The Eden of Apple: The advantages of a powerful ecosystem

When Apple launched the iPhone X in 2017, a significant portion of the market had its doubts with the $1000 price tag. Many analysts believed that this would spell doom for Apple as the sheer absurdity of the price was not going to bode well with customers.[1] As rational as it may seem – given price sensitivity in today’s markets – it turned out to be an incorrect assessment. The iPhone X was Apple’s best selling smartphone over the course of the last year, with iPhone sales rising around 2.9 percent to 52.2 million phones[2]. A year later, Apple seems to have gained further confidence from a successful gamble, when it announced 3 new iPhones. In their largest iPhone lineup to date, a $1000 dollar iPhone XS sits comfortably in the middle of iPhone XR ($750) and iPhone XS Max ($1100).  As a consequence, even competitors have increased the prices of their flagship models, with Samsung pricing Note 9 at $1000[3].

For years, Apple has been known to actively shape consumers’ demand for products, as opposed to merely catering to their demand. It never shies from considerably radical changes with its products, moves that have potential to disrupt any company’s sales. The example above is just one of the market-defining changes introduced by Apple. Massive moves like removing the headphone jack in the iPhone 7, or the legacy computer ports in the new Macs, generated plenty of outcry from consumers, but even that has stopped as consumers underwent a period of forced adjustment.

In an industry where the maintenance of a USP is seemingly impossible due to significant advances in short spans of time, consumers’ convenience becomes an important factor for consideration with most companies . But it is strange how Apple can inconvenience customers and still retain their loyalty, when other companies would fail. Maybe not so surprisingly, the compensation of that inconvenience is an abundance of convenience elsewhere.

Convenience, completeness and captivation

If one word were to be used in characterising “The Walled Garden of Cupertino”, it would be convenience. Constructed in a manner that combines powerful devices with fluidity, Apple’s conceives their line of products not merely as separate classics that shall perform, but as a powerful interconnected system that provides a seamless experience and bolsters the image of an ecosystem. Their software provides a unified sensation with features like AirDrop, Siri and Continuity. The MacBooks and MacOS have become industry standards that work seamlessly with iPhones and iPads, providing users the ability to take calls, work across devices and transfer files with ease.[4]

Alongside this integration of devices, however, the success of this system is also a product of the lucidity and ease of using powerful features. This, in turn, is brought about by Apple’s simplistic and effective presentation of complex technology, that resonates with more people. While their features may not necessarily be completely unique in the market, the commonplace presentation of their complicated features captivates people much more. For starters, the Fingerprint Scanners in devices were named “Touch ID”, Facial Recognition was relabelled as “Face ID”, and a higher resolution and definition display was portrayed as “Retina display.” Despite having these features, no other company has arguably gone all the way with their elucidation as Apple has. Therefore, in an age where consumers have short attention spans, tapping into their convenience and keeping them satisfied shall require something simple and appealing to captivate them. Luckily for Apple, their marketing does just that and with a score of 81 against a mobile industry average of 79 on the American Customer Satisfaction Index, it tops the chart ahead of companies like Samsung, Lenovo and LG.[5]

A hard exit and a different objective

Having provided users such a comfortable and effective experience, what becomes pretty evident is that exiting Apple’s ecosystem is very hard. This is because an alternative selection of habits alongside devices is what fundamentally accompanies that exit. The fluidity of MacOS or iOS and services like Siri and Handoff may have counterparts elsewhere, but the way they have been portrayed and designed by Apple make them much more convenient than the alternatives. Relying on a notion of familiarity and ease, Apple’s ecosystem ingrains habits which are harder to usurp, once established.[6] The lack of convenience in the availability of features elsewhere make the exit in itself is a big inconvenience.[7]

With that knowledge, Apple becomes aware of its leverage in the market. Their objective is not to keep enticing people with revolutionary products each year. It is simply to make users comfortable in order to retain them. They do not engage in sparring with the competition every year in a market of swinging customers who shift from one brand to another. Instead, they create their own market, with the sole objective of luring people into an ecosystem which is hard to exit.

Viewing Price Hikes Differently

An added advantages of luring customers in a walled garden is that it enables Apple to test the boundaries of their garden and see how much are consumers willing to stay in. Contrary to popular opinion that such hikes are merely moves to maximise Apple’s growing profits, it is much more prudent to see these price hikes as a mechanism for Apple to evaluate the elasticity of their customers. This is evidenced by the trend in which prices have increased, marginally going up every year[8] and the response it has gotten from its consumers. So far, they seem to be minor inconveniences in a life of convenience for their customers. If the sales numbers at the beginning are anything to go by, then the iPhone user does not mind paying somewhat extra money for a new model, as they realise the premium product is a long-term investment. In fact, Apple’s emphasis on durability and the ‘long-haul device’[9] tend to suffice as justifications for higher prices.

Apart from the durability, Apple’s emphasis on premium products[10] also helps explain why high prices are a much more better thing than they seem to be. Leveraging their image as a premium brand with premium products, not only do they justify the price tag, they ingrain the realisation that paying anything less than a premium price is a crime. No matter how the competition tries to spin the rhetoric about better specifications or make the bang-for-buck argument about their devices, factors like software, experience and feel add to the lure of the ecosystem and its premium nature, validating the tag.

The future is now

Over the course of the 2015-16 period though, Apple had a considerable slow-down, as it reported a decline in profits for the first time in 15 years[11]. The products launched during this period, including iPhone 6s, the 12 inch MacBook, and the iPad pro did not captivate audiences and have been a part of a larger argument about lack of innovation. It seemed that Apple was undergoing a phase of stagnation, but what people forget about Apple, given the pace of this industry is, that it usually took about 3-5 years in delivering their next revolutionary product.  Apple looks to have hit the ground running this time with their ecosystem. Not only have they launched totally different products, they are also beginning to use the ecosystem to greater advantage. While the jury may still be out on the new iPhones, iPad Pro or MacBook Air, their massive effort with iOS 12 and its support for very old devices, shows how Apple isn’t the salesperson who wants you to necessarily buy their best and most expensive product. They want to establish a relationship so that you needn’t look anywhere else.

Advancing technology might make itself much harder to sell. But Apple’s ability to simplify that complexity does place huge control in its hands. It has the power to steer mass technology in the years to come and set trends people will follow. Until 2 years ago, the uncertainty question would have loomed much larger than before and the concern for lack of innovation would hold more ground. But with recent developments at the Infinite Loop, it seems clear that Apple’s plan for the future is based on leveraging the power of an ecosystem whose seeds were sown years ago.

[1]https://www.cnet.com/news/apple-second-quarter-iphone-x-sales-show-wall-street-analysts-got-it-wrong/

[2] ibid

[3] https://www.theverge.com/2018/8/21/17763322/iphone-x-galaxy-note-9-smartphone-pricing-2018

[4] https://www.businessinsider.com/apple-mac-vs-windows-pc-why-i-chose-macbook-2018-3?IR=T

[5]https://www.theacsi.org/index.php?option=com_content&view=article&id=149&catid=&Itemid=214&c=Apple&i=Cellular+Telephones

[6] https://www.businessinsider.in/how-to-break-free-from-the-apple-ecosystem/articleshow/60246706.cms

[7] ibid

[8] https://www.statista.com/chart/11067/how-the-iphones-price-developed/ (note that before iPhone 6, prices for iPhones were shown with a cellular contract, therefore they are higher than what is shown in real terms)

[9] https://finance.nine.com.au/2018/09/13/11/58/apple-iphone-xr-xs-max-watch-durability-environment

[10] https://www.cleverism.com/apple-product-strategy/

[11] https://qz.com/869175/apple-didnt-have-a-great-2016-but-2017-is-looking-to-be-a-big-one/

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Vaibhav is a second year undergraduate majoring in Economics. He has diverse interests such as politics, literature and tennis, and loves to engage in endless discussions on anything remotely related to them. He loves writing and believes that it allows for a thoughtful consideration of inputs, making it much better than impulsive responses. Among other things, he loves playing tennis, reading new books, quizzing and listening to varieties of music.

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