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Understanding Apple's positioning: Part 1 - a premium brand at a premium price
It's widely understood in strategy that a firm that is known for delivering a certain value may end up confusing customers (or perhaps undermining its own credibility and reputation) if it attempts to deliver alternate value. The attempt to simultaneously deliver inconsistent offerings will not serve a firm's strategic position. Many continue to criticize Apple's premium positioning and pricing.
At its most basic level, competitive strategy is deeply rooting in being different from rivals. For years Apple used the phrase 'Think Different' (video), a marketing slogan that not only shaped consumer perception but also represented the company's internal activities. Today, these internal activities remain aligned with that slogan despite Apple dropping it in 2002. The 'Think Different' mindset is firmly embedded in the company's culture and is clearly evident in Apple's approach to product and software design, integration, and ease of use. In order to understand these activities, we need to take a look at Apple's strategic positioning.
A premium brand that meets a need
It is widely recognized that Apple is a premium brand that demands and earns a price premium. This price premium spans the entire Apple product lineup encompassing the Macintosh, iPod, iPhone, software, and accessories. Apple's positioning is aligned with targeting a less price sensitive customer. As a result, Apple's culture and internal activities are structured to meet the needs of these customers, strategists call this needs-based positioning. Apple has thus created a culture and a set of activities to differentiate itself from rivals in order to meet the needs of their target customers.
If Apple were to attempt to compete for all customer segments, it would have to lower product prices. The danger with such an approach is that it would not only undermine and erode the company's premium brand image but it would also undermine the company's culture and internal activities.
So what has Apple done in recent history to the Macintosh product line to demonstrate this premium positioning? Each new Mac revision has either maintained or been subjected to modest price increase while Apple has simultaneously improved product features. A few examples include the introduction of the unibody MacBook and MacBook Pro, larger displays on the iMac, and the replacement of the $499 Mac mini with a higher priced ($599) model. The motive is clear, protect the brand position via a tradeoff.
In the part 2 the series (to be posted tomorrow), we'll analyze this tradeoff.
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