Sopped Sales

Apple has more to worry about than the FBI, courts and the government breaking Apple’s privacy engineering.

smartphone-shipments-market-saturationApple has a peaked market that appears to be limiting their growth.

All markets eventually saturate. The smartphone market, in most first-world nations, is saturated, or nearly so. Thus, the number of people willing to pay a premium for Apple mobile devices is almost capped. iPhones – at least in their current incarnation – appear to have reached saturation. iPhones will not compete in second- and third-world markets against $4 Android phones.

All markets are segmented. When the segment you dominate becomes saturated, you have to change something before revenue growth abates and stockholders call for your head. The question remains which action is correct. Apple has a brand built around the high-end of their market, so they are unlikely to trash their brand by dropping prices.

Since this is basically a segmentation and product question, segmentation and product are where to look.

SEGMENT: If your segment is saturated, you start by looking at other segments. But this depends on how narrowly you defined your beachhead segment. You begin by examining your targeting assumptions and seeing if other segments offer new customers with little or no product changes (often it is a simple as localizing the product for a different geographic region).

REGIONAL: As Apple’s dilemma demonstrates, different regions have different demands, pricing being one. Examine the demands and see where a product can be inexpensively augmented to fit local needs and preferences.

FEATURE: One set of features may be fine for one audience, and either too much or not enough for the next. There is little harm in providing a stripped-down version of a master product, and nearly everyone extends their products to reach previously unreachable buyers.

REPLACEMENT: If all your segments are saturated, then you may be forced into replacement marketing (where Apple appears to be heading). You must keep current customers replacing your products with more of your products, but you can also try to move customers away from competitors (in Apple’s case, this becomes increasingly more difficult as Google solidifies their Android universe).

NEW PRODUCT: If your markets are completely saturated, and the cost of converting customers is high, then creating a new (and preferably synergistic) product is a way forward. Some think this was the goal of the Apple Watch, though sales reports are not encouraging.

Plan for saturation. It always occurs eventually.

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