smartphone use grows and players like Sony and RIM decline, we will be left with a struggle between Apple and Google – the owners of Android. In the US, most estimates give Android about a 40% share of smartphone operating systems and Apple about 30%. In the UK, about half of the smartphone market uses Android compared with Apple’s share of about 20%.

But those figures are deceptive. A sales executive looks at market share data and sets objectives. A marketer looks at share data and wants to know the identity of the consumer behind the sales. And there the data gets significantly scarier for Apple.

There are relatively few reliable surveys of the demographic and lifestyle differences between Apple and Android users, but those that do exist all point to the same significant differences. According to Hunch, an online recommendation site that ran a survey on 15,000 of its members late last year, Apple users are likely to be more liberal, live in urban areas and prefer movies by Woody Allen. In contrast, Android users are less urban, have lower incomes and prefer movies such as X-Men and Harry Potter. And here comes the key point – Apple users are 29% more likely to be over 35 while a typical Android user skews heavily in the 18- to 34-year-old segment.

When was the last time you saw anyone under 25 using an iPhone? Therein lies the problem for Apple. It’s a parent’s phone.

For all Apple’s success, when was the last time you saw anyone under 25 using an iPhone? Every time I discuss Apple with MBA students or executives, the conversation always ends with the same point: “Yes, but my kids would not be seen dead with an iPhone.”

And therein lies the crucial problem for Apple. It’s a parent’s phone. In the short term, that’s great news because parents are a high spending segment and that ensures that Apple’s smaller market share is worth more than Android’s. But over time three unavoidable things are going to happen. First, the 20-year-old Android phone owner will grow up, earn a decent salary and become more valuable. Second, the iPhone’s association with parents will ensure that these younger consumers will not migrate to Apple as they age. Third, the switched-on parents will start to realise that owning an iPhone is the technological equivalent of wearing corduroy slacks or driving a Mondeo and they will also switch to Android.

It might take a decade for this demographic doomsday scenario to play out, but it would appear that the die has already been cast. Ironically, given Apple played the cool brand versus Microsoft in the last major technological battle, this time it will be on the receiving end of inter-segmentation dynamics.

Little is known about what takes place in its Cupertino HQ, but if Apple is as good a marketing company as I think it is, these issues should already be well up its corporate agenda. Unlike Nokia, which confused sales dominance with marketing competence, Apple should already see the problem on the horizon.

What can be done about it? Unfortunately, Apple’s current strengths actually exasperate the threat over the next few years. The brand’s exemplary approach to premium pricing means it will be very hard for Apple to drop prices in an attempt to lure the younger segment to iPhones.

Unlike Android’s multibrand approach, Apple uses an endorser brand architecture meaning there is little option of launching a new brand aimed directly at the younger demographic segment.

And Apple’s belief in its own proprietary approach, as seen by the way it refused to consider a Windows-based system on Apple Macs in the 1990s, will also preclude the company from ever launching an Android phone.

I think Apple might be screwed.

This theory might sound a little far-fetched. Isn’t Apple the biggest and most successful brand in the world? But imagine a columnist in 1983 predicting that Levi’s would become the jeans for your dad or that driving a Ford Capri would make you look like a bit of a spanner. That would have sounded unlikely too.

Markets change. Brands change. And, unfortunately for Apple, those changes usually undermine the dominant and aid the underdog.

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