Is Apple the new Volvo?

[Ray Macsweeney]

"In some instances, companies are still just skimming the cream off of the early adopters and migrating into the masses." (Stephen Baker)

Volvo's success in the car market, prior to its purchase by Ford, was based on a skimming strategy:

* Build a clear ownership of one niche in your marketplace
* Grow market share by making your success factor critical to adjacent niches and skimming them off
* Target only premium niches initially until faced with the mass market

With the launch of iPhone 3GS, Apple is clearly demonstrating a determination to follow this strategy in the mobile phone market and this will shape the options for competitor responses to the iPhone.

Clear Defining Characteristic
If there was one word to sum up Volvo it would be "safety". For Apple it is "usability". Apple is competing against a range of companies like Nokia which have such a large range of phones that it is difficult for them to have a single defining characteristic. Fortunately for Apple, just like "safety", customers are willing to pay significant premiums for "usability".

Adjacent Targeting
Volvo's initial target market was for highly safety conscious individuals. Over time, the company realised that "safety" was becoming a more salient belief for wider segments of the market - families. In thin slices, Volvo attacked each adjacent category.

Apple has taken a similar approach. Its core value of "usability" appeals to the early adopters of the market. Through the App Store it is now promoting an adjacent value of "usable functionality" to a wider customer base, slowly but surely picking off the adjacent pieces of the market.

Premium Targeting
Volvo was launched and targeted at a limited segment of the market (the soccer moms of the 1970's/80's). They were not cheap cars, and they were not available cheaply. Apple has followed a similar strategy.

The iPhone is a premium product, charged at at a premium price. Not only is it restricted by price, but it also restricted by network operator. Apple has decided to initially only reach a small segment of the market (circa 1 - 3%), but a highly profitable segment of the market.

Apple also has a major advantage here over its competitors. It is already one of the worlds largest manufacturers of consumer electronics through its iPod line. This means that when Apple launched the iPhone it had already made a significant journey down the experience curve and allowed it to make targeting decisions that would, for other manufacturers, be unprofitable.

Like Volvo, Apple is growing fat on the cream of the market and leaving the skimmed milk for the competition.

So What
If Apple is the new Volvo, does that make Nokia the new GM? And what will happen when Apple has to start on the mass market. Until next time...

Thanks to chuckbiscuito on Flick for the above image

[Ray Macsweeney]

In much the same way, BMW sells an "ultimate driving machine" - the BMW proposition is designed to appeal to drivers who look for a driving experience, whereas Apple and Porsche offer an "ultimate design experience".

I deliberately chose Volvo as the analogy for Apple because of its skimming and proliferation strategy, based on a single value.

And I'm not sure I like the idea of the iPhone Cayenne.

[Stuart Cosgrove]

....or put another way is Apple the new Porsche?

I am struck how both Apple and Porsche have communicated to their consumers that they are in the "design business", not the business of either technology and cars.

This is the corporate history of Porsche design:

"Professor Ferdinand Alexander Porsche, designer of the Porsche 911 and grandson of the Porsche founder, opened the Porsche Design Studio in Stuttgart in 1972. The 911 quickly became the quintessential sports car and a design classic, along with many other products that Professor F. A. Porsche designed. Over the following decades, numerous classic men’s accessories such as watches, glasses and writing utensils were created and marketed worldwide under the “Porsche Design” brand. At the same time, many industrial products and household- and consumer goods for internationally recognized clients, including streetcars for the city of Vienna, were developed under the brand. All of the studio’s works are distinguished by a clear and functional design language, careful selection of materials and high-quality workmanship, which combines artisan tradition with state-of-the-art technology. Since 2005 all products have been developed and marketed under the brand Porsche Design."