Brand Equity: The Case of Apple Computer

Introduction

The scheduled chat with an advertising agency head credited with some amazing creative work had led me to expect some behind-the-scenes stories for such global brand accounts of theirs as Absolut, VISA Card and Pedigree pet food.  Pushing for a brand equity and positioning agenda, however, I soon heard a question being posed, “when is a computer not a computer?”  For my resource has been a confirmed Apple and Macintosh user since 1976.

Brand loyalty interview: the brand and its competition

George Balagtas is the 50-year-old expat CEO of the West coast branch of TBWA/Chiat/Day whose plate glass windows overlook Venice Beach a scant block away.  Perhaps it is the perfect day or crowded boardwalk that has him alternately shaking his head and gazing dreamily out the windows, much as old people do when they reminisce…

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As a young copywriter/art director, George got his hands on an Apple II in 1977, a full seven years before the IBM PC came to market.  Through succeeding generations of Apple Computer Inc. product launches – the Lisa, the Macintosh, the MacBook and Mac Air – George never forsook his love affair with the ease of use and graphic capabilities of Apple PC’s.  Two children now in college are also constantly wired to their Mac Air’s, iTouch players and iPhones.

As George tells it, he never felt alone in his loyalty, nay an obsession, with Apple computers.  Advertising agencies are full of graphic designers and busy account executives who want to get the work done without having to search through four-inch thick manuals of Windows applications or sift through the enormous “knowledgebases” of Microsoft Online (personal interview, Nov. 14, 2008).  Their time is better spent brainstorming advertising concepts and making these come to life in breakthrough ad executions.  “Creatives”, the collective genre they like to go by, were therefore delighted to play around with the world’s first color graphic user interface (GUI), learn almost intuitively what the windows and icons could do for them, and best of all, realize that the Apple promise of WYSIWYG (“what you see is what you get” from the laser printer) was absolutely true.  In contrast, the blinking green cursor in the early IBM-type PC’s would torture users with dozens of error messages unless they learned arcane Disk Operating System command terms and syntaxes that only professional UNIX programmers could possibly memorize for their day-to-day work.

In the eyes of graphics designers, advertising art directors, book and magazine publishers, and college students, therefore, there is a special cachet to the MacBook and the Mac Air that no beige box PC could ever match.  How was this created through 31 years of Apple Inc. successes and failures when “Wintel” boxes (Intel CPU’s, Windows OS) captured a near-monopoly 85 percent share of the U.S. market in offices and homes combined?

Analysis of interview: brand equity and brand positioning

Innovation, being first in the marketplace, was fine but it by no means guaranteed success.  If that is all Apple had in the beginning, it would not have been enough.  On both sides of the DOS/Windows and MacOS/Safari divide, the endless stream of innovation virtually guaranteed that superb hardware and software would be displaced by a better offering within a year or scant months later.

VanAuken (2007) suggests that the strength of Apple and like brands can be understood in terms of two variables: a) Estimating brand value as financial asset; and, b) Understanding core brand equity.  Setting aside discussion of the latter for the next section, one notes with interest the assertion of the author that numerous bases for putting a dollar value on brand equity exist.  The overview by VanAuken includes: the publication Financial World that, till it closed down, issued an annual ranking of top brands by value, and David Aaker covering several options for valuing brands as assets in Managing Brand Equity.

In 2005, Badenhausen and Roney reported on the outcome of an analysis by New York marketing consultants Vivaldi Partners.  Combining the hardnosed approaches of looking for category-leading earnings growth, having chief marketing officers and consumers name brands they perceived to be simultaneously fast- growing and innovative, and using discounted cash flow to estimate the extent to which brand equity drove sales turnover, the authors reported that Apple topped a list of 40 brands.

In the select roster of 20 brands that had thrived through the 2001-2004 collapse of the “dot-com bubble”, the aftermath of 9/11, and an ensuing mild recession, Apple stood head and shoulders above the rest with an estimated brand value of $5.3 billion and an annualized brand value growth of 38%.  More tellingly, the new venture into portable MP3 players had stoked no less than 400 million songs purchased and downloaded from the iTunes store at a time when numerous peer-to-peer services (e.g. Napster) flouted copyright laws.  The quality of this achievement was all the more sterling for having bested such iconic brands as Google, Amazon.com, eBay, Starbucks, MTV, Victoria’s Secret, Nike, Toyota and Harley-Davidson.

PART 2: Research on the Brand

How did the two Steve’s, Jobs and Wozniak, manage this feat?  Employing the VanAuken brand equity framework, one discerns that the value-added of the Apple name is evinced in such factors as:

Price premium – List price for the MacBook Air is currently at about $3,000 with promotional campaigns bringing this down to $2,500.  This is affordable for ad agencies and pre-publishers, notably when one considers that the competition in the graphic workstation vertical consists of the high end offerings from the likes of Sun Microsystems, HP and Dell.  On the other hand, famously cash-strapped students would not care to pay double the going price for “Wintel” laptops were it not for factors three and four below.
Brand loyalty among graphics professionals and students persisted for three decades now.
Supreme ease of use with a superb GUI that Wintel rivals struggled till the turn of the century to imitate.  For a long time, the Macintosh held the advantage of speedier handling of graphics files that are notorious for their demands on CPU processing cycles.
Persisting in an “anti-establishment” brand positioning, relevant differentiation and an emotional connection – The launch of the landmark Macintosh desktops was supported by award-winning television commercials created by Chiat/Day.  These aired during the third quarters of the 1984 and 1985 Super Bowls and never again the rest of the year but created a tremendous “buzz” long years before the term became popular.  In one, a female runner avoids an Orwellian “Big Brother”, an obvious reference to “Big Blue”, as IBM was known then.  The second commercial also thumbed its nose at IBM, depicting a long line of “corporate suits” singing the dwarves’ song in “Snow White” while parading like lemmings off a cliff and into the sea.  The power of high-impact advertising execution was proven once again.
Adaptive innovation – Steve Jobs persisted in a vision of being niche specialist to the extent of never licensing the Mac architecture, ruthlessly suing copycats all over the globe, refusing to play the market share and affordable-price game, staying with an operating system that rendered Mc files unreadable on PC’s, and even, for a time, being forced out of his own company.  Since 2004, however, Apple became more flexible.  The Mac CPU is now an Intel, for example.  More important, Apple continued to innovate by bringing together known technology (e.g. touch screens) into novel product designs that appealed strongly to old-time loyalists and the anti-establishment youth of a new generation.  Hence, the successful market launches of the iTouch, the iTunes service, the Nano, and, most recently, the iPhone 3G.
Extensibility of the “seriously cool” brand positioning to portable music players and two generations now of the iPhone.  Note how Nokia, SONY-Ericsson, Blackberry/RIMM, and Korean rivals were quick to copy the look and feel of the iPhone interface.
Accessibility – The company has Apple Stores virtually everywhere that target consumers shop, even in newly-industrializing developing countries.
Finally, there is no gainsaying performance parity, even superiority.  The unique product advantage of Apple Computer in the beginning was the combination of the fast Motorola RISC chip, speedy machine-language programming and an efficient internal architecture.
Conclusion

All in all, one is satisfied that the Apple Inc. brand equity is an asset that, like any other, required an investment of strategy and persistence in maintaining brand positioning.  Steve Jobs has so far succeeded in leveraging the Apple cachet to become a formidable competitor in the MP3 player and mobile phone markets.

References

Badenhausen, K. & Roney, M. (2005) Next generation. Forbes, v175, Issue 13. Retrieved November 15, 2008 from EBSCOhost.

Charles, G. (2008, April). Technology brands return value. Marketing, v4.  Retrieved November 15, 2008, from ABI/INFORM Global database.

VanAuken, B. (2007). Brand equity measurement. Retrieved November 15, 2008 from http://www.brandcoolmarketing.com/equity-measure.html.

 

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