Apple’s Sales and channel strategy – key to it’s success

Apple-logo1

From its direct and channel pricing strategy to its retail and online storefronts, Apple sells its products like no other company in the consumer electronics space. If you know “the channel,” you know this is by no means an easy trick. What makes Apple’s sales and channel strategy unique: • Apple never discounts through its direct channel. It does discount refurbished products and, of course, there are price changes, but there’s no “sale” pricing, say on a holiday, for example. • Apple keeps reseller pricing stable. While it’s illegal to set dealer pricing (to its customers), Apple still manages to keep retail pricing remarkably stable. It probably does that by keeping dealer margins slim, offering no volume discounts, and keeping terms consistent between resellers of the same product. • Apple’s retail and online storefronts are unique. They’re more about education and support than selling. They’re simple, even austere, with minimal signage and crystal clear messaging. The pervasive feeling is that lots of folks are there to help you and nobody is there to sell you anything. • Apple products are positioned as unique categories. To the extent that it’s feasible, Apple likes resellers to sell its products as unique categories, as opposed to side-by-side next to competitors, either on storefront shelves or online. For example, Best Buy online has a section called “iPad and Tablet PCs.” They’re distinct and separate. Now, the strategy of positioning a product as unique relative to competitors and maintaining tight channel control and pricing to manage that positioning is nothing new. In fact, it’s sort of the holy grail of selling. Many companies have tried to do it with various products and with varying degrees of success, including Intel processors, Microsoft software, , Dyson vacuums, and certain “premier” manufacturers of watches. In each case, it really comes down to the same five factors that enable that holy grail of sales strategy: 1. Perceived or real high demand and limited supply 2. Unique and superior value proposition or brand perception 3. Perceived or real monopoly 4. High enough margins to support a robust channel support infrastructure 5. Clear, top-down sales / channel strategy and disciplined execution Having said all that, the practical matter of maintaining the practice over an extended period of time is almost impossible. Sooner or later, it breaks down and things can change. It could be a change in the competitive landscape; intellectual property protection ends, a new widget or innovation comes along, societal trends change, or even changes in government regulations. Sometimes, the company itself is willing to break its discipline to accelerate growth at the expense of profit margins. The bottom line is it can be done, given certain factors. And those factors change over time. So, if you’ve got a company and a product where some of those five factors exist, by all means, develop and execute the most airtight sales channel and pricing strategy you can and milk it for as long as you can. Go ahead, sell like Apple, if you can. Just make sure you keep an eye on market conditions because, in time, they’ll change, and you want to be as proactive as possible when or, better still, before they do. And that goes for Apple, too. https://i1.wp.com/image.slidesharecdn.com/distribution-policy-apple-1227810589544805-9/95/distribution-policy-apple-11-728.jpg Apple’s retail stores are a huge success, generating more revenue per square foot than any other retailer in the United States, including Tiffany. During the company’s last earnings call, CFO Peter Oppenheimer said Apple’s 372 stores collectively generated $4.1 billion in revenue. That’s a vast sum, and one that might lead you to believe that Apple sells most of its gear through its own stores. But that’s not the case, according to a new study by Consumer Intelligence Research Partners (CIRP). Between December of 2011 and August of 2012, CIRP surveyed 1,227 U.S. consumers who purchased an iPhone, iPad, or Mac, and found that while Apple Stores sold by far the most Macs and iPads during the period, they didn’t sell nearly as many iPhones as the company’s retail partners. In the U.S., Apple’s retail stores, along with the company’s online storefront, sold 47 percent of the Macs and 40 percent of the iPads purchased by the survey sample during December 2011 and August 2012. But they only sold 21 percent of the iPhones. AT&T and Verizon stores both sold more than Apple, with 28 percent and 26 percent shares of sales, respectively. And Best Buy and Amazon (via fulfillments) together sold nearly as many iPads as Apple itself. “Apple has around 250 stores in the U.S., while Best Buy and Best Buy Mobile total 1,300, and AT&T, Sprint, and Verizon have over 5,000 combined,” CIRP partner Mike Levin told AllThingsD. “Clearly, the Apple stores are much more productive on a per-unit basis, but their relatively low store count keeps them reliant on the carriers and Best Buy, not to mention Walmart, Target and others, for the vast majority of their retail sales.” In the year 2013 Apple generated 171 billion in revenue and $37 billion in profit. These figures are staggering for a company that had to borrow money for much of 1990s and early 2000’s to keep its head above the water. Ultimately, Apple’s retail partners are as critical to the company’s success as its own stores. Sure, the typical Apple Store might cater to 17,000 visitors per week, but that foot traffic translates to a smaller-than-expected share of the company’s overall business. As CIRP co-founder Josh Lowitz told AllThingsD, “Everyone who lives in an Apple Store city thinks that is where everything happens, but you can’t sell 40 million plus iPhones in a year through just 250 stores.”

References

http://www.cbsnews.com/news/how-to-sell-like-apple/

http://allthingsd.com/20121003/apple-stores-get-the-glory-but-retail-partners-shoulder-load/

http://image.slidesharecdn.com/distribution-policy-apple-1227810589544805-9/95/distribution-policy-apple-11-728.jpg?cb=1227782178

http://venturebeat.com/2013/10/28/apples-170-billion-2013-amazing-and-amazingly-forgettable/

http://www.forbes.com/sites/jaysondemers/2014/07/08/heres-the-simple-secret-to-apples-marketing-success/

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21 thoughts on “Apple’s Sales and channel strategy – key to it’s success

  1. Thanks for this post – I found it interesting and confirms a few things about Apple – namely the importance of the mobile carrier retail channel partners, Apple’s relative proportion of sales through the physical network of stores (small compared to overall sales, but massive considering the number of stores against the revenue that they generate!). Apple is obviously quite a unique case study in that it’s brand is so pervasive in it’s owned channels (whether online or offline) and it’s consumers are such evangelists that they pull the demand through everywhere, and Apple use their branded retail stores to reinforce the brand experience, provide opportunities for Apple ‘geeks’ to connect with others and the Apple staff, that it’s truly an extension of their brand and they use this this distribution channel to really connect with customers, and I imagine as a great source of consumer intelligence as well.

    Interestingly, the new T Store shopfront designs that have been rolling out over the past 2-3 years around Australia seem to owe a lot to the Apple Store experience, aiming to emulate that. However you do notice the immediate difference of a Telstra retail shopfront… there’s no single minded proposition (think a range of devices, Foxtel cross-sell screens and booths, etc) and that absolute commitment to the brand epxerience that you ‘feel’ in an Apple Store just isn’t there (and let’s face it Telstra is no Apple!). Not surprising, but further evidence of Apple’s unique place in the consumer electornics market.

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  2. Thanks for the blog. I think one of the Secrets Of The Apple Store’s Success is the entire customer experience. Apple provides outstanding expericences for the customers including the great customer services and touching and playing the products. You won’t spend too much time on lining up at the checkout, as each of the sales person is able to assist the checkouts and picking & packing the products for you. The customers can take their time to touch and play the apple products, and that’s totally ok at the apple stores. The store experience is the secret to build insanely great customer loyalty.

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    • Thanks for your comment. You are correct, Apple Stores physically creates a retail atmosphere that enables customers to properly experience Apple products and build a sense of community. Apple’s store layout is designed in such a way to provide customer the feeling that connecting with Apple products are natural and logical for them.

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  3. Nice blog! Apple’s simplistic products is what differentiates them as an industry leader. iPad’s, iPhone’s are fashion statements and simple to use for tech savvy consumers. Although the reflection of sales from the Apple Watch are not surprising as a Watch is a very intimate accessory and when consumers think Apple they don’t think watches. When a watch lover seeks to purchase a new watch, they seek movement, style, heritage and brand e.g. Rolex, Patek, Tag etc. This particular growth strategy has imposed (introducing watches) may not be their next defining step. I believe customers would rather an iPhone 7 than an Apple watch.

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    • Thanks for your comments. I agree that the popularity of Apple’s products is largely due to their simplicity, making them easy to use not only to tech-savvy consumers, but also to kids and seniors

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  4. Thanks for post!!!i think distribution strategies are a major key to success, which are maximizing
    sales and profits. Apple is utilizing from distribution strategies by using multiple channels, especially including direct or semi-direct sales and different distribution channels for different products. By pursuing this strategy, Apple increases its market coverage, lowers channel cost and provides more customized selling. Apple also has its network of stores, which gives it a major advantage in distribution. Apple is expanding and improving its distribution capabilities by opening its own retail stores in key cities around the world.

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  5. Apple has a very good grasp of who their customer is (everyone!) and what they want. Their products are very intuitive to use and are designed with the end user in mind- they look great but at the same time are very functional. They continue to innovate and, in turn, delight their customers. Despite signigicant competition in the mobile phone, tablet, pc etc. market they have maintained strong profit margins- typically because people are willing to pay for the product because it is cool and innovative and everyone wants the latest and greatest version. I think Apple also create a terrific shopping experience. At a time when many retailers are cutting back on retail staff (i.e DJs and Myer) it is staggering to see the sea of blue shirts in every Apple store during all operating hours. The team are helpful and seem motivated to provide customers with a good experience and to hopefully find the Apple solution for their need. It actually doesn’t even occur to me to buy an Apple product from anywhere but an Apple store- the price is the same so the difference is you don’t get the Apple service and experience!

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  6. Thanks for the post. I think benhammondmpk732 is onto something where Apple’s consumers are described as evangelists. What I see that Apple has done is created a brand (albeit based on good products) that are so liked that they pull the product from the manufacture. The Apple store is essentially a vehicle to reinforce and support this momentum. They don’t need to sell it – the expectation from the company is that because its Apple it will sell – they only have to ensure its devotees are able to buy it – along with all the proprietary accessories.

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  7. Apple in today’s world has become one of the biggest brands. With their retail outlets located in major hubs of every city and the customer experience provided by their employees drag the customers into buying the product. It has happened with me once, where I had no intentions of buying an apple ipad but due to the customer experience and due to the opportunity of experiencing and trying out the ipad I landed up buying it the next day.
    Good blog though!

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  8. I think that all of the design and user experience in the world will not matter if a company cannot master distribution. Apple has certainly received success. However, I would like to share my thought on the release of Apple Watch. It is known that the Apple Watch can only be sold online. According to research firm Slice Intelligence, only 22% of U.S. customers who ordered the Watch received the device during its first weekend release. What Apple referred to as ‘try-on’ appointments did not guarantee a reservation for purchase nor did they help inform customers of an approximate ship date.
    In my opinion, a heavily online-based ordering, reservation, and preview system for product ordering and customer relations has equaled a worse in-store customer experience — at least so far. The last thing I want to hear when I head into an actual store front is that they can’t sell me a product that’s already on display.

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  9. Good post~
    I always think about a question, which is why Apple is fascinating? why Apple fans are crazy to follow?
    I search on the internet got some information about Apple’s marketing strategy.
    The first one is hunger marketing, since listing, regardless of the marketing for needs how much this product, Apple has always adhere to the limited supply. Such a strong marketing style and its products, people have to love and cannot stop, haha. The second one is humanity marketing, Steve Job’s think is to “do the right thing “, this is correct, its not technology, not design, not aesthetic, but its “human nature”, for example, when you face close call, iPhone will automatically turn off the screen power.

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    • Thanks for your comment. Apple’s simplistic approach towards it products makes them appealing not only to tech savvy people but also to kids and old people.
      One can feel that strategy when you visit one Apple’s retail stores.

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  10. Apple Co. will always be a hot topic. And, it should be because there are only few other companies that had become a world leader in such a short period of time. Apple was listed on first position in world’s most valuable company last year. Their quality, innovation and marketing has played a huge role in there success. But, in my opinion Apple’s secret to success is their high level of Customer Satisfaction. I have never seen such a big queue in any company’s product launch. Some people are so crazy that they just take all the products of Apple, whether it is useful or not.
    Whatever, is the reason but still Apple dominates the entire world. And I personally respect them for it.
    Thanks for your Blog though! I really enjoyed reading it.

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  11. Apple does not prefer discount selling but the price will be change; their market position has been set as a unique seller; the qualities of their products are in a high satisfaction level for consumers. Apples’ is successful because they raise the loyalty of consumers and it received a real high demand; their brand reputation is positive for consumers. The retail stores of Apple received high revenues; they provide many huge stores and show many samples and provide assistances for customers to test and teach them how to use their products; it is a good example for customer services; this is one of the reasons for them to gain the loyalty of customers. Apples’ known about the needs and wants of nowadays customers very well; such as they pursue high-tech technologies; simple and lightweight design for the product.
    Thank you for your sharing !

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  12. Great article – goes well with my article on Apple’s packaging:
    https://mpk732.wordpress.com/2015/03/26/does-packaging-matter/

    🙂

    I think one thing we both touched on is the perception that Apple created, whether it is via packaging or via distribution. I especially like your points on perceived high demand/ limited supply and brand perception, which has been executed quite faultlessly by Apple. In fact, I believe retail employees at Apple’s distribution channel also drives the success of Apple. Without well-trained employees, Apple customers would not be getting extraordinary services that they are currently getting, which could lead to dissatisfied customers.

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  13. Apple do well by marketing a quality product. There are better products out there but what Apple does well is by pushing the customer experience to new levels, and not providing discounts. Stores such as Tiffany and Porsche don’t discount themselves as their image is quality, and if the demand for the product is there people will always chase the product

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  14. Apple in today’s reality has turn into one of the greatest brands. With their retail outlets situated in significant centers of each city and the client experience gave by their workers drag the clients into purchasing the item. It has happened with me once, where I had no expectations of purchasing a Macbook yet because of the client experience and because of the chance of encountering and experimenting with the macbook I arrived up purchasing it the following day.

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  15. Very good post .
    Apple has an one of a kind and powerful experiences about how individuals need to cooperate with innovation. Occupations utilized a quote initially credited to Henry Ford to portray why these experiences were so critical: “In the event that I had asked individuals what they needed, they would have said quicker steeds”—showing the issue that clients may be restricted to thinking just regarding what they know, rather than what is conceivable. As indicated by generalizations, designs just need to chip away at undertakings that are imaginative, mentally difficult and cool, while representatives just need to deal with tasks that profit. Any individual who has worked in a tech situation can bear witness to the way that this prompts a characteristic strain between the two gatherings. From the client’s perspective, this heap of gadget and substance gives gigantic quality that advances unwaveringness and cross-class spending.
    Thank You for Blog.

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  16. Pingback: Direct Sales vs. Channel Sales – StackStreet

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