Will Apple’s Strategy Drive Demand?

by Eric March on May 12, 2008 at 10:45 am

3G iPhone I am not an Apple fanboy. I don’t own a Mac, and as nice as I think they are, I probably won’t for quite some time. However, even I will admit that Apple have already proven themselves to be eminently capable marketeers. Ever since The Steve returned to the fold in 1997 by the roundabout way of having his own computer startup, NeXT, bought up by the very company he was ousted from and intended to compete with, Apple has had a steep uphill battle for market share, chasing the behemoth from Redmond as they were. Amazingly though, they made progress — and they did it with wickedly unconventional flair.

First, the iMac redefined the shape of home computers. No longer were gray boxes and slabs good enough. Now it was all about curves and colour and bold industrial design. The iMac made more people take a second look at Apple for perhaps the first time since the original Macintosh rolled off the line in 1984. But that in itself wasn’t enough. Not even the introduction of OS X in 2001, which changed the face of Apple’s OS itself to bring it more in line with the bold design of their computers, was enough to make a big dent in their market share.

What did work wasn’t their computers. It was nothing so much as a music device. One that integrated smoothly into their computers through a piece of software called iTunes. They called it the iPod, and it revolutionized the world of digital music players for Apple users — and then for Windows users a couple of years later. It was simple and intuitive to use, and in what was becoming standard Apple fashion, it “just worked.”

While its rapid and unstoppable domination of the market was interesting in and of itself, there was a more subtle, but ultimately more profound side effect being produced — an ulterior motive behind the iPod’s outwardly innocent position in the marketplace. The more market share it took, and the better the iPod became with subsequent generations, the more people were suddenly and once again taking a second look at Apple’s computers. Besides being the world’s most popular PMP, the iPod was acting as a side door, enticing users of other operating systems (primarily Windows) with a computer and OS that was just as cool and trendy and intuitive as that iPod they just purchased.

And the strategy worked. More and more people were flocking to the Mac such that the past few years have seen Apple’s computer market share grow as never before. It helped that Redmond’s juggernaut was flagging as XP grew more stale and Vista became a rock for it to trip over, while its own OS continued to improve and its cheeky ads repeatedly poked Microsoft in the ribs.

The iPods helped make the Mac more popular. Both of these in turn reciprocated when it came time for the iPhone to be released. January’s hype built anticipation to a fever pitch by the time it was released in June of 2007, where it was released to massive lineups at AT&T and Apple stores, and actually managed to live up to its hype. Like the release of the iMac and the original iPod, it was a game-changing device that, while perhaps not the most powerful or capable compared to other smartphone devices, brought a fresh new face to an industry that everybody suddenly realized was getting pretty stale. It put a simple, elegant, intuitive interface to smartphone usage, and did it with such style as had yet to be seen in any smartphone to date.

All of this long essay is simply a means to illustrate what kind of position Apple is in right now, sitting on the precipice of the next generation of iPhone as it is. They have, by turns, managed to insinuate themselves into several markets in ways and by means considered rather unconventional, but as it turns out, highly successful, with each product release building on the strengths of both its core and its predecessors. That has put Apple in a very powerful and very desirable position in the market right now, and they seem to be using that position effectively.

With the 3G imminent, they are doing something they have never done before: They are depleting stock of the first-generation iPhone before releasing the next generation. Ordinarily, there was typically overlap from one generation to the next, with the previous generation enjoying a price reduction while the new version appealed to the early adopters. But not so with the iPhone. Why?

I can’t speak for Apple, but if I were The Steve — and I have too much hair and not enough charisma to even pretend — I’d use this opportunity to build hype. And how would I do that? Exactly as he is doing it now. Let the rumours flow, as rumours always do, and then fuel them to critical mass by depleting stock and creating shortages. But if I were The Steve — and again, I couldn’t even afford his shoes, much less walk in them — I would time this depletion at the most opportune time, which would be just before its release. That way the hype builds demand which turn into sales upon its release, and with any luck, there will be enough sales during its initial release to still make this quarter look good to investors.

With all of the recent reports of shortages in the US, Europe, and now even through the Apple Store itself, the possibility of a 3G announcement happening at the WWDC is growing more and more likely — in fact, if the online unavailability persists, it must almost be a certainty, because if I were The Steve — and I’m not — I’d fully understand exactly how close I was cutting this.