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Apple Doesn’t Have What Consumers Want

 

Apple and Samsung are back at it again. The two tech giants have been battling in court on and off for about as long as Samsung has been manufacturing smartphones. Some of it has been warranted (at one point one of Samsung’s lawyer’s picked up the wrong tablet, basically making Apple’s point for them) and at other times it’s been called “silly” or “ridiculous” by some of the judges presiding over the cases.

In the process of the most recent round of legal dinner theatre, several internal emails and slide show presentations that were never meant to be seen by the public have become, well, public. The reason many find this interesting isn’t just because the information was for internal use only, it’s what the information actually says.

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“Consumers want what we don’t have”. As someone who has followed Apple for half my life, I can tell you that this isn’t the sort of thing the company would ever admit to having said. To anyone. Ever. Internal or not, this admission that customers are looking for something that Apple isn’t providing could signal a huge shift in the way the company thinks about the devices they make. Steve Jobs famously said “A lot of times, people don’t know what they want until you show it to them”. Apparently the people know what they want, and it’s not the iPhone in it’s current form.

There have been rumors of a larger screened iPhone for a long time, and I for one am hopeful that some of them come true. The last time there was a rumor that the next iPhone would be larger was leading up to the announcement of the iPhone 5, and while it was larger (read “taller”) it wasn’t really what some consumers were hoping for. Apple was betting that people really wanted to be able to operate the phone with one hand. They even paid Jeff Daniels to do the voiceover on a commercial that showed that even though the phone was larger, you could still feasibly reach from one side of the screen to the other. Now it looks like that bet might have been wrong.

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According to the graph above, the growth of Apple’s iPhone sales have been tapering off, and in some cases flat out falling over the past five years. If you were an optimist, you could say that the decline has been due to the economies of the countries the iPhone is sold in having been in recovery. That answer, however, would have also been reflected in the numbers of your competition. But that’s not the story the next slide tells…

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According the Apple’s own internal assessment, consumers want less expensive phones and bigger phones. According to the numbers in the first slide, the smartphone market grew by some 228 million units. Of that 228M, 91M were phones that cost more than $300 and had a screen larger than 4 inches. Ok, so that’s a pretty small group comparatively. We’re talking about some of the most expensive smartphones on the market when you go up over $300. The meaty part of the numbers breakdown comes in the form of the 159M units that were under $300, but still have a screen larger than 4 inches. The other two boxes on this slide are interesting too, and site some things that Apple isn’t likely to change, and other things that they can’t change. Let’s look at them in order.

The second box is labeled “Carriers” and claims that they, the carriers, could be responsible for some of the drop off by “Capping” the iPhone due to one or more factors, including:

“High Share” – Apple did have a really high share in the smartphone market at one point. I don’t think that carriers should start telling people to buy other phones just because one platform is doing well, but whatever.

“Subsidy Premium” – When you buy a new smartphone, if you’re new to the carrier or are “eligible” for an upgrade, the cost of the phone is being subsidized by the carrier themselves. If you buy a new phone straight from the manufacturer, Apple or anyone else, and cut out the carrier you loose the subsidy and pay full price. At the time this was written, the Samsung Galaxy S5 is $599 from my carrier if I pre-order it without a contract. The iPhone 5s is $649. So in this instance, Apple is charging $50 more for a phone that’s been out for months vs Samsung’s new flagship phone that hasn’t even hit stores yet. Both are $199 if I sign a 2-year contract. The difference of $50 isn’t being passed on to the customer, and Apple sure isn’t eating it. The cost is to the carrier.

“‘Unfriendly’ Policies” – There are a lot of things that Apple has done and may continue to do for the sake of their customer’s that carrier’s would consider “unfriendly”. The first example that comes to mind is bloatware. If you’re unfamiliar with that term, I’m talking about the crappy apps that are put on your phone from the factory that you can’t delete. An example: A close friend of mine just bought the Samsung Galaxy Note 3. It’s the most expensive phone Samsung sells right now, and out of the box it had several apps, some from Samsung, and some from Verizon, that he doesn’t want but can’t delete. They are just there, taking up space on his phone. Now, since he is using an Android device, he can root it and put custom firmware on it which will get rid of all of those apps, but it will also get rid of any of the Samsung specific software features that were built into the phone. The good news is that this won’t void his warranty. He would have to set it back to factory settings if he wanted to claim the warranty on it, but he can do it. If you jailbreak an iPhone (similar idea to rooting an Android phone) you’ve voided your warranty with Apple. Period.

“Lack of Alignment” – This one is probably involves several things, including the “unfriendly policies” talked about above. Another thing it could include is a refusal to allow carrier’s to make their own TV ads for the iPhone. I don’t know if you’ve every noticed this, but you’ll never see or hear a commercial for the iPhone that wasn’t made by Apple. Sure, at the end the logo for a carrier will show up, and they rotate which one, but it’s always just the companies logo. It’s never Verizon or Sprint talking about the iPhone. It’s Apple talking about the iPhone and oh yeah, these guys have networks to run the iPhone on.

One final thing on the carriers before we move on. I have heard from at least a half a dozen people who were in a carrier store and heard employees of that store telling people that they shouldn’t buy an iPhone. Now, I’m not the guy who thinks that the iPhone is right for everyone, it’s not. But employees don’t get to make that call, the customer does. Sales people who impose their own agenda, or the agenda of the company they work for, on consumers who are there trusting that they will be looked after is unconscionable.

On to the final box, “Competition”.  In this box Apple admits that the other guys are stepping up their game. I just wanted to take this opportunity to point out the large Android at the top of the box. There are no berries, black or otherwise, and there are no Windows of any sort. Jus the little robot hanging out.

“Competitors have drastically improved their hardware and in some cases their ecosystems”. I think that they may have pluralized one word correctly, “competitors”, and accidentally pluralized the word “ecosystem”. There are certainly many competitors to the iPhone when it comes to hardware. I’m not going to spend a lot of time naming off a bunch of phones, but it’s happening. Go see if you can’t get your hands on one of the new HTC One (M8)’s. It has a terrible name, but the HTC One was a solid phone to begin with, and by all accounts the new version is even better. However, when it comes to ecosystems, there’s really only one place to point to when it comes to drastic improvement, and that’s the Google Play Store. Those guys have been busting their butts to bring customers a better experience, and I’ll give you just one of the many things they’ve done. In the Google Play Store, app developers can respond to customer’s who leave a poor review of an app. Now, that could go really badly if a pissed off dev jumps on there and tears the customer a new one for being too stupid to figure out how to use their obviously perfect app, but Google knew this and headed it off at the pass. If you leave, let’s say, a one star review of an app on the Play Store, the developer can see this and can actually respond to you and other customers can see it too. Google has outlined that the response must be respectful and not contain any profanity or anything anyone might find offensive. This gives the developer the opportunity to either try to explain to the customer how to fix their issue, or in many cases get the customer in touch with the support team and get them the help they need to be happier with the app. That’s something Apple does not currently offer, and it’s just one of the many things that Google has put in place to improve the experience of their Play Store customers.

We now know that Apple is thinking seriously about what customers want in a smartphone, and hopefully they’ll respond with something great. I certainly hope that they do. Google needs the competition. Competition is good. Competition promotes innovation and change. I’ve always said that despite the fact that I prefer to use an iPhone, I’m glad that Google launched the Android platform to compete. If they hadn’t, there’s no telling where we would be. Or where we wouldn’t be for that matter. WWDC will take place in San Francisco June 2-6, and I have a feeling Apple has something to show us.

 

About Justin North

Justin North
Yeah. 220... 221, whatever it takes.