Apple's Superior Brand Strategy Leads to Strong Results

Implications: Apple once again delivered very strong results in the face of hesitant consumers under recessionary pressures.Total revenue growth for the latest quarter was +36% led by the Mac brand in personal computers at +51%.The MP3 segment led by the I Pod brand delivered growth of +1% while the I-Phone sold 1.7 mm units.   So how is Apple able to deliver consistent sales and profit growth in tough recessionary times with premium pricing while many of its competitors deliver poor results.In a phrase --it's their superior branding strategy.  

Analysis:   A company's brand name is often its most valuable asset.Simply put a "Brand" is a name that consumers associate positive or negative benefits or attributes about a particular product,service or company.Many people think of brands as it relates to the supermarket industry.However, a brand can be more than just a product name.Strong brands can evoke images of dependability " Maytag", safety "Subaru", luxury " Tiffany" or in Apple's case  "cool or hip and technologically superior".  

There are many types of Brand names.You can have a corporate brand name "General Mills" for example (GIS).Most General Mills products have their own individual product brands "Cheerios".The Big G logo is put on most General Mills products to signify trust and consumer confidence.The individual brand "Cheerio's is what most consumers remember.In Apple's case, Apple is the corporate brand with I-Pod being the individual brand.Some companies brand a service or a component of a product "Intel inside".Other companies use an "Umbrella" brand Pepperidge Farm (owned by Campbell Soup-CPB) This where they use the same brand for multiple products(cookies,bread,crackers etc).Umbrella brands are used when marketing funds are tight and the umbrella brand provides instant name recognition to the consumer.However, companies must be careful not to use the umbrella brand for all products.Kraft (KFT) means "cheese" to consumers.Cheese based products under the Kraft brand have done very well.However, when Kraft Foods has used the Kraft brand on other categories (salad dressings,barbecue sauce etc) their results have not been as strong and effective.

Apple's success in the last year is based on two strong strategic moves they have made over the last several years.The first was branding and marketing support behind the launch of the I-Pod.They created a segment (MP3 players) using a very cool, image based television campaign featuring big name music stars to appeal to the image crazed teenager crowd.They provided a good product (not superior in my mind) but correctly branded it and provided a high level of marketing support to cement their image as the only cool MP3 player.I have 3 teenagers and consistently tried to get them to settle for the less expensive Sansa brand (Sndk) but was told it was an I-Pod or nothing.Apple created a value added difference vs. their competition (image) based primarily on advertising and "Branding". 

  Secondly, they followed up that success by supporting their Macintosh line of personal computers and highlighted the ease of use vs. the Vista operating system and other computer manufacturers.Their recent quarterly results for Mac's +51% shows this effort has also delivered.Consumers have bought into their branding efforts for Mac's -- they are easier and simpler to use and also more cool than traditional personal computers from Hewlett Packard and others.In this situation Apple,also benefitted from what's known as the "Halo" effect.In advertising terms this is when when one product or brand from a company benefits in sales from a 2nd product or ad campaign from the same company.The I-Pod has had a halo effect on the Macintosh brand by bringing in younger,more image conscious consumers.The I-Pod brand has also provided some of this same "halo effect" to the I-Phone. Consumers clearly know that all 3 products are made by Apple (the corporate brand) and this translates to consumers believing Apple's products are more hip and technologically superior than competitive products.  

The benefits to Apple as company for this superior branding strategy are immense.It provides a fantastic platform for future new products.Consumers will constantly seek out their new products and view them as the next generation with a cool image and technological superiority,It will also provide them with superior pricing power over the long term.This means that Apple will continue to lead and deliver above average sales and profit growth.As in consumer food products a superior brand name is worth its wait in gold.