Deconstructing Apple’s iPhone Strategy
While the iPhone has an incredible number of fan(boy)s talking about it on the
Net, there is no dearth of articles criticizing it, either. The 2G version came under fire for not having GPS or a video camera — and for being 2G, of course. The 3G version now comes under fire for battery life, the kill switch, the app store, etc. If you were the product manager in charge of the iPhone, what would you do? What would you roll out and when? How would you balance the features, the price and the release timing to satisfy the clamoring crowds?
Whoever is making these decisions — my hunch: a guy wearing a black turtleneck and blue jeans and nothing so lowly as a product manager — has done a fantastic job. The first generation was aimed at the Apple fanatics. These are the evangelists, the first to buy every new Apple product at high prices and tell their friends about it. You have probably seen pictures of them lining up outside Apple stores. They serve as Apple’s test market, helping the company to recover development costs and reduce risk. That’s how Apple got away with pricing the phone around $500 initially. I’ll bet Apple knows exactly how many of these guys there are, where in the world they are located, what they want, and how much they are willing to spend.
This early-adopter group does not care if the phone has a 3G chip or whether it has GPS. They care only about the Apple experience. For the first-generation iPhone, Apple likely included just enough features to price it at the edge of this group’s affordability range. The 3G chip could have been too expensive at the volumes they could support, and GPS could have forced too many tradeoffs. Apple knows exactly how much it can invest in development and how many devices with what features it can sell, at what price point and when.
Applying the lessons learned from the evangelists, while leveraging the gospel that they spread, the second-generation iPhone targets the mainstream audience. In planning this release, Apple had a very good idea of exactly what was missing and the relative priorities of the various features. They knew clearly that they needed 3G, GPS, apps, etc., before they could increase sales. They also knew that a $200 price point would reach a much larger group. This was while they were selling around 5 million devices at 500 bucks a pop.
So much for all of those articles saying Apple doesn’t know what it’s doing.
- Girish Wadhwani
