Apple's Brand Makes It a Good Long-Term Investment
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Amid a heated battle for market share in the smartphone segment, competition is escalating at a blistering pace. In view of this, it is emerging that the key determining factor in this contest will not be innovation or pricing as many people would want to believe, but rather brand perception.
Is brand that important?
From a business standpoint, brand sits at the top along with human capital and customers. Brand not only creates a point of contact for a business and its customers, but it also creates a business’s identity and further signals its reputation. The American Marketing Association contends that 89% of customers consider brand popularity when choosing similar products.
In light of how important brand perception is, let’s look at the brand strength of each mover and shaker in the smartphone segment.
Apple’s (NASDAQ: AAPL) brand is cool
Apple’s brand has for a long time been synonymous with coolness. In addition, the element of superiority is woven into every aspect of the company- it is Apple’s unique selling point. This explains why Apple is reluctant to back down from the premium product concept; even in the face of strong opposing sentiments from analysts. The question: What is Apple doing to enhance this?
The Cupertino tech titan claimed the top position among its peers in the 2013 Temkin experience ratings. Consumers believe that Apple presents the best customer experience. Temkin in particular highlighted that consumers were very emotional about Apple, signaling the level at which Apple connects with its customers. A March survey actually highlights that at least one Apple product is in about half of American homes.
BlackBerry (NASDAQ: BBRY) still largely associated with enterprise
BlackBerry is another smartphone maker with a strong brand. The Ontario-based tech heavyweight is largely associated with its solid footing in the enterprise market. When you mention BlackBerry, the first thing that comes to mind is business. Even in the wake of the Bring Your Own Device concept, which was argued to be the BlackBerry killer, the company is still king among corporate clients. Enterprise has, and continues to be, the predominant selling point of BlackBerry.
BlackBerry is currently leveraging its position in the enterprise market to strengthen the push for increased penetration in the consumer market. It is doing this through the Z10 and Q10. The latter has the traditional BlackBerry qwerty physical keyboard design, and is largely focused at maintaining numbers among corporate customers. The Z10, on the other hand, is fully touch-enabled and aimed at roping in customers in the consumer segment.
Analysts are upbeat about the Q10. Andy Perkins, an analyst with Societe General believes that the Q10 will bring in 1 million of the expected 5 million total Blackberry unit sales in the impending earnings release. Perkin’s outlook echoes that of many other analysts. This suggests that BlackBerry, despite taking a stronger stance in the consumer market, still sees the need of maintaining the corporate image that it has long been associated with.
Nokia (NYSE: NOK) rebranding, wants to be the ‘unique’ option
Unlike BlackBerry and Apple, Nokia’s case is fundamentally different. The Finnish handset maker has had to rebrand. The ‘Connecting People’ catchphrase was purposely put forth to signify Nokia’s overwhelming global market share. However, when it failed to jump onto the smartphone ship in time, the table was turned. It now has dismal presence in the global smartphone market when compared to its peers.
Nokia is, however, using the whole concept of ‘we are different’ to rebuild its brand. Nokia is renewing its identity through Microsoft’s Windows Phone, which offers a new experience when compared with existing ecosystems like iOS and Android. In the tech industry, being different can at times act as the perfect bait. True to this, Nokia is already riding on the back of increased Windows Phone penetration in the U.S. And in India, Nokia has dominated the Windows Phone platform in full swing. Recent statistics show that Nokia’s Lumia lineup pretty much controls the Windows 8 ecosystem in India.
I will purposely make no detailed mention of Samsung. Not because it’s not a competitor (in fact it even has a bigger global market share than the great Apple,) but because its case is in many ways different. In my view, Samsung was at the right place at the right time. It managed to get on the Android bandwagon early enough and because of that, it inevitably enjoys the market share it does today. It is only recently that the company has started taking a solid stance on branding (starting with the Galaxy S3 and S4).
Going by how these companies’ brands are positioned and viewed, it is evident that Apple will continue being a leader over the next decade. BlackBerry’s is likely to come in second ahead of Nokia, which has had to start on a whole new branding pillar. There is also a possibility that Nokia is on a collision path with Microsoft. Like Google, which earlier in the year displayed its worries about Samsung’s dominance in Android, Microsoft may also develop worries in the event that Nokia continues to dominate Windows Phone, pushing other smartphone makers away from the OS.
Although each player is working on enhancing its brand perception, Apple has shown that its brand is defendable. Even in the face of relentless attacks for the past six months from the media, Apple lovers still hold on to their devices in the hope that the iPhone 6 and subsequent products will be worth the wait. Over the next decade, Apple will be able to retain more consumers compared with its competitors. This makes a compelling bull case for the tech bigwig, and it remains a good long-term investment.
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Lennox Yieke has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!