Is there such a thing as too much brand strength?
This past week, Apple celebrated its 30th year in business and announced 1Q revenue and earnings above analysts’ estimates. The reward? Apple’s stock went down -8% in a single day. The story was that iPhone unit sales were below expectations.
I suspect there’s more to it than that.
What’s going on? Apparently Apple has so completely trained us to expect huge news, that merely growing a huge profitable business is seen as a negative, the ‘Microsofting’ of Apple, if you will.
Apple, of course, has brought this upon itself, introducing us to the Mac, iPod, iTunes, iPhone, iPad, and changing an entire industry. As Apple’s legend continued to grow, this sort of pattern became expected, much like a sub-30 point game for Michael Jordan was greeted with a shrug. The next cool thing? It’ll come from Cupertino, of course.
More recently, Apple’s track record has been less spectacular (perhaps not coincidentally following the passing of Steve Jobs). Solid growth, but innovation more of the incremental sort, compounded by previously unimaginable screwups in product (Apple Maps) and marketing (being ‘out-cooled’ by Samsung!). Competitors have started to catch up – Apple actually is following by increasing iPhone screen size. In a recent Forrester Research study, Apple dropped from second to fourth in a consumer electronics brand customer satisfaction survey, behind Samsung, Microsoft and Sony. What the what?!?!
Finally, as one measure of expected future profitability, Apple’s P/E stands at around 12.7, down from 22 or so a few years ago.
What should we make of this? Has Apple set the bar for itself too high and is now entering a death spiral (#Sony)?
1) To be sure, Apple’s experience demonstrates that ‘what have you done for me lately’ is alive and well for investors.
2) However, to paraphrase Mark Twain, the rumors of Apple’s demise are greatly exaggerated.
– What is less visible is that Apple has built an enormously deep reservoir of confidence and mystique over the years. Apple still commands our attention, and has retained its exceptional image as an innovator and cultural driver, the result of its exceptional record of success, and absolutely consistent, disciplined branding work over the years.
Ever notice how sportscasters lead with how Tiger Woods is doing, even when he misses the cut (as happened this last weekend)? We are all still looking to Apple for the next surprise. This is what branding can do. And you don’t need a high-profile marital flame-out for it to work, either.
I would venture that Apple is still the one technology company that all others measure themselves against.
Apple absolutely needs to continue to drive category innovation. But when this happens (and it will happen), its deep-seated brand equity will help to re-energize its consumer base, driving greater sales and loyalty than might be possible with the same product from a different company. Personally, I’m waiting for the Apple TV…
The Armchair MBA 