Umair Haque / Bubblegeneration

Wednesday, December 12, 2007

Apple, the Edgeconomy, and the Future of Consumption

Why do Apple customers care so much?

It's a good question.

But in fact, it's the wrong question to start thinking strategically about consumption.

The real question is the opposite: why don't most consumers care about most firms/products/services/brands?

Let me put it another way. Firms spend enormous (really, huge) amounts of money on trying to influence consumption. We don't often think about it, but marketing as a % of GDP is enormous - it's the second largest expense firms incur.

And yet, for the most part, consumers don't care.

Marketers think consumers are "loyal" to brands (like slavering animals).

But when you look a little more closely at the economics, the intensity of so-called loyalty consumers display even for their most-liked brands - apart from players like Apple - is laughably small. The marginal benefits to marketing are, in fact, tiny. For most brands, "loyalty" is about as intense as a tepid bath.

How do we know that? Well, there's a massive existence proof hidden in plain sight: the fact that Apple's, well Apple, and everyone else is pretty much not Apple. Or we think a little more deeply about it: firms wouldn't have to invest so much in marketing if the intensity of loyalty was greater.

Either way you cut it, there is deep strategic truth to note: most firms invest huge amounts in marketing, with very little in terms of strategically beneficial outcomes, to show for it.

Put another way: we can "measure" the "returns" to marketing all we like - but what we're measuring is largely superficial and almost totally strategically meaningless. From an economic point of view, "loyalty" and it's cousins are a joke.

Despite all the money we spend on earning the love and respect of consumers - we can't seem to achieve it.

There's very (very) wrong with that picture, most marketers feel. But they're not really seeing the picture yet - because the implication of these economics is: marketing is utterly dominated in the edgeconomy.

Luckily, a very big part of the answer's also hidden in plain sight.

We need to reboot. We need a blank canvas. Yesterday's concepts - loyalty, etc - are totally obsolete, stale; they get in the way of thinking truly strategically about a better economics of consumption.

They are, ultimately, artifacts of rusting, industrial DNA. And that's the problem:. The firm itself is in decay.

Boardrooms and marketing both need new DNA to live the truth of the mystery of the Cult of Apple.

-- umair // 9:22 PM // 5 comments

Comments:

Well, the whole concept of brand loyalty is not even in the same ballpark as in the post WWII era. "My dads a Ford Man, so I am Ford Man."

http://abmw.wordpress.com/2007/07/24/61/

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bizQuirk // 1:52 AM

Here's an interesting question: do you think that this also applies to pharmaceutical companies and their relationships with doctors?

$10 Billion annual spending marekting me too drugs to doctors...

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Anonymous // 1:34 PM

A brand is a "promise." In the case of Apple, it is such a good promise that it engenders that kind of loyalty. Few brands can compete with Apple in fulfilling their promise. For most, it is no more than a "sounding brass and tinkling cymbal."

Reminds me of a fellow I knew who worked with a startup and the management of the startup was always complaining that he wasn't getting them good press that would raise their stock price. He said, "Get me some real earnings, and I'll get your stock price up!"

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Tim Orr, Nashville // 4:59 PM

Branding is a broad term -- the sum of a product, its purpose, design, packaging, differentiation vs competitors, various marketing executions, retail presentation, etc.

To say branding is irrelevant is ignorant.

Certainly it's harder to build and maintain a brand in an ever-faster world of customization and product proliferation, but your premise is incorrect -- and not backed up with anything but subjective commentary.

As someone said long ago, the value of the brand is the difference between the cost of a product and its price. Enjoy your Zune.

Rob, Albertson Industries

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Rob // 11:58 AM

hey anon,

that is an interesting question, which i may actually post about it if i can find the time.

hey rob,

i don't think a brand is not a broad concept at all. tim nailed it - as he says, a brand is a promise.

the point is exactly what you mention: the returns to inert branding are diminishing.

so what i'm saying is hardly subjective: even looking simply at the largely invalid measure of so-called "brand equity" tells us that branding is in big trouble.

or you can choose any other measure you want. they all tell the same story.

because it's the economics that are important: branding will continue to be more and more irrelevant until it learns to create value again.

thx for the comments guys.

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umair // 12:14 PM