Apple has stores in 26 countries and its products are available in nearly 200 countries worldwide, but what has led to its enormous success?
A breadcrumb can be found in headlines earlier this year when it announced a new spatial computing product, the Vision Pro, that commanded a $3,400 price tag. The price point signaled it would be a luxury item aimed at high-income customers.
Also this year, it was revealed that Apple was launching a low-cost Macbook line designed to compete with popular Chromebooks whose user figures are on the rise and whose usage is even starting to edge out iPads in the education sector.
So what is Apple’s target market? The higher-end or the lower-end? Who does Apple target? And how did Apple become so successful?
Who Is Apple’s Target Market?
Apple’s primary customer base is middle-to-high income consumers who value and are willing to pay for higher-quality goods. They are also willing to pay more for an enhanced and seamless user experience.
These are generally educated, working professionals have the disposable incomes to afford Apple’s flagship product, the iPhone, and also to purchase supplemental products, from iPads to Macs.
Millennials, in particular, have latched onto Apple as their brand of choice, largely because of their familiarity with it over the course their lifetimes. Apple is also popular with younger users, 70% of whom are under 45. That current market is also slightly skewed toward women.
Even though there’s data to back up the assertion that Apple users have higher incomes than Samsung consumers, other personality traits are attributed to Apple’s buyer demographic. For example, Apple aficionados reportedly consider themselves to be happier and more adventurous than other smartphone customers.
They also spend more time engaging with their technology products, spending as much as 5 hours a day on their devices, a figure significantly higher than those of Android users, who generally spend closer to 3 hours and 45 minutes.
How Does Apple Appeal To Its Target Market?
Apple has achieved remarkable brand recognition through a razor-sharp focus on simplicity. It may seem counterintuitive for a cutting-edge tech company to manufacture and market its products on minimalist principles, but there is no arguing with Apple’s success.
Simple product packaging with de minimis documentation has become commonplace now, but it was groundbreaking when the first iterations of the iPod and iPhone were released. It was a testament Apple engineers’ thoughtful and conscious design focus from the beginning that its technology is easy to use and intuitive.
Another component of the company’s appeal is its comprehensive ecosystem of applications and services that provide customers with a one-stop shop for day-to-day needs. While Apple’s proprietary software may seem inflexible and even monopolistic to some, it’s a huge plus to others.
And because many of Apple’s customers are younger, the ecosystem serves as a moat that keeps its users from switching to competitors. The longer customers stay with Apple the harder it is to leave.
What Is Apple’s Market Strategy?
Apple sold its first iPhone for just $499 back in 2007. At the time, it was a stunning cost but fast forward to today and it’s a drop in the ocean compared to phones that are closer to $1,500 a piece.
That premium pricing has been key to Apple’s market strategy. Products are priced at elevated levels, making them aspirational for many consumers. The high price adds to the brand’s allure, making it even more desirable, which economists dub as the Veblen effect.
The result has been that, while Android dominated unit volumes worldwide, Apple enjoyed the bulk of the smartphone market’s revenues.
Another feature the company has executed well against is product innovation.
Unlike companies of yesteryear, Apple doesn’t sell gadgets but instead sleek iPhones and intuitive MacBooks that connote luxury. Simply put, Apple stands out with its emphasis on innovation, design, and high-quality products.
The polish of Apple’s product suite are the result of massive investment. Indeed, the company spends literally tens of billions of dollars each year on R&D. In the past twelve months alone, Apple spent almost $30 billion on research and development related costs.
High Friction For Users To Leave
Apple’s most defining feature is its ecosystem. Steve Jobs originally pioneered the idea of a network of interconnected devices, services, and software that provide a seamless experience and enable the company to cross-sell to other services.
According to a Morgan Stanley report, Apple’s services business alone, which includes Apple Music, Apple TV+, and the App Store, is set to be a $100 billion revenue generator by 2024.
What Is The Demographic of Apple Customers?
Apple knows its audience well and targets affluent, tech-savvy, and brand-conscious consumers who are willing to pay a premium for perceived quality and brand status.
Apple’s strategic targeting is so effective that, according to Forbes, it has the highest brand loyalty among smartphone manufacturers, with a rate of 92%.
Apple’s customer focus has been undoubtedly a key to its success. Indeed, Apple created the Net Promoter Score (NPS) as a measurement of customer satisfaction. NPS measures how loyal a customer is by gauging how likely they are to recommend the company to others.
For 2022, the company’s NPS ranked at 72, which was by far and away above the industry standard at 54. That’s a direct result of Apple’s consistent efforts to make its products and stores more engaging and enjoyable.
A Masterclass In Branding
There is no doubt that Apple’s market strategy is a masterclass in how to build a brand empire. From its magnetic ecosystem to its polished products, premium pricing, and eagle-eyed audience focus, Apple has created an enormously wide moat that few firms can ever consider competing with let alone disrupting.
The company’s commitment to R&D, its enormous earning potential in the services sector, and its capture of global handset profits make it a virtual must-own in any portfolio.
So what’s coming next for Apple?
Next Up For Apple
In the company’s 2nd quarter of 2023 earnings release, iPhone sales increased 2% year-over-year, which is especially impressive given the cell-phone industry as a whole is experiencing a downturn nearing 15%.
Total revenue still declined by around 3% in the quarter due to sluggish sales of iPads and Macs. But there was also a nearly 5.5% increase in revenue from Apple Services, such as the App Store. Despite the overall sales decline, revenues and EPS were above analysts’ estimates for the quarter.
The big innovation for Apple will be the Vision Pro which CEO Tim Cook has claimed will change how users interact with the world thanks to its pioneering spatial technology.
While other substantial developments have been rumored, none have been confirmed so far, such as a search engine to rival Google or an Apple car.
How Does Apple Excite Customers?
The sleek packaging, ease of use, the robust ecosystem, and the customer-friendly approach are all cornerstones of the Apple business model. But none of those things mean anything if the tech doesn’t do what customers expect.
Innovation is the crucial avenue that enables Apple to excite its customers. From iPods to Apple TV, the company has continued to push the boundaries of what its products can do.
Apple has intentionally nurtured the expectation in its customer base that it’s on the cutting edge of technology, and that keeps the company’s users excited for every new product release.
Does Apple Target a Niche Market?
While the company has a broad user base, Apple does skew toward higher income consumers. The company has always been about providing a quality, easy to use product to its customers, but lowest price has never has been a priority.
The Vision Pro is certainly a niche market at this time, as its price tag is sure to dictate. And the new Apple Watch with a Hermes band can run around $1500. These products are certainly not designed to appeal to the majority of consumers.
Outside of the higher-end market, Apple also targets business and educational institutions for its products.
Who Is The Target Market For Apple Watch?
For the most part, anyone who would buy an iPhone or another Apple device is the target market for the Apple Watch. But the device also expands that market to, really, anyone who would wear a watch already.
A main benefit of smart watches is health tracking data, so anyone who would wear a FitBit or other fitness tracker is a potential customer for Apple Watch. It also gives Apple users a quicker way to receive notifications and respond.
All in all, it’s a great addition to the massive Apple ecosystem, and that makes it a device that’s targeted to anyone who’d consider an iPhone.
Success In a Nutshell
So, to the question how did Apple become so successful? Apple built disruptive and innovative products, established a trusted brand, and created an ecosystem that consumers loved.
From there, Apple charged premium prices to create an allure while simultaneously building a highly profitable business. The combination has resulted in one of the world’s most successful business valued at just shy of $3 trillion.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.