updated 01:00 am EDT, Thu July 4, 2013
Sweeping change in iPhone marketing to feature trade-ins, price-matching
Apple CEO Tim Cook is said to have told top retail managers in a secret meeting that the company would like to "equalize" the difference between the percentage of customers that come to Apple retail stores for iPhone repairs versus iPhone sales. The move, reported by unnamed sources, would encourage more customers to use the Apple retail presence to buy iPhones (where currently only 20 percent of buyers do) through the use of direct trade-in offers and other incentives. The recent addition of the iPhone to Apple's "Back to School" promotion was allegedly the first step in the plan.
While only one-fifth of all iPhones are sold from Apple retail stores, fully half of those needing a repair or replacement get it from the retail chain. Having customers buy their iPhones from Apple stores, Cook told those present at the strategy briefing, offers a number of advantages -- including more exposure to other Apple products during and shortly after the initial purchase, and as a way to fight bribed or biased carrier-outlet and retail-store employees that may push customers away from Apple's mobile products.
The meeting was said to have been held in Fort Mason in San Francisco, and telecast live to Apple Retail Leaders all over the world, reports 9to5Mac for approximately three hours. Another emphasis at the meeting was instructions from Cook and other executives to the retail management to make more effort to treat employees better. Among the suggestions were to be quicker to offer praise and reinforce the importance and value of retail employees as "the face of Apple" to many consumers.
Morale is said to have been dropping at some stores due to a long "dry spell" of new product announcements, the high pressure of a constantly-crowded work environment and even the lack of a formal head of retail -- a position that has remained unfilled since John Browett departed the company. His responsibilities are now handled by Cook and other executives such as Phil Schiller, but his policies and methods angered some front-line retail employees and customers.
Schiller, SVP of Internet Software and Services Eddy Cue and SVP of OS X and iOS Development Craig Federighi were among those also attending the meeting, which lasted for nearly three hours. While no new details of forthcoming products were revealed, managers were told to expect a significant array of new and refreshed products in the fall leading up to the holiday buying season.
Among the known products that are coming are at least one new iPhone model, new iPads, the latest major upgrades to both OS X and iOS, and the long-awaited arrival of the redesigned Mac Pro. Rumored but not confirmed is the possibility of one or more entirely new Apple produces such as a branded HDTV or smartwatch, additional services and software updates related to iCloud, a possible "low cost" iPhone model and additional refreshes of products such as the MacBook Pro.
Cook spent much of the meeting discussing the iPhone in particular, since it faces the strongest competition from rivals. Collectively, handsets running Google's Android already outsell Apple's iOS platform -- but Apple remains the top single brand, and is gaining ground in North America and some other markets as more former rivals like BlackBerry and Microsoft continue to fade. Cook is said to have expressed satisfaction with sales of Macs and iPads, both of which dominate their own market niches and thus didn't focus on them during the meeting. He told representatives that the iPhone is Apple's chief "gateway product" to other devices like the iPad and Mac, and consequently it was of vital importance that more iPhones be originally sold from Apple Stores.
The plan would not interfere with carrier-owned retail outlets much, since customers would still need to arrange service with a provider as they purchase the iPhone in an Apple retail store. However, if Cook's plan is to steal away sales at reseller outlets in order to increase sales of the iPhone at Apple Stores, he will likely face strong objections and a further alienation of resellers, who are then even more likely to push customers towards Android phones.
The vision for the retail strategy makes sense given Apple's design to control the buying environment as much as possible; the company is notorious for demanding that the iPhone be displayed separately of other makers, not mentioned in carrier commercials where rival phones are mentioned and other restrictions meant to isolate the brand as being separate from lesser products. It adds the advantage of having potential iPhone buyers self-select to being sold one, making sales much easier.
However, the success of the strategy would depend heavily on the company's ability to get customers to make the separate trip to evaluate the iPhone when comparing options. That most Apple stores in the US are located in malls where smartphone options abound may prove to be an advantage, since most resellers do not take the time to create the buying experience that Apple does.
Cook believes that if new customers buy their first Apple product (likely to be an iPhone) from an Apple Store, the environment and their likely high satisfaction with the product will send them back to the Apple store to get a tablet, or additional iPhones, or even consider making the jump to the Macintosh platform. Mac user communities like our own MacNN Forums are filled with stories of "switchers" who had such a positive experience with their first device that they switched over their entire household.
It is possible that Cook simply intends to grow iPhone sales so that the rates of purchase and repair visits are more "equalized" rather than taking sales away from other retailers, but Apple is still expanding the number of Apple Store locations both inside and outside the US, and has recently included the iPhone in the annual "Back to School" discounting program that is run out of the retail and online stores. New buyers who qualify for the promotion can get a $50 gift card good at Apple's online app and media stores, such as the iOS and Mac App Stores; the iBookstore for e-books, and the iTunes Store for music, movies, TV shows and audiobooks.
According to the report, additional incentives will be announced at the quarterly retail store meeting at the end of July. This is thought to be referring to a new "trade-in" program that would compete with similar offers from resellers like Radio Shack. Under the promotion, Apple Stores would be allowed to price-match discounted current iPhone models available elsewhere, or offer credit on a damaged iPhone towards a brand-new model (if the phone doesn't qualify for replacement). The company may also begin demos of iOS 7 ahead of the software's official release to get potential and new customers familiar with it early -- just as Apple has done in inviting retail employees to work with the unreleased betas of iOS 7 currently.
Apple's retail stores have traditionally been thought of primarily as ground zero for new product launches, complete with the requisite line-ups; a repair oasis for damaged or malfunctioning equipment that has a stellar customer service reputation; a learning and training center for mastering new Mac and iOS skills, and a store that sells Mac and iOS devices and accessories at retail prices. With above-average staff and a busy-but-hip vibe that shows off both the detail and passion that drives the company, and a raft of new products coming this fall, Apple can expect all its stores to be bursting at the seams again when the holiday season rolls around.
While most people are not thinking about the end of the year yet, Apple is clearly expecting that new goodies, fresh looks and mostly-weak competition have given it an opportunity to reach out to entirely new customers as well as returning ones, and it will be relying heavily on its retail army to achieve that goal. Taking solid steps to make sure the troops are as excited about the mission as customers are delighted with their purchases may be another key factor that separates Apple from the pack going forward.