«

»

Dec 01

Last-to-Market: Apple´s Design Premium

In launching innovations companies typically pursue one of three market entry strategies: first mover (or first-to-mar­ket with the sub-variant first-to-mass-market), fast follower, or imitator. Is there space for an additional strategy, a last-to-market strategy? Apple seems to prove there is.

Only in October 2001, i.e. three years later than the Rio PMP300, the first MP3 player for the mass market, Apple enters the market with the iPod … and turns the iPod into a huge hit product. With its iPhone, Apple is now entering the mobile phone market 24 years after the first mobile phone, the Motorola DynaTAC 8000X. Even compared to the first mobile phone with Apple´s iTunes software for downloading music, the Motorola Rokr, Apple´s iPhone is entering the market with a delay of two years.

The first reaction of the market to the iPhone is promising. In the USA Apple has already sold 1 million iPhones within 74 days after the sales start on June 29. It achieved this despite the fact that the iPhone is only available at one mobile phone carrier, i.e. AT&T. What is it that makes Apple´s last-to-market strategy feasible and successful?

Three main factors are to be mentioned

  • Ingenious superior design
  • Impressive ease of use
  • Maximum secrecy around all product details up until the launch date.

The first two factors up to now make Apple stand out. Apple is able to use the premium of its superior design in order to capture significant market share from the established competition, or to decide on its date of market entry without time pressure. Hitherto there is no company which is a match for Apple in terms of consumer understanding, the resulting ease of use and in terms of design. When pursuing a last-to-market strategy, obviously the strategy of maximum secrecy is even more important than normally in order to delay any imitation attempts by the established competitors. It will be exciting to observe whether the clear worldwide market leader in mobile phones, Nokia, will succeed in pre-empting Apple´s iPhone with its new Ovi music store and its new N95 music phone.

In order to minimize this risk of pre-emption by competition in important local markets, it is of utmost importance for Apple to launch the last-to-market product worldwide within a short time window. Top innovators such as Toyota (see e.g. the new Camry) or Procter & Gamble (see e.g. Swiffer) already demonstrate how to do that. They are synchronizing their innovation processes worldwide and introduce their innovations within a narrow time slot.Apple, too, is increasingly pursuing this strategy of worldwide synchronization as the following figure shows. It illustrates Apple´s market-entry strategy for three Apple innovations, the iPod, the iTunes Store and the iPhone in the big developed markets USA, UK, Germany, France and Japan. 

 

As far as the „hardware“ products iPod and iPhone are concerned, Apple´s market entry dates indeed lie within a narrow time window. For the iPhone this holds at least for the time being. For the “software” product iTunes Store, however, Apple has taken its time and launched this innovation in these five markets over a period of more than two years.

Accordingly we should expect a launch of the iPhone in all the remaining big countries within the next few months. In any case the territory in those countries that remains for competition and that is as yet untouched by the iPhone, are the distribution channels of those mobile carriers that are excluded from Apples´s exclusive iPhone contracts. Based on the strength of Apple´s design premium it is to be expected, though, that the iPhone will succeed in stealing a significant number of consumers from these mobile carriers and, by this, from the competitive mobile phones. 

(c) Rolf-Christian Wentz

Source