As Apple shifts toward services, company needs to rethink brand
August 11, 2017
Photo: Liz Hafalia, The Chronicle
Apple Inc. owns one of the most valuable corporate brands in the world. But that equity — worth an estimated $107 billion, according to Brand Finance — has not always extended to the products and services that it offers consumers.
In fact, you would probably have to go all the way back to 1983, with the debut of the Apple IIe computer, to find the company’s last major Apple-branded product that struck gold.
A spokesman for Apple did not respond to a request for comment.
“Apple is still perceived as one of the most dynamic brands in the world,” said Jonah Berger, an associate professor of marketing at the University of Pennsylvania’s Wharton School in San Francisco. “So while some of the recent products haven’t hit the mark, its not clear the brand is to blame.”
“It’s hard to transition from a corporate brand to additional brand franchises,” he said. “But if the corporate brand is strong, companies tend not to stray too far.”
Yet Apple may need to rethink its strategy. Under CEO Tim Cook, the Cupertino giant is changing from a company that makes products to one that offers services, like mobile payments or streaming video. The aesthetic attributes we naturally associate with Apple products — craftsmanship, simplicity, beautiful design — don’t translate as well into stuff we can’t hold or touch.
Corporate brands and product brands are often separate things (think Alphabet versus Google, or General Motors versus Chevrolet). That’s because they play to different audiences for different purposes. The name of the overall company speaks to the firm’s culture and reputation to employees, shareholders and governments. A product brand communicates a specific message about the item’s quality, design, or function to consumers.
Procter & Gamble is a well-respected corporation. But none of its products carry the name of its parent. Instead, the company owns a plethora of consumer brands: Bounty towels, Crest toothpaste, Dawn dishwasher detergent. Most people wouldn’t know that P&G makes Gillette razors.
Target, on the other hand, more closely resembles Apple: Both companies pursue a “master brand” strategy in which the corporate name publicly anchors all individual product brands. Target has developed a lot of store brands, including Archer Farms and Cat & Jack. But the most important brand in a Target store is always Target.
Like most tech startups, Apple’s marketing strategy during its early days was mostly impulsive and improvisational. The name of the company originated from one of Jobs’ favorite foods.
“I was on one of my fruitarian diets,” Jobs told biographer Walter Isaacson. “I had just come back from the apple farm. It sounded fun, spirited, and not intimidating. Apple took the edge off the word ‘computer.’”
“Plus it would get us ahead of Atari in the phone book,” he said.
Co-founder Steve Wozniak said that the professional marketers were not too enamored of the name.
“Our ad agency said to me and Steve: ‘You’ve got to give up the name Apple as it doesn’t imply the power of the computers,’” Wozniak told a marketing conference last year. “We tried to tell them once our products get into the home and change people’s lives it will make sense as an apple is a good name for a household brand.”
Jobs offered a more sophisticated brand strategy when the company released the iMac computer, iTunes jukebox software and the iPod music player in the early 2000s. Jobs envisioned Apple’s computers acting as a central digital hub for an integrated set of products and services. The “i” in iMac stood for “Internet.”
But over the past decade, the tech industry shifted from personal computers to mobile devices and software that lives in remote Internet servers known as the cloud. The company’s iPhone and iPad have replaced computers as the company’s focus.
Despite the success of the “i” products, “it wasn’t clear that was truly a brand,” Berger of Wharton said.
At the marketing conference, Wozniak suggested that Apple has run out of innovative things to make.
“Maybe we are at an innovation plateau as we now have reached a certain height on cameras, microphones and sensors,” Wozniack said.
And perhaps, there lies the problem. Apple’s brand historically signified innovation. So if Apple has tapped out on innovation, what does it stand for?
In his quarterly calls with investors and Wall Street analysts, Cook has talked up Apple’s fast-growing services business. But the tactile factors that make Apple computers and mobile devices so appealing don’t necessarily migrate well to products that mostly live in the cloud, like Apple Music or Apple TV.
“It’s harder to brand a service,” said Scott Galloway, a professor of marketing at New York University’s Stern School of Business. “Obviously, you are doing it in a more abstract way.”
The shift hurts Apple in another way: Its stores, temples to Apple product designs, are less valuable for selling services. The Apple Store has been such as success because it effectively showcases products that customers can touch and hold. You can’t generate that same level of excitement or connection with a service. Perhaps that’s why, according to Brand Finance, Apple’s brand value dropped by $39 billion this year, falling behind Google.
I can marvel at the aesthetic pleasures of a MacBook Pro but I’m not likely to say Apple Pay is “beautiful.”
As Apple plots its way forward, the company might need to rethink what its name is worth — and what to attach it to.
Apple’s big hits
Macintosh, PowerBook, iMac, iBook, iPod, iPhone, iPad
Apple Newton, Apple Watch, Apple Music, Apple TV