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

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. 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

Apple’s $171 billion 2013: Amazing … and amazingly forgettable

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