Scott Galloway and the tricky mindset of Apple's downselling strategy
I addressed very recently the (in my very much professional opinion) superb move of Apple regarding the laptop market, and their introduction of the MacBook Neo.
Philippe MEDA
Downselling 101: How more focused and cheaper products canunlock a dormant market with more margin.
Just yesterday, Scott Galloway (brand professor extraordinaire) shared his take on the whole thing and, unlike me, wasn't much impressed.
I would always be premium-priced if I were Apple. I'd always be unattainable for 78, 85% of the world's population.
Then, pushed further, he laid out the trade:
I think it works in the short run. I think in the long run, if CHANEL came out with a $400 bag, they would sell a shit ton of them. And then over time, it erodes their margins. And the truly aspirational people stop, start buying more Hermès or what have you. So I think it's a tradeoff of market share in the short run for what is the core asset, and that is irrational margin as the premier luxury brand in consumer products.
And to put the last nail in the whole coffin thing, he added:
Apple has the margins of Ferrari with the production volumes of Toyota. No company has ever pulled that off before.
Admitting, though:
They think they're going to expand share and clear out a bunch of their competition.
While, in the end, he was diplomatic and added that if we had to pick who's right between the strategy team at Apple and Scott Galloway, you go with the strategy team, I think I missed the point entirely. But if you had to pick between Scott Galloway's take and mine, maybe take his ; )
Here's the thing:
A down-selling strategy is not synonymous with devaluing your product or service, making it cheaper, or removing features. Down-selling entails a strategic overhaul of your business operations, prompting a reassessment of how value is generated, delivered, and monetized. The goal is to access market segments that your business model historically overlooked (certainly for good reasons at the time), which doesn't just mean "make it cheaper."
In Scott's argument, there are two fallacies: 1) It's not about the product but the value added you can pull off, and 2) It's not about the whole market but the market you can't access yet.
In that regard, a bare-bones but well-crafted and more than powerful enough laptop is not a discussion about making a cheaper product for customers without enough money to buy a regular Apple-branded device; it's about delivering 80% more value to a market that has never had access to such "privilege." With this, Apple doesn't degrade its brand; it reinforces it in a major way by reaching a part of the market it hadn't been addressing until now.
I spent two days last week discussing it in great detail with leaders from different parts of the world at Saint-Gobain, and three more days last week still discussing it with executive MBA students in Paris: it's never about the product. If you spend too much time discussing any strategic move (especially if it's somehow disruptive) by focusing on the product, you're missing the point entirely.
Strategically changing the market is about creating a new connection between who's facing a core problem and how you're going to solve it by adding value. The product is just a consequence of your move; it's important because it will deliver value, but in itself it's meaningless – and your brand is certainly not defined by its features, packaging, price point, etc.
So I don't know about his current take on branding, but in any case, Scott is doing many interesting things, and maybe you'd need to check his Resist & Unsubscribe initiative:
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