Apple's marketing conundrum in China. Answered.Brilliantly.

Only last week I blogged about Tim Cook's announcement that Apple was going to make China it's "number 1 market". However, my point was that it created a marketing conundrum. (http://streamabout.blogspot.ie/2013/01/apple-sees-china-as-their-number-one.html)

If Apple stayed premium priced (as it is) then few Chinese could afford it. If it dropped prices, then that would have a global affect on the brand as it re-positioned itself more downmarket. It suffers hugely from lower priced competition anyway in the form of Samsung who outsell the Iphone 4:1.

So it was an interesting marketing issue.

Today we have the answer. What Apple have done on its China website is to let buyers pay for products in instalments and mostly, over two years. So the price remains the same, but the payment plan is structured to be affordable. Good solution, leave it to Apple.

It's only for purchases been 48 usd and 4,800 usd and some additional fees are paid at the end, presumably to cover the cost of credit. An Iphone in China is 850 usd, well outside the average Chinese salary (averages 577 usd per month) and dreams but this way, it puts it into affordable reality.

Apple is currently the 6th biggest player in China but only starting.
This is a great solution and great marketing.

Simple yes, but then you have to think of it and implement it.
I wouldn't have.

Google are serious about developing glasses. These have real potential.

 

The growth of Glasses as a replacement for the mobile phone - or indeed, just as a new type of glasses - is stepping up a gear.

At the CES show last week, I blogged about the introduction of Goggles that allow you to video whilst ski-ing downhill for example and live streaming it to your friends. (http://streamabout.blogspot.ie/2013/01/video-glasses-mark-2-launched-this-week.html)

And Instagram had a go at 'Instaglasses'  (http://streamabout.blogspot.ie/2012/07/instaglasses-from-instagram-this-has.html). Google's launch last year is here (http://streamabout.blogspot.ie/2012/04/google-goggles-apple-fiddles.html)

Google have just announced a big session around what they call 'Google Glass' (as distinct from what we know as "Google Googles").  They're holding a 'Glass foundry' this month, to introduce developers to the concept and to start to build the platform.

The Glasses, which they demonstrated last year, have the option to record video, get weather updates and see messages so already they've achieved a level of good sophistication. Now they're taking it further.

'Explorer Editions' of the Glasses are expected to be in people's hands next year and are currently being ordered at 1,500 usd a pair. The developers who attend the foundry event, will be able to use the glasses and the whole purpose here is for Google to get feedback.

It's early development days but this marks a real serious input by Google into developing a better product and platform because they....eh, see the light. They know there's a good business model here.

Glasses have real potential to deliver all sorts of content and to be able to do things hands-free (such as video by head movements alone). These Google versions look smart (always has been an issue) and at 1,500 usd expensive. But that's a starting price and they'll reduce in time for the mass market. The applications are enormous - Sports being one - but so many others including 'Driving glasses' that show directions, locations and geo targeted offers (possibly using 'Foursquare' for example).

And the potential to watch Movies and TV.

It's something every one of our kids will have.
I can see it now.
(sorry)

Netflix makes another content move. Deal done with Turner + Warner. This is some company.

 
Netflix is moving on with more content deals. Having the cash, allows it to compete with traditional broadcasters and win, snagging content deals that will propel it into outer space.

Netflix knows well too, that they've "got away" with poor content already and have clearly identified their content as a weakness. Something to be admired in a company.

Their positioning as a more "children" brand - insofar as they see that as being the initial hook to get subscribers - means they've a kids content focus. So now they've done a deal with Turner and Warner Brothers bringing past series of Cartoon Network and Adult Swim, starting in March.

Animation's Green Latern and TNT's Dallas will arrive in 2014. Cartoon network includes Johnny Bravo and every parent's nightmare, Ben 10. Robot Chicken and Children's Hospital are amongst many that's included - you mightn't know them, but your kids do. Very well.

The list of programmes is endless.

The Warner Brothers selection includes The West Wing, Chuck, 666 Park Avenue and Revolution. Previously Warners had said they didn't want this content streamed but seem to have succumbed to the inevitable.

Netflix has also arrived on Windows 8.

The growth of Netflix, notably in 2012, has been staggering and I don't know how many times I've blogged Netflix but it's a lot - simply, it's hard not to because this is a business that just keeps in the news. Always doing stuff.

The regrettable administration of HMV in these islands will of course give Netflix more customers and, lest we forget, we're not even at the stage where integrated TV's are omni-present in the domestic market. Imagine when they are, Netflix will rule the world.

The losers in all of this? DVD rental and traditional TV. 
The winners? all of us. 

This is a real champion of the digital world.

Google's new Chrome browser has a new focus. Voice. This could be the next wave.

The manner in which we input data - typing that is - is both tedious and old fashioned. Like touchscreen has taken over the phone, voice commands will now take over email, twitter, desktops and computing.

Apple's 'Siri' is an example of that and although cumbersome at the start (and a bit of a novelty) intelligent software allows it to recognise your voice to make it better. But all the talk is of improving voice recognition.

Now the new Google chrome browser (version 25) comes with it, a good attempt at voice commands, notably for email and web apps. On a phone or tablet, voice commands are very useful but also now on desktops.

Google's Chrome demo is about speaking to create an email so they've highlighted it as the feature.

Whilst there are software versions available to download - such as HAL and Dragon - the system is yet to be perfected so that commands are better understood. But have no doubt, it's getting much, much better and with a focus from Google and Apple, it could become the next wave.

One would think that if voice recognition worked as it might, we'd all be using it and such is the market scale that it's getting real focus. Tweeting by voice is a clear example of the need never mind email.

Voice tweeting you can already do but in a small way using brands like Shoutomatic which I've blogged about before. Wholesale voice is coming.

It could well be the next wave.

HMV ready to call in administrators Tuesday.

All major media are reporting that HMV are to call in administrators (Deloittes mentioned) tomorrow Tuesday, putting their 4,000+ jobs in its 238 stores, at risk. ITV are now reporting it as definitive. It follows a poor sales time at Christmas which was THE last ditch effort.

It's very very sad for creditors and staff - I know, I've been there. It doesn't affect Waterstones whom HMV sold in 2011 for 53 million stg.

Here is my Blog from before Christmas which gives you the background:

It was July 1921 when Edward Elgar (the 'Land of Hope and Glory' man) opened the first HMV ("His Master's Voice" which featured the famous logo and 'Nipper' the dog as above) store in Oxford Street, London, pictured below.

Elgar was the first composer to understand the "gramophone", as being a technology of the future.

The men behind the store, Williams and Owen, had founded 'The Gramophone Company' in 1897 to help spread the new technology (what was a recording device), and opening a shop to sell it, seemed to make sense. Ten years later they merged it with Columbia to create, Electric and Musical industries. EMI. Still one of the world's leading record labels and famous for signing The Beatles in the 60's.

Pioneers.

But today, it is the very threat of technology, that has brought about the demise of HMV. Internet digital sales, such as Itunes, has eroded sales on the high street and HMV stood by, like so many companies of old and watched it all happen. Who was in a better place to adopt online music when it began, than HMV? It was the music brand. Indeed, it was the DVD brand.

In 1984, Dublin's own, Bob Geldof, opened the flagship store on Oxford Street as the biggest music store in the world and it still is. I was in it many, many times. In 1998, HMV was spun off from EMI and sold to Advent International, a private equity house. In 2002, it floated on The London Stock Exchange at a 1 billion sterling valuation. Last Friday it was worth less than 10 million.

It now faces a breach of its banking covenants in January and therefore, "material uncertainty" of 220 million stg debt with 8 Banks. When you start to breach banking covenants, it's the start of a quick but slippy slope. I know. I've done it and it's the first big flag of impending doom.

Why is it happening?

Alan Giles CEO since 1999 said in 2004 he wouldn't "bet the company" on making the investment needed for digital because, "if we had bet the company then we would have lost it". Irony. They didn't make the investment and now they have lost it.

In fact, since he said it, the sales of "singles" has risen from 40m a year to 180m a year (!) almost entirely due to digital downloads. So talk about an opportunity lost.....

The Web now accounts for 60%+ of sales, HMV has about a 20% market share of UK sales and 5,000 staff losing about 36 million stg every 6 months and 176 million in net debt. The share price has gone to 2p, from £2.72.

Christmas accounts for 60% of all annual sales so these days right now, are critical to the future of HMV. However, it's unlikely they're going to make it.

Their online offering http://hmv.com/hmvweb/home.do is frankly, naff. Real "retailer built", rather than Social Media savvy. And they no longer have the money to make the investment they need to. 

And HMV is now irrelevant in a changing market landscape. Even today, it just isn't at the digital races. It's simply become extinct.

It is the story of a big brand that didn't get digital. Like their sister company, Waterstones, who let Amazon own books - or Blockbuster/Xtravision who let Netflix own video - or TV broadcasters who let The Huff Post own the news -  or Microsoft who let Apple own computing - they are the  story of the ongoing saga of dinosaurs in a world that's changed. There's no excuse either because even allowing them to miss the boat at the start, they've done little to catch up. It's appalling actually because that lack of thinking, might now cost 5,000 jobs.

Instead of walking away with some payments no doubt, the management team should be taken out and flogged. Publicly.

But herein lies a lesson for the other companies out there who have their heads in the sands. There still is lots of them and they will be replaced by this new order.

The Web is here, are you?

Apple sees China as their "number one market". But it creates a problem on price. A real marketing conundrum.

Apple for once, seems to be in a bit of a marketing bind. Their CEO Tim Cook, currently on a visit to China, said China will be "Apple's number 1 market in the future" even taking over from the US. And who would argue with that.

In fact China is going to be the biggest market in the world for most brands in the future, full stop. Remember too, there are Chinese technology companies (I can name 5 already) of note who will also have an impact outside China - this is not a one-way street.

The problem Apple have in tackling China and indeed, in competing globally with Samsung (who outsell Apple 4:1) is price. Apple is and always has been, the premium brand ($400/$500) but China needs a low cost brand (under $200). The winning formula for Samsung was of course, to do it better (or copy) than Apple and sell it cheaper - that's proved a winner. The problem with China is they don't have the incomes en masse to support Apple's current pricing. So they simply won't be able to buy Iphones and Ipads in massive numbers at current pricing.

Never mind just China, with a worldwide recession, Apple needs to consider its pricing anyway.

If Apple reduce their pricing, it will shift the brand values worldwide into a place where I'm sure it doesn't want to go - cheap rather than premium - and affect every market in which it trades.

Although interesting isn't it, that a brand can be premium in one market and cheapest in another? Corona beer in Mexico is the 10 cent, cheapest, downmarket beer. In Ireland and the UK it's $4 and premium. Same beer, same bottle, different markets.

If Apple don't reduce their pricing but try the old marketing trick of developing a new "low cost" brand - The "A Phone" or something - it will be absolutely transparent and have exactly the same impact. Apple will be cheapened.

Of course a cheapened brand is not a bad thing in recession - not at all. One only has to look at Irish Airline brand 'Ryanair' and sees them sweeping across Europe. Cheap and nasty but a huge success.

So it's a brand conundrum and a particular problem with a brand as established as Apple. My view is the way out is to move towards value add. In other words, retain the existing pricing (more or less) but then give something with the brand - buy one get one (bogof) or possibly a loyalty scheme (Apple club) giving massive rewards and so on. Subsidise the upfront cost.

We will see what Tim Cook does. Already Apple have indicated that they will not be reducing prices....but we'll see. If they're going to crack China, whatever about competing with Samsung, they have a problem and it's not going away. 

But then I'm talking about Apple and we know they'll find a way, they always do. But it will be interesting marketing to watch.