Wednesday, June 24, 2009

Price, Aesthetics, Functionality

Back in the paleolithic age of personal computing, Apple was among the first out the gate in the mid-1970's, and then established a strong presence through its open hardware architecture (which was mostly a product of founder Steve Wozniak's philosophy). Then in 1981, IBM came in like a tsunami and swept away the PC market from Apple. IBM's message was: we're the Big Serious Computer Company, not a bunch of bearded hippies like the other guys. Apple came back with the paradigm busting Macintosh and quickly built up a fanatical following. Apple was big on aesthetics and usability. The IBM-Microsoft product was a sloppy apology, but it had the right combination of lower price and a vast ocean of applications that the Mac could only dream of. Price and functionality won over design aesthetics and usability. In 1996 before he returned to Apple, Steve Jobs declared,
If I were running Apple, I would milk the Macintosh for all it’s worth–and get busy on the next great thing. The PC wars are over. Done. Microsoft won a long time ago.
What nobody realized at the time was that Jobs was plotting his revenge -- and that he had learned his lessons well from the Mac-PC wars. Fast forward a decade to 2007, and Apple introduces the iPhone. Well known industry expert John Dvorak declared it dead in the water. Aesthetically, the iPhone was the Mac's spiritual successor -- and indeed, in its refinement, outshone it in every department. There was feeling going around, however, that it would suffer the same fate as the Mac -- a fine device worthy of being an art exhibit, but overpriced and likely an also ran in a crowded cellphone market. It didn't escape Jobs' sharp intellect that applications were what made the PC a rip-roaring success. At the same time, his high personal standards refused to permit him to put out an aesthetically inferior product. As he observed, of products coming out of Apple before his celebrated return in 1997,
"The products suck! There's no sex in them anymore!"
-- On Gil Amelio's lackluster reign, in BusinessWeek, July 1997
Hence, rather than compromise, Apple came out with an elegant product and aggressively promoted a market for iPhone applications -- which now number over 50,000. When the 3rd generation iPhone 3GS debuted in stores last weekend, over one million sets were sold.

There is a lesson here for the marketing of functional digital products. There appear to be three important dimensions of a product or service: Price, Aesthetics, and Functionality. The IBM PC was scored low on aesthetics but its scores for Price and Functionality were high. It won over the Mac's high aesthetics but low score on Price and range of apps (Functionality). The iPhone is scores moderately on Price (neither too high, nor low), but scores very highly on Aesthetics and Functionality (Apps). No wonder, then, that it's beating the pants off the competition; it's like buying a high-end PC and getting a Mac for free. Who wouldn't go for it?

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