Design as Marketing: Apple

Sucheta AcharyyaKelly Kivioja

Liang XuDali Zheng

Ying Wei

Agenda

• Differentiating using design

• Eisenman’s framework – commoditized industries as fashion systems

• Design differentiation at new product introduction

• Apple’s iMac and iPod

Differentiating using Design

Ability to charge premium price Tap different market segments Leverage psychosocial diversity amongst consumers Can create different meanings of the product Ability to create meaning using symbols more likely achieved by brand

centric versus product centric companies Ability to effectively integrate good design involves integration of R&D,

engineering and marketing – difficult to imitate Therefore, can be used to create a sustainable competitive advantage

“the moral of the story, which I repeat many, many times to engineers, is that all the fancy-ass technological engineering in the world couldn’t get us a nickel more for the product, but squirt –gun green plastic, which actually cost us nothing, could get us fifteen bucks extra per unit.” (Fortune, 2001).

Or it can be really simple…

Third state in industry evolution - “Aesthetic Ferment”

• Eisenman’s dissertation postulates that there is a third state in industry evolution:

– innovation and the introduction of new products

– maturation and exploitation of scale economies

– Aesthetic ferment is when companies focus on differentiating using aesthetic product qualities to resist the de-commoditization of products

Eisenman’s claims that this stage is particularly important to technology products as they typically have longer commoditization periods.

Eisenmen’s propositions:

P1: Aesthetic subsystems are more tightly couple with core subsystems during years of technological stability

P2: Investments in product design and marketing increases in periods of aesthetic ferment when compared to periods of technological ferment.

P3a: Likelihood of a successful design increases if it reflects collective tastes

P3b: Likelihood of a successful design increases if it allows consumers to express their identities and social status.

Eisenmen’s propositions:

P4: Likelihood of a successful design increases if the company has past design success.

P5: Likelihood of a successful design increases if the design is similar or reflective of designs introduced by trendsetting firms-but should not be a copy.

P6: Likelihood of a successful design increases if the design has elements that have been favoured in the past by intermediaries.

P7: The sustainability of the competitive advantages of using design as differentiation depends on the investment in design and marketing the firm has committed towards design.

Design Differentiation at Product Introduction

• For companies that have already created a fashionable brand image, introducing a new high-tech product as a fashion statement can help speed product diffusion whether it is an effective and resonant expression of collective taste or viewed as a status symbol.

• For a new high tech product that is successfully positioned as fashionable, competitors are more likely to be construed as imitators, allowing the product to capture a premium price for longer than the competition.

• For new product introductions in a winner take all market, if a fashionable image can help disseminate the product more quickly then aesthetic design can be the competitive advantage.

A high tech product becomes a cultural good meaning that it is “consumed in the act of interpretation rather than being used in some practical way to solve some practical problem” --- Lawrence and Phillips 2000, page 2

People perceive Apple as a Cultural good

The iMac Advantage

iMac and iPod Apple examples fitting into the 7 Ps of Eisenmen…

P1&P2:

Board of Directors are comprised of:

Arthur Levinson - CEO of biotech company Genetech Insight into how to move Apple scientists and researchers forward in their research

Millard Drexler, CEO of GAP help direct Apple to satisfy the needs of consumers and change the image of Apple into a “hip” company

P3a &P3b:

BLADE 3:• Blade: "What's she doing?"

Ryan Reynolds: "She's making a playlist. She likes listening to MP3's when she hunts"

Close up of Jessica Biel making a playlist in iTunes, and then puts on her iPod.

...

...

...

AND THEN SHE MAKES A PLAYLIST AGAIN BEFORE THE LAST BIG FIGHT

http://www.brandchannel.com/brandcameo_films.asp?movie_year=2005#138

This track record of success is also seen in Apple’s iPod product category

P4:

Apple’s sustained success in being able to design new products

P5: Customer reaction to imitation products

• Imitation products such as the Super Shuffle & IPOD mini cannot recreate the same prestige and status for customers:

“I would never be able to live with myself if I actually bought this thing. I'm sure there’s some kind of immense catch. Like price must certainly be higher. And I bet a dollar the build quality is nowhere near Apple's. But mostly, it is such a blatant rip off by a company who's obvious only intent was to siphon sales from an outstandingly popular product. I would never ever buy one.”

http://www.macnn.com/articles/05/03/10/ipod.shuffle.knockoff/#comments

P6:

Intermediaries such as U2 endorsing the iPod & iTunes products positively influence sales of U2 autographed iPod case

Newsweek “iPod therefore I am”

P7:

Apple as an organisation is already in a mind set that will allow it to sustain a competitive advantage over it’s competitors

Current Apple business strategy allows for the major investments needed to build and maintain a brand that is built on aesthetic-based differentiation.

The iPod Design Introduction

Risks to differentiating based on fashion

Fashion goes ‘out-of-style’ and typically fashion oriented products have a shorter than average product lifecycle

Brand management mitigates this risk.

Aesthetic design aligned with brand promise has the potential to increase brand loyalty.

If fashionableness is associated with the brand and the product fits within the brand then the key skill is to introduce the next generation of product under the brand before the last goes out of style.