P&G BEST-IN-CLASS

BRAND VALUES BUILDERS

APPLE

SOURCES:
Interview Professor Luc Wathieu, Harvard Business School
Interview WPP Expert Panel
HBS Case Studies – Harvard Professor David Yoffie

SITUATION/FACTS

• In 1997, Apple's stock traded at $7, which was its lowest price per share.
Steve Jobs returned to Apple as CEO in September of that year to
turnaround the company he created twenty years earlier. Ten years later,
In May 2007, Apple stock trades at an all-time high of $110 per share.
• Apple maintains a 2% share of personal computer market; and a 75%
share of the US portable music player market.

RESOURCES

• Strong Brand Heritage: Apple was founded in 1976 by visionary Steve

Jobs, who sought to change the world through technology. In that era,
Jobs made it Apple's mission 'to change the world through technology'.

• Consistent value/product proposition: ease to use, industrial design,

and technical elegance.

• A visionary leader, a brand champion CEO

o Steve Jobs has a unique ability to see into the future. Not every
Apple innovation can be attributed to Steve Jobs' vision, but
through the combination of the right people and money – Apple has
been able to consistently identify the next big thing.
o Jobs is also a CEO with multiple experiences above and beyond
hardware technology: In 1986 he co-founded Pixar, an animation
studio that produces major films such as Toy Story and Monsters.
In 2006, when Pixar was acquired by Disney, Job assumed a seat
on the Disney board.

• An affluent community of brand fanatic that adopt the brand and

spread the word: early adopters of technology, very loyal to Apple since

1
 the early days. The core customers are typically in creative fields such as
graphic design, publishing, film and music production, Apple benefited
from a very influential audience to grow through word of mouth.

• Strong partnership with agency: TBWA Chiat Day – the agency that
created the breakthrough 'Think Different' campaign 20 years ago was the
natural choice for Jobs when trying to reenergize the brand's image. In
1998, no agency review was conducted; Jobs went to TBWA Chiat Day
without hesitation; it is about relationship and mutual understanding, not
competition.

• Attractive location: the location of Headquarters defines the

company and its likelihood of success. According to Steve Jobs,
innovation happens when great people congregate and have the
opportunity to bounce ideas off of each other. San Francisco offers this
environment; Stanford and Berkeley draw smart people from all over the
world. People are smart, ambitious and open minded.

• People: 'people at Apple straddle the distinction between artist and

scientist'. Steve Jobs

PROCESS

INNOVATION - R&D

• Simplicity and focus yield better innovation:

o Listening to consumers' wants and needs can drive sales; it can
also create a complex and confusing offering.
o When Steve Jobs rejoined the company in 1998, there were 80
unique models and variations at Apple. He refocused the innovation
team along four dimensions: consumer products and professional
products; desktop offering and portable offering. Having only four
platforms to focus on, the teams instantly became more targeted
and more aware of each platforms' advancements and findings.

MARKETING

• It is all about the product. Apple computers help people

do their work more effectively and efficiently; the iPod
enables people enjoy life more. 'These products aren't just
good; they're great, insanely great' Steve Jobs.

• Set a clear Goal, clear vision: 'Make Mac central to the emerging
digital lifestyle'; control the software, create the consumer

2
 experience, empower the consumer with iphoto; itunes;
final cut pro.

• Focus, focus and focus:

o Consolidation of product lines: Upon arrival, Jobs reduced the
number of product lines from 15 to 3.
o In 1998, Jobs slashed new projects plans by 70%.

• Involve consumers, make them your brand

ambassadors; do not outsource this part of the
relationship, keep it internally. When iPod was
launched, Apple created an iPod lounge Web site where
users could make their own iPod accessories, submit
suggestions and ideas… The forum was moderated by Apple
employees themselves, who sifted through suggestions and
presented them to the company.

• Make the consumers a hero; they speak louder than

any advertisements. With the launch of iPod Apple
enlisted some of the consumers who had been sued by the
RIAA for copy right piracy to star in TV commercials.

• Make the brand iconic and instantly recognizable: the

dancing silhouettes wearing iPod's distinctive white
headphone was strikingly simple, yet extremely
breakthrough and memorable. It also cut across all ethnic
groups, all age groups… a truly iconic representation of the
brand.

• Give consumers flexibility and customization: Apple

and its iPod were extremely successful at giving consumers
what they wanted. While the brand was extremely
consistent in its promise (music + simplicity + design), the
product line offers different price points and capacities
(Apple Mini, Apple Shuffle, Apple Nano).

• Agency Relationship – high involvement from the top;

involvement and attention to details from Senior
Management: Steve Jobs chose TBWA/Chiat/Day for their
creative and style sensibility. No formal pitch was ever
made, it was a decision based in mutual respect. No
creative brief was ever written; Steve Jobs himself led the
agency creative brief, by explaining in simple terms the

3
 idea and the objectives of the brand. No power point; no
charts…
• Destroy ability of competitors to compare to your
products - own a claim that is difficult to rationally
out-perform: ie 'easy-to-use; simplicity'. (Luc Wathieu,
HBS)

• Create encounters and dialog with consumers –

Breakthrough brands need to create high engagement
moments with consumers. It is about letting consumers
create their own stories. The Apple stores or the iPod play-
lists let the consumers exchange, touch and feel the brand.
The stores become a creation center. (Luc Wathieu, HBS)

MARKETING MIX

Consumer insight:
• At Apple, Steve Jobs, the marketing and the engineering teams frame
their research in broad and simple terms: 'what do people do in their lives
and how can Apple support them.' – Text with Macintosh in 1984; Web
with iMac in 1998; Digital media with iPod in 2002.
• Insight / iPod: In today's world, empowered consumers care about having
a voice. They strive for empowerment and customization. (major cultural
shift of first decade of 21st Century)

Positioning:
• Positioning - Apple is the only technology company that helps people tell
their story because its products are simple, integrated (photo, video,
music) and easy to use.
• Rational benefits: brings solution to complexity - simple, easy to use - a
fusion of fashion, industrial design and computing
• Emotional benefits: "says who I am"; "gives me freedom" - makes me
feel in control, creative and independent. It (iPod) is customized to my
taste, my style, my mood. (i.e. playlists; colored designs)

Price:
• Price Premium: create machines that offer cutting-edge, highly integrated
design, both in the hard-ward and in the user experience the product
delivers, which justifies a price premium.
• A high margin business: the razor-and-blade business in reverse - gives
record high gross margin (20-30%) on iPods. The variable element (songs
bought on iTunes) serves as a loss leader for a profit-driving durable
good, the iPod.

Product:

4
• New product versions on annual basis: launching new versions not
only generate extra revenues but also new interest and greater loyalty.
(fashion model brought to technology – make an event/a show out of your
new 'collection')

• Create the Surprise with Simple and Fun products: iMac in 1998,
followed by IPOD in 2001, play on the simplicity (plug and play laptop,
music download); and the fun (colorful computers; breakthrough design;
non-conventional materials)

• Different products for different targets: introduced different products

year on year at different prices, with different storage capabilities or for
different usage (iPod Mini, iPod Shuffle, iPod Nano, Video iPod,)

Distribution:
• 200 Apple Stores to bring the brand to life:
o The stores generate 20% of total sales
o They give a great visibility for the brand with 50
million in foot traffic
o The stores offer a unique way for consumers to bond
with the brand by test driving machines; talking to
salesperson; taking video editing classes
o Reduce the fear factor among PC users through
education and demonstration.
• Focus on large national retailers; drop small retailers;
sell directly on-line (40% of sales in 2001)

Promotion – Build the brand through strategic

partnerships
• Strategic partnership with Motorola and Cingular Wireless to
market iTunes-supported phones.
• Partnership with Nike in 2006, with the launch of the Nike +
iPod product line.

5
VALUES

• Leadership Belief: aim high, think big and broad.

o "Apple is not just a technology company, it is a cultural force”
o "We're out to make the best product in the world'

• Corporate values: Be intuitive, be consistent; conform to the ways in

which people actually work; be reliable; be pleasing and fit into an every
day work/life environment.

• Believe in product quality even if it means higher

prices to the consumer. Steve Jobs said 'We don't
underestimate people. We believe that people want
something good. Rather than making a far inferior product
for a hundred dollars less, we give the product consumers
want and will use for years, even though it is little pricier.
People are smart; they will figure these things out.'

• Innovation doesn't come from money, it comes from

people. On the other hand, innovating without
money is nearly impossible. Apple spends significantly
more than its competitors in R&D (8% of sales) compared to
1.5% at Dell. Even in the worst times, those R&D dollars are
always found. Because they are always found, Apple
continues to re-invent itself.

• Define your own category and space: Apple does not

define itself as a technology company, but rather as a
consumer company – Apple focuses on the final output - the
consumer experience and use of the technology – in others
words, how as a brand/product, Apple fits in consumers'
lives.