December 19, 2017

Is Apple’s brand police blind? A surprise in Hongkong.

Everyone has a true love brand. This describes the status of deep emotional, passionate bonding with a brand. It is the holy grail of Marketing: a brand which creates stronger attachment and engagement than any other brand over a very long time. It might be the sweets from childhood. Or a tech brand we are forever tied to as an adult – standing in line to purchase the latest gadget at every launch.

When I strolled through Hongkong two weeks ago I had a surprising encounter with one of my love brands – Apple, just honored again by Interbrand as the most valuable brand in its 2017 Best Global Brands ranking, with a plus in brand value by 3% to US$184,154m. In Summer 2015 Apple had launched ads featuring the slogan “If it’s not an iPhone, it’s not an iPhone.” touting in a video that 99% of people who own an iPhone love it.
It seems only logic that iPhone means in Chinese slang „Ai Feng“ ( ) which translates into „Crazy Love„. Rival Samsung already parodied the fiercely loyal Apple customers as “iSheep” in hilariously funny videos. Nonetheless it was an encounter I wasn’t prepared for as a Marketer who strongly believes in shepherding a brand in all its facets – anytime, anywhere and under all circumstances.

In Hongkong glossy Teslas and towering skyscrapers offer a striking counterpoint to hollering street hawkers who offered me iPhones – the latest models; i.e. the 8, the 8 Plus and even the iPhone X. It weren’t even bad fakes, but original ones of the current top-of-the-line model, coming in at $999 for 64GB and $1,149 for 256GB. They didn’t do their promotion shamefaced in dark backyards, but right in front of the local Apple store in Causeway Bay, one of the six stores in town. There wasn’t only one ‘dealer’, but more than a dozen of them presenting relaxed between 30 to 100 phones on card tables or on the sidewalk directly out of bags. Their bargain: Pay in cash and you will receive your “must have gadget” with an original sales receipt from Apple in a minute! And the most astonishing fact: The price would have been identical to the official – neither cheaper, nor more expensive.

Apple and China is a story in itself. The tech giant considers China one of its most important markets. Apple shipped 8.8 million iPhones in the 3rd quarter in China, ranking behind Huawei, Oppo, Vivo, and Xiaomi, IDC estimates. This leaves Apple at approx. 8% of the Chinese smartphone market, compared with 33% for Huawei and Xiaomi combined.

Still, that represents improvement. The greater China region returned to growth for Apple in the three months to September after several quarters of declines. Revenues from Greater China were up 12% year-on-year to $9.8 billion.

Tim Cook, Apple’s CEO, spoke at China’s World Internet Conference in Wuzhen for the first time, emphasizing the importance of the world’s largest smartphone market.

The iPhone X could bring a „renaissance“. GBH Insights estimates that there is an install base of 100 million iPhone users in China and that half of these are due an upgrade in the coming 12 to 18 months. „It all comes down to the success and elongated demand trajectory of iPhone X over the coming quarters to determine if Apple finally ends up joining the elusive trillion dollar market cap club in 2018„, concluded the analyst. The exact margin on the iPhone X isn’t known but according to Reuters it costs $357.50 to manufacture giving it an initial margin of 64% before shipping, research, and marketing costs.

Back to my encounter. Puzzled from my discussions with several touts I entered the Apple store and questioned a sales expert about the black market directly in front of his shop. He couldn’t have kept more cool. The local police would look into the situation sometimes and would shoo away the hawkers for some hours. If I would want to buy my latest love product – the iPhone X – I could enroll online for one and could pick it up with a very high probability on the next day. But this would be it! I beg your pardon?

Officially the firm is taking a hard line against Hongkong’s scalpers with a strict policy on refunds and exchanges. In a note on their online store in Hong Kong, the company announced that it would not “accept return for online orders placed on, and after August 15th, 2017.” This mirrors the policy unveiled last September during the launch of the iPhone 7 and iPhone 7 Plus. Here a 25% “open box fee” was levied or a 15% “restocking fee” when customers wanted to return their Apple or Beats products, depending on whether the packaging had been opened. This rule is a break, as it normally offers customers a 14-day free return service for undamaged products, upon showing original receipt and packaging.

But all this doesn’t seem to stop the vendors popping up on street corners to hawk the new devices. The city’s lower taxes and duties have long provided an incentive to buy there and re-sell to tourists or ship across the border to mainland customers unwilling to wait.

For my part I have to admit: My love brand lost something of its holy grail aura when its latest high-prized products are laying hundredfold in the dust of Hongkong’s street.

Based on my two decades of Marketing experience I am convinced: Brand consistency is key. And this is fundamentally a personal experience. When we buy into a brand, we buy into what it stands for, how it acts and what it means to us. Consistent brands assure us our next experience will make us feel as good as last time, a source of satisfaction we can rely on and look forward to. This special “relationship” carries expectations. When these fall short we feel let down – and we might look elsewhere.

How would you feel about this?

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