The Customer Service Survey

Doing Business vs. Doing Profitable Business

by Peter Leppik on Wed, 2012-02-15 17:33

Apple is not the biggest company in the mobile phone industry, as measured by metrics like employees, customers, and revenue. But it is far and away the most profitable--to the extent that the company actually makes up the bulk of the profits of the entire mobile phone industry. According to today's Wall Street Journal, Apple is so insanely profitable that it is distorting the stock market as a whole.

How does one company manage to suck the profits out of an entire industry?

I think the answer is obvious: every other major company in the mobile phone value chain is focused on winning business. Apple is focused on winning profitable business.

So where other handset manufacturers and the carriers are beating each up on price and trying to outdo each other on feature-by-feature comparisons, Apple is delivering an entire customer experience. Apple's experience isn't just about the hardware: it covers everything about the phone including hardware, software, support, upgradeability, battery life, and the list goes on. Even the experience of removing a new iPhone from the box is meticulously designed.

Not every customer wants what Apple is selling, but a lot of them really want it and are willing to pay a premium (or put up with a carrier they don't like) to get it. As a result, the most profitable business flows to Apple and the carriers feel obligated to make crazy deals to get the iPhone or lose customers.

I don't think there's anything magic about Apple's formula. But it requires a company to focus on what it really does well, think about the whole customer experience, and not get distracted trying to respond to every ripple in the marketplace. That's very had to do in our business culture where the goal is usually profitability measured in three-month increments and the mantra is "win every battle at any cost."

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