How Apple and Samsung Are Winning Through Customer Engagement
Blackberry, Nokia, HTC and Sony. What do these companies have in common? A stated aim to be number three in the mobile marketplace. You're probably asking yourself is this really the limits of their ambitions? I can tell you it isn't, but circumstances currently mean that number three is all they have to shoot for right now. Apple and Samsung are winning - and winning well. Displacing them requires them to either become complacent and slip up or a significant investment in time, money and development, something that few competitors are able to do in the current financial climate.
So why are the big two doing so well?
For Apple its easy to see. By delivering only high quality products and backing them with a phenomenal customer experience they engage with customers on an emotional level. Owning an iPhone is only ever a good experience for the customer and that positive emotional attachment is reinforced every time that Apple enhances its experience or capabilities. We rush to buy Apple products because they make us happy and its rare that we get such high satisfaction levels from any product we purchase today. The high cost of entry is immaterial because the expectation of great experience adds value to each one of those dollars invested. That the product then delivers only reinforces that experience. Partnered with a whole Apple ecosystem that delivers the same positive experience it is no wonder that Apple it thriving. Its the reason why Apple gets little leeway when it does fail - Antenna-gate and Maps for example.
Samsung's success is a little different. It would be a stretch to say that Samsung delivers a great customer experience every time - understandable as a large part of its volume comes from the low end, cut throat market where margins do not support great post-sale user experience. Even when the product is exceptional we don't get the same emotional attachment to Samsung products even though they'll generally outperform their direct competition from Apple.
So how have Samsung reached this position of dominance? I believe that they have become the anti-Apple, selling to everybody who doesn't engage with Apple for financial, political or cultural reasons. Its ironic that Samsung's strength and dominance in the market has been directly driven by Apple. Only after Apple began its high profile litigation against Samsung did sales really take off. The message being given to consumers was firstly that Apple didn't like Samsung, an immediate emotional driver for the anti-Apple consumer. This was then further re-enforced by Samsung with its clever advertising that further positioned it in direct competition with Apple. Its classic David v Goliath strategy and for Samsung it has worked so well that the protaganists roles have reversed.
Secondly Apple's litigation told those users who weren't able to purchase an iPhone that a Samsung phone was just as good as one - after all they copied it, how could it not be?
The two now sit at the top of the tree in a constant state of conflict. Its similar to the current state of the Cola market. Who's number three after Coke and Pepsi? Who cares? The big two purveyors of sugared water can effectively ignore the rest of their competition because they are no competition. So long as Pepsi and Coke continue to battle each other they ensure their position at the top of the tree.
By playing on positive and negative feelings about Apple, both Apple and Samsung have created a strong emotional attachment with their customers. As any businessman will tell you, that's something that every large enterprise strives for.
As long as they continue to score points off each other Apple and Samsung can polarise the smartphone market in the same way as Coke and Pepsi. However, the smartphone market is much younger and there is still some opportunity to break the stranglehold. Several companies have the motivation and/or the capability to deliver.
Nokia and Motorola for a start.
The former has the funds and the backing of Microsoft to drive a wedge into the market and make a three way battle for supremacy. Neither Microsoft nor Nokia can afford to be number three in the market and will need to invest heavily in joining the battle. Financially Microsoft has the muscle to make it happen - especially whilst its grabbing a chunk of the profits in the Android market thanks to its licensing agreements with several OEMs. It will be interesting to see whether Nokia can deliver a user experience which rivals Apple's, certainly the initial signs have been good. However working within the constraints of Windows Phone limits the amount they can do and at some stage I feel Microsoft are going to have allow Nokia to go outside the limits of the OS to maintain competitivity.
Google's ownership of Motorola gives them an opportunity to break the stranglehold too, although only at Samsung's expense. This has to be a consideration for Google, a strong Samsung hogging the bulk of Android sales has considerable risks to Google's mobile strategy. Motorola needs to seriously upgrade its game if it intends to dethrone Samsung and its questionable whether Google's timeline for turning the business around ever puts it in a position to compete.
Elsewhere, Huawei and ZTE could drive their large China-focused businesses worldwide by starting to deliver high end handsets. Both already deliver in the budget sector and if they can grow brand recognition and deliver competitive flagship models who knows where they could go? If they are intending to maintain their dominant position in the market executives at Samsung will be keeping a close eye on developments at their near neighbours and have a strategy to counter any growth at Samsung's expense.
For Sony, HTC, Blackberry, Asus and other competitors however, the future does not encompass being number three in the market. A future as a bit player means they are going to have to put together a business model which allows them to deliver profitability on small volumes.
There's a shakeout coming… not all will survive.