Changing Marketing strategies: Is the Apple iPhone going the same path as Porsche?

By Frank Goedertier, Vlerick Professor of Marketing

A few days ago Apple announced the introduction of two new IPhone models. In a nutshell: the 5S – high-priced ; colours: silver, black or golden; traditional casing and the 5C – a (slightly) lower-priced model; fancy colours: green, white, blue, pink, yellow; plastic backside.

Looking at this announcement from a market perspective it seems like Apple is introducing the 5C to face the increasing popularity of competing phones in the “value-for-money” segment, and is searching for additional growth in that segment. Apparently the success of Samsung phones in the more price/value-conscious mass market segment in general, and especially in Asian growth markets has inspired Apple to launch the 5C.

Is this a good decision? Like always time will tell. But looking from a brand perspective at this new product announcement, there are some risks to be considered. Although the 5C model will actually not be that low in price (official, international stand-alone prices are not released yet), the model is certainly introduced in such a way that it looks like a low-priced IPhone (“starting from only 99$ when combined with a 2 year contract”).

Product prices have strong signalling functions in terms of the expected quality and premium-image of a brand. The price-focusing part of the announcement of the 5C model may send a signal to the consumer population that Apple will not be that premium in the future as it used to be. And there is not only the ‘price-image’ aspect. Other product attributes like colours, or the material a product is made of also work as strong cues for quality and premium perceptions of consumers. Research has shown that when consumers hold a phone with a plastic backside, they consider it as lower quality and less premium than when they hold the same phone having an aluminum backside. Apple has a rich history of products with fancy colours similar to the current 5C “green, blue, pink, yellow” colour-set that is announced. Such colours may attract a young, dynamic audience, but certainly communicate premium to a much lesser than colours like black, grey, silver or gold. By introducing IPhones that send out lower-quality/less premium signals Apple may risk losing that part of its original audience that bought the phones (at least in part) for the exclusive, premium-aspect of the Iphone brand.

The current evolution in terms of products introduced Apple is going through, reminds me of the evolution that Porsche went through some years ago. At that time Porsche had to decide whether it would ‘sacrifice’ its niche, pure “street-ready luxury race-car” image by introducing car models that were more attractive for the mass market. Porsche decided to introduce a more mass-market oriented SUV (Porsche Cayenne) and later on a sedan version (Porsche Panamera). It also introduced a lower-priced race car (Porsche Boxster) compared to its traditional success products (e.g. the Porsche Carrera or the Porsche 911). In this way Porsche chose to dilute its niche brand image to a certain extent.

Was this a bad thing? Not necessarily, but by doing this Porsche indirectly told the consumer audience that it henceforth was going to compete in the segment of Mercedes, BMW or Audi. In other words, in the eyes of consumers Porsche lost (to a certain extent) its exclusive position as a premium niche player on the market. Did Porsche consider that it might lose its original premium audience by these new product introductions? Yes. In an attempt to get the best of both worlds (both the niche, premium market and the mass market) it decided to strengthen the brand building efforts that focused exclusively on the Porsche 911 which is positioned as the exclusive, premium car of the Porsche range. The idea was (and probably is) to keep on attracting the initial, premium, exclusivity-loving Porsche audience with this model.

It looks like Apple to some extent follows a similar marketing strategy at this moment. Apart from the more mass-market oriented 5C model discussed above, it announces the IPhone 5S that sends out the premium, exclusivity brand signals associated with the original IPhone brand image (colours associated with quality/premium (silver, black, golden); an aluminum, high quality-feel backside and a premium price). Like the Porsche 911 was/is intended to keep on attracting the exclusivity-loving audience, the IPhone 5S may be launched with the same objective in mind. Will this best-of-both worlds strategy work for Apple?

As said before, time will tell. But there is certainly a brand-risk involved, as Apple is saying to the consumer that its IPhone brand will be playing more in the field of competitors like Samsung henceforth. As such Apple is risking to sacrifice the niche, premium, exclusive market position of the IPhone brand. And once you are there in the mind of the consumer, it is nearly impossible to return to that initial brand image.

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