JIN-523 -- Boutique Brand Logic: Why Apple Will Never Truly Go Mainstream

[jin at mailman.japaninc.com]

J at pan Inc Newsletter
The 'JIN' J at pan Inc Newsletter
A weekly opinion piece on social, economic and political trends in Japan.
Issue No. 523 Friday, June 25, 2010, Tokyo


There's a point in the life of every large, successful company at which,
once a critical mass of customers has been reached, that company must face
the reality that it can no longer hide behind the oft-used underdog, startup
excuse that may explain away mistakes, bad planning and service blunders.
When a company fails to recognize this inflection point, its brand
credibility is at stake, and its subsequent market share can be directly
tracked to its handling of any major crisis or service issue that follows.

Imagine if, in the wake of the recent braking controversy, Toyota had
attempted to "aw shucks" its way out of the matter with a simple blog
statement, followed by a dutifully contrite Twitter message explaining away
the matter as a mere aberration, and promising better performance in the
future. As the number one carmaker, this would have been unacceptable.
Thankfully, Toyota remains competitively aware of its position and went
beyond mere contrition and engaged in major restorative action (free
repairs), outreach (trip to address the U.S. Congress) and innovation as
brand reinvention (the new Tesla tie-up).

Consumers are acutely aware of this inflection point. They instinctively
understand that smaller companies have growing pains that may, in some
cases, deserve a bit of patience on their part as loyal customers.
Conversely, when a company reaches a certain size and market footprint,
customers rightfully hold those brands to stricter standards and will
usually vote with their wallets if it becomes clear that a company doesn't
respect the patronage that put them in a leading market position. The future
history of a company is usually dictated by how a company navigates and
frames (internally and externally) the unexpected pitfalls that inevitably
befall every commercial concern.

The CEO of e-commerce giant Zappos, second-generation Taiwanese-American
Tony Hsieh, understands this dynamic and focuses a great deal of his energy
on ensuring that Zappos users benefit from the company's transparent
approach to customer satisfaction. With over $1 billion in annual sales,
Hsieh maintains that Zappos is "a service company that just happens to sell
shoes."

When it comes to this kind of customer-first operational ethos, it is now
obvious that Apple, despite its recent boost in market cap over Microsoft,
is doggedly committed to maintaining its boutique brand logic that puts the
the company's reasoning and internal imperatives far ahead of its customers.

There are numerous examples of Apple's boutique brand logic to draw from the
company's recent history, but the most interesting came to light just a
couple of days ago during the launch of the iPhone 4. The trickle of trouble
began as users started reporting phone reception problems when holding the
iPhone 4 on its sides and bottom, areas which also act as antennas for the
mobile phone. Scores of users reported their signal bars going from five
bars to two, or in some cases zero, significantly damaging call reception.
What seemed at first like a mere quibble by Apple-haters soon turned into a
legitimate, confirmed problem picked up by most of the major technology news
sites.

Finally, days after the initial report, Apple finally released a statement
to tech site Engadget addressing the poor signal reception issue: "Gripping
any phone will result in some attenuation of its antenna performance with
certain places being worse than others depending on the placement of the
antennas. This is a fact of life for every wireless phone. If you ever
experience this on your Phone 4, avoid gripping it in the lower left corner
in a way that covers both sides of the black strip in the metal band, or
simply use one of many available cases."

This is, essentially, a non-answer. For those of us living in the 21st
century, it's common knowledge that various issues can block or reduce a
mobile phone's signal (walls, bodies, basements, etc.). But simply telling
consumers to avoid holding a commercial product in a natural way during use
is quite absurd. When one pays for a mobile phone, one should be able to use
that phone while holding it in "any" position--full stop. Only the arrogance
of a boutique brand could produce such a cavalier response to what is, at
best, a major design flaw and cause for a refund, and at worst grounds for a
class action lawsuit.

Just a couple of days ago, Omotesando was besieged by legions of Apple
loyalists waiting overnight in front of the Softbank store to be one of the
first to get their hands on a product that isn't even known to be scarce in
terms of availability. This scene played itself out across the globe from
Tokyo, to London, to New York. Thus, while the offense against Apple's
consumers is indeed great, it may be that after spending hours on line and
panting via Twitter about their new acquisition, many iPhone 4 consumers may
simply be too embarrassed to raise their voice and demand satisfaction.

This is probably what Apple is counting on. And, as a long time Apple
consumer myself, I can attest that this approach has worked in the past. But
the past is now prologue, and Apple is a different, much bigger, much more
influential company than it was before. Ignoring product issues and consumer
complaints simply won't play in the big leagues. Unfortunately, Steve Jobs
is infamous for his stubborn adherence to this boutique brand mentality. And
this is just the opening Google's Android, as well as local players like
Docomo, may have been hoping for. While Apple plays the boutique brand game,
and in the process walks away from its doorway into the  real consumer
mainstream (in much the same way it did when surrendering the consumer PC
operating system business to Microsoft's Windows decades ago) other
smartphone players now have an invitation to step up and be the
service-oriented smartphone leader Apple refuses to be.

Sexy products are great, but companies that offer solid products wrapped in
fantastic service are the ones that generally prosper over the long term,
fueled by the trust and loyalty of its customers. While Apple tries to
convince us that there are surface areas of a mobile phone forbidden to
touch during use, other companies will likely step up and shed such
arrogance in order to meet the needs of the consumer mainstream. So the good
news is that, regardless of who has the biggest market share or market cap,
the real winner will be the consumer.

-Adario Strange



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