Vertygo Team

Apple Marketing Strategy

In 2003, the Apple share price was $7 (seven US dollars).
In 2007 the Apple share surged to $180.

A 2500% increase in just 4 years.

In 2012 Apple share reached the $680 mark, and Apple market capitalization topped $500 billion, overtaking giants like Microsoft, IBM, Exxon and Shell.
In 2012 and 2013 Apple enjoyed the status of #1 stock market capitalization company in Wall St.

Which is the secret of Apple astounding success?


If we want to really understand the secrets behind Apple stunning success, we need to focus on a specific period: the key period for Apple, that is the years between 2001 and 2008.

Before proceeding with the analysis, let us examine some more data (from the official Apple Inc. financial statements):

in 2003 Apple revenues were $ 6.2   billion
in 2008 Apple revenues were $ 37.5   billion
in 2012 Apple revenues were $ 156.5   billion

and in terms of profits:

in 2003 Apple profits were $  0.0 57 billion
in 2008 Apple profits were $ 6.1   billion
in 2012 Apple profits were $ 41.7   billion

This makes a 5000% increase in revenues, in 9 years,
and a 8000% increase in profits, from 2003 to 2012.

From 2003 to 2012, Apple stocks and market capitalization rose 9700%.
Calling these results 'spectacular', is an understatement.

It has to be remarked that, in the 2003-2012 period, Apple did not make any significant acquisition.
Thus, all the Apple growth was the outcome exclusively from its in-house operations and products.

More than 90% of this growth came out from just 3 product lines: the iPod, the iPhone (from 2007 onwards),
and the iPad (from 2010 onwards).

Since the iPhone launch, in 2007, and until 2013, Apple sold 500 million iPhones.
in 2012 alone, Apple sold 120 million iPhones,
in 2013 iPhone sales have been more than 160 million units,

Since the iPad launch, in 2010, and until 2013, Apple sold 200 million iPads.
in 2012 alone, Apple sold 60 million iPads,
in 2013 iPads sales will reach 100 million,

Recession? Apple thrives.

All the great economists on the planet keep telling you, over and over, that the years between 2008 and 2013 have been (and still are) "challenging times" for the economy.
This is an elegant way - and quite hypocritical - to say that US and Europe have been (and are) deep into a 5 years recession.

On Sept. 15, 2008 the crash and bankruptcy of Merrill Lynch gave the headstart to the present 5 years recession.
And generated an avalanche effect.

Well, the above numbers say that, in spite of the "challenging economic situation", when most companies in the US and Europe saw contractions of sales and profits, Apple thrived.

How was that possible?
What Apple had, and did, that all the other major companies in the US and Europe didn't?

Which is the secret of Apple astounding success?

The answer is straightforward:

  • excellent products
  • stellar brand value
  • unconventional marketing
  • brilliant, smart and unconventional communications

However Apple brand value is a consequence of the excellent products and unconventional marketing.
And communications are an integral part of the marketing process.
Therefore, the keys of Apple success can be synthesized in:

  • excellent products
  • unconventional marketing

The Apple Milestones.

There are four milestones in the history of Apple astounding success in the last 10 years:

2001: The launch of the first iPod.
2004: The iPod start to sell significantly.
2007: The launch of the first iPhone.
2010: The launch of the iPad.

The Origins of Apple success.

Today - 2016 - the key products of Apple are the iPhone and the iPad.
Together these two product lines make more than 70% of Apple total revenues.

But both the iPhone and the iPad derive from the iPod.
It was the introduction of the iPod and iTunes, back in October 2001, that marked the turning point for Apple, from being just a hardware and software computer company to what it is today.

The iPod was the turning point of Apple history and success
The iPod made the fortune of Apple.

Therefore, to understand the roots of Apple growth and the astounding success it made in the last 9 years, we need to focus on the iPod, rather than the iPhone or the iPad.

Before October 2001, Apple was just a computer company, producing hardware and software.
While Apple computers and their operative systems were decidedly superior to their competitors - Dell, Compaq, HP - the marketshare of the "Mac's" - the Apple computers - were idling at around 4%, never making it much above that level.
It should be noted that all Apple competitors computers were using a Microsoft Windows operative system, which did amount to mre of 90% of the operative systems marketshare.

Apple made incredible efforts in research and development, and in marketing, to climb above that miserable 4% of the marketshare, but never succeeded, in spite of many innovations introduced in more that 20 years.

For Apple, computers were a dead end.

One of the key drawbacks of the Apple computers and software system was the non-compatibility with Microsoft Windows based computers. Since Windows based computers were dominating the market, at 90% of marketshare, the non-compatibility issue was a no-win situation.

Again: for Apple, computers were a dead end.

Then, the iPod came.

The Turning Point.

In 2001, financial analysts had little interest in Apple, as it was just one of the many companies listed at the NASDAQ. Apple profit and revenues results were not that interesting, nor promising.
Apple was not displaying any significant growth.
At that time, the name of the company was 'Apple Computer, Inc.'.

Therefore, even today, the great majority among financial analysts and marketing experts take for granted that the iPod + iTunes concept originated inside Apple.

This was not the case.

The iPod + iTunes concept was brought to Apple by an outsider, a former Philips engineer, named Tony Fadell.
Before contacting Apple, Fadell had proposed the iPod + iTunes concept to Microsoft.
Microsoft executives turned down the proposal, saying “This will not make any money”.

Where are those brilliant Microsoft Executives, right now?

Apple, on the opposite, bought the iPod + iTunes concept, hired Fadell, and gave him a development team.

Great ideas may come from everywhere.

A great lesson for company executives.

The idea was genial and powerful: a small, portable mp3 music player, and an online mp3 (aac) music store.

However, with the iPod things did not start so sweet, for Apple.
After its initial development, Apple launched the iPod on the market in October 2001 - right after the September 11 events, and subsequent Wall St. turmoil.
The iPod launch did not seem to make any significant impact in the marketplace.
Infact - and few financial and marketing experts know it - for the first 3 years the iPod was a terrible flop, whose sales were not covering even the research and development costs.

In the first 3 years (Oct 2001-Sept 2003), iPod sales were lingering between 50,000-150,000 units per quarter, very far from the 10-20 million units per quarter of 2006-2012.
In the first 3 years the iPod sales were not even covering the product research & development costs.

Then, in June-August 2004 something happened, and iPod sales began to rise, and rise significantly, quarter after quarter.
In late 2004 iPod sales broke for the first time the 800,000 mark in a single quarter.

We know what happened after:
in 2006, in a single quarter, Apple sold 20 million iPods.

Then, in 2007, the iPhone came. And in 2010 the iPad.
But the turning point for Apple was the iPod.

Which were the reasons of the iPod success?
(after the 3 initial troublesome years)

>> continues in Apple Marketing Strategy - Part 2

This essay on Apple Marketing Strategy has been first written in 2003, then extended and updated in 2007, in 2010 and in 2013.

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