Issue: Newspaper and Magazine Publishers have gotten pricing wrong on the Kindle.  They need to get it right for the iPad.
Commentary by: David Vinjamuri

I used to teach a pricing class at NYU whose enrollment was approximately one quarter of the number of students I routinely see in my new media survey courses.  Pricing is one of the most important decisions that a marketer can make, but it’s a chore much less interesting to marketers than advertising or promotions.  At the largest consumer companies, pricing is often set at the highest levels within an organization, and as a result young brand managers may have very little practical experience with the consequences of making bad pricing decisions.  The magazine and newspaper industry is no exception.  In the past few years, these publishers have repeatedly erred when pricing their content for the Kindle.  With the upcoming launch of Apple’s iPad, these folks have another chance.  They’d best not waste it.

As the clock ticks down to first shipment of Apple’s iPad, the company is reportedly in deep talks with magazine and newspaper publishers.  While early deals with book publishers got much of the attention before the iPad launch, robust content deals with print publications may be at least equally important to both the iPad’s success as well as the future of the traditional news media.

As this advertising blog has noted previously, print publications are living on borrowed time.  Rate bases have been shrinking and might have done so even if these organizations not been so quick to post their content freely online in the mistake belief that online advertising revenue would offset the sales loss from cannibalization.  Just as the iTunes store did for the music industry and the Kindle has begun to do for book publishers, the iPad may create a new revenue model for newspapers and magazines.

The cardinal rule of pricing is that it’s easier to lower a price that’s been set than to raise it.  Publishers seem to have learned this a bit two well.  Newspaper pricing on the Amazon Kindle is far too aggressive, ranging up to $14.99 a month for the New York Times.  Many newspapers and magazines routinely offer new or lapsed subscribers significantly cheaper deals for print subscriptions than the fixed price for the Kindle.

Publishers need to remember that the “right price” for a product is the highest price a consumer is willing to pay and feel that a fair value has been received.  “Fair value” is an important concept here.  Photos and graphics reproduce poorly on the Kindle.  There is no sense of holding the newspaper or being able to scan the front page.  What you get is literally the news.  And consumers are aware that the production costs of a printed magazine are entirely absent from the electronic version.  There is no justification for the substantial prices for these publications on the Kindle.

The iPad is a more complex story.  Because of its high resolution color screen and its ability to show video, the iPad will allow publishers and advertisers alike to create a richer, multimedia experience that may far surpass the printed publication.  But refining these efforts will take time, and demand patience from readers.  Therefore, publishers would be wise to price magazines and newspapers at a level that encourages consumption rather than placing a choke-hold on growth.  Penetration pricing, rather than skim pricing is the correct strategy here.  If publishers attempt to overcharge, they’ll have only themselves to blame for losing their last, best chance to find a new revenue model.

Issue: Will the Apple iPad help print media reestablish a revenue model?
Commentary by: David Vinjamuri

Apple has just introduced the iPad - the long awaited tablet computer.  Just as this advertising blog predicted that the iPhone would revolutionize the mobile internet, we believe that Apple has taken an important step towards rescuing the print news media from oblivion.

As you may know by now, the device itself has a 9.7″ touch screen, wi-fi and some versions have 3G from AT&T.  Pricing runs from $499 to $829 (for the 3G version with 64gb of memory) plus $30 a month for unlimited data.

We have long believed that the Kindle will revolutionize publishing, but it is not a realistic device for advertising because it lacks color and a high resolution display.  Even the larger Kindle DX is too expensive ($489 - as much as the base version of the iPad) for a black and white low-res reader. On the Kindle, you can have newspapers delivered to the device daily and then read the text of each article.  The iPad allows you to read the newspaper as a newspaper, or a magazine as a magazine.  In fact, magazines and newspapers can improve on the paper experience by incorporating video, interactive and multimedia content.
This suggests that news organizations and publishers will be able to create a subscription model for iPad content which can be partially advertising-supported.  The advertising will be measurable, just as with online advertising.  Although this has not been discussed, it is reasonable to assume that widgets - or other functional ad units - could be created for this device.

Immediate reaction to the iPad has been somewhat muted because the technical characteristics did not excite tech fans.  Apple’s real genius, however, is understanding how to evolve consumer behavior - a far more difficult and important task.  The so-called “paperless office” has been hyped and discussed for over a generation, but it has not come to pass because paper is portable and easy to read.  Although the iPad and subsequent devices will not outdate paper, they take an important step forward.  Just as the iPod delivered the ability to carry around hundreds of cds worth of music in a tiny device and the Kindle allowed us to carry a thousand books, the iPad will allow average consumers to keep books, movies, pictures, magazines, newspapers and important personal documents on a device that is the right size to view them.  That’s a bigger deal than it may initially seem to be.

Brand: Apple
Execution: TV: iPhone / iPod Touch
Target: Business People / Mainstream Users
Rating: **** / ****
Reviewer: David Vinjamuri

Description:
Two new campaigns from Apple feature real Apple consumers.  The new iPhone campaign features a variety of real consumers, from a businessman to an airline pilot.  Each explains how they use the iPhone to help them with real everyday problems while visually demonstrating on the iPhone.  The second campaign is for the new iPod Touch.  This campaign does not feature a consumer, but was created by a consumer from stock footage and gained a viewership on YouTube.  Apple began running this spot last weekend nationally as the launch spot for the iPod Touch.

What Works:
Apple has suffered from a series of missteps over the summer which showed the company to be somewhat removed from the everyday concerns of its core brand followers.  First was the $200 price drop on the iPhone.  In itself a good idea (a classic skim-pricing strategy), Apple neglected to consider the impact on those who had waited in long lines just a few months earlier to pay more for the new phone.  After some waffling, Steve Jobs announced a $100 consumer credit on the iPhone for early purchases.

The next misstep - also affecting the iPhone - was the strategy Apple initially adopted of keeping the phone locked from outside developers.  This may have resulted from Apple’s contract with AT&T, but it mirrors Apple’s general approach to design which is to tightly control all aspects of the final product.  In the case of the iPhone, this strategy proved unpopular as developers and consumers alike wanted to add functionality to the phone.  Compounding the issue, a number of users who had made unauthorized alterations to their iPhone - including unlocking it to use on other carriers than AT&T - found that installing phone updates disabled the phone entirely.  Apple eventually reversed course by allowing outside developers to design applications to run natively on the phone.

Beyond the specifics of the new spots for the iPhone and iPod Touch - which are both extremely well executed - there is a more important underlying theme for Apple which is a good sign for the company.  Pulling a video off of YouTube and blessing it as the launch spot for a major new product is a startling development for this close-lipped organization.  Spotlighting ordinary consumers is an old ad technique (the testimonial may pre-date even print advertising) but shows an engagement with real consumers that is a definite change for Apple.  In sum, we think Apple is starting to realize the power of the brand cult it has created beyond their usefulness in populating the churches they have built for the - the Apple Stores.

Allowing consumer to engage in co-creation with the Apple brand is a good sign for the brand as well as a sign of the times for marketing.

What Doesn’t:
Co-creation is a process that is difficult to stop once the lid is ripped off the top.  Apple needs to carefully map the path of its upcoming brand extensions to ensure it will continue to listen to and engage with consumers.

Branding Bottom Line:
The iPhone proves more useful than the U.S. national air traffic control system.  Scary.

Steve Jobs introduced the long-anticipated Apple iPhone today to great acclaim (and a significant rise in Apple share price). You can read the play-by-play on Engadget. Jobs teased the intro by telling the audience that Apple was introducing three significant devices: a new iPod, an Apple Phone and an Internet device. The big revelation was that the three devices were actually one - the Apple iPhone.

Over the next few weeks you will read a lot of justified praise of the Apple iPhone. Most of it will focus on how it appears to out-Treo the Treo, offering full computing features in a smaller, slicker package. And there is no doubt that the organizer capabilities, e-mail and iPod (4 or 8gb) attributes justify the $499 to $699 price of the phone and represent a major step forward for the phone industry.

But we think the most important feature of that little phone might be the third part - the Internet connectivity. For the first time we’ve seen on a mobile device, web pages can be pulled down crisply and usably on the real Internet instead of a scaled-down version.

Back in 2000, we kept hearing tales of convergence, but the supposed devices that were going to bring it all together (Internet, telecommunications, video) failed to execute well. Apple under Steve Jobs has become the master of fulfilling unrealized consumer promises. iPhone finally may create the convergence that the industry has so long sought.

Two other news items from today’s MacWorld keynote address support this thought. First, Apple also introduced the apple TV device, which brings movies and video from the computer to the television. Secondly, Apple Computer changed its name to Apple, Inc.

Even five years ago the thought that a computer company with less than 10% market share would introduce the hottest mobile phone of the year would have been laughable. Now it seems almost a certainty.

It will take marketers some time to realize the implications, but it seems that the mobile Internet may become a reality for the mainstream consumer sooner than we thought.

Brand: Mac (Apple)
Execution: TV
Link: Click Here
Target: Dissatisfied PC users
Rating: ****
Reviewer: David

Description:

What Works:
As advertising, these spots are good but not terribly surprising. They hit familiar themes of comparison between Macs and PCs like reboots, freeze-ups and general ease of use. As advertising strategy, however, they offer a glimpse into Apple’s master strategy made possible by the success of the iPod. The revealing spot in this instance is the ‘iLife‘ ad which shows the PC guy dancing while listening to his iPod. As he talks to the Mac guy, the PC guy remarks at how well the iPod works and how easy it is to use with iTunes on the PC. The Mac guy points out that there are a lot of other lifestyle applications that work just as well on the Mac as iTunes and that they come bundled with the Mac.

And there, in a nutshell, is the Apple strategy for this year. Mac turned digital music into serious business by coming up with an application (iPod + iTunes) that was slick and easy to use. Now after spending a year moving the Mac platform to Intel chips and creating Boot Camp software that allows Intel Macs to boot up into Windows, Mac is connecting the dotted lines for consumers. iPods work great and their software is easy to use. They both come from Apple which makes the iMac. Macs have other great applications, they still run Microsoft Office and they are very easy to use, don’t freeze up or get viruses, etc.

This is a trojan horse strategy. All along, we thought the iPod was just a nice gift to American civilization from Apple. Instead, it is a stealth invasion intended to convert millions of people to Macs. It makes great sense as a strategy. In addition to being a nice revenue boost, the iPod effectively becomes cheap sampling for the iMac. While we do not expect to see Apple with Dell’s share level anytime soon, it is a sensible strategy for a company ready to break out of the margins of the computing world.

What Doesn’t:
Apple’s strategy is consistently to play the ‘good computer/bad computer’ moral card when positioning against the PC. This turns some people off. Douglas Atkin’s work on cult brands (click here to learn more) is instructive on this point. Even though Apple is struggling for mainstream acceptance, it still needs to operate as a cult brand if it is to maintain its expertise as the differently thinking computer company. That means running the risk of offending some potential customers in order to gain the stronger passion of others. Although this may not play with part of the mainstream now, we think it is a sound strategy.

One risk that these spots run for being so visually stark and simple is that they lack stopping power. It will not be clear to anyone casually eying the TV that they are watching an Apple spot and that may cause this campaign to get less attention than it needs.

Branding Bottom Line:
Apple reveals its thirst for world domination. Which is fine as long as we get a Nano.

Brand: iPod (Apple Computer, Inc.)

Execution: TV

Link: Click Here

Target: Those without iPods

Rating: ****

Reviewer: David

Description
The pulsing, energetic track ‘Cubicle’ by Rinocerose pulses in the background as recognizable CD covers from the Doors to Sinatra to Beck flip and spin and eventually build a virtual city of skyscrapers. At the end of the spot, the albums are sucked into an iPod Nano, which displays each album cover in color on its screen as it is incorporated. Then we see a black screen with the words, “1000 songs in your pocket” in white letters. It is followed by a screen with the Apple logo in white and the words “iPod + iTunes.”

What Works:
This advertising blog loves single-minded advertising. Dramatic and simple, this iPod spot is narrowmindedly focused on a single purpose. The visual metaphor of vastness created by building a city from album covers and then moving them all into a single small device neatly explains the end benefit of an iPod to the uninitiated. There is not a single wasted thought or motion in this spot which uses both the aural and visual elements of music to reinforce the point. Apple and TWBA/Chiat/Day are smart enough to realize that most people without iPods know what they are and many have thought about buying. So the spot works to drive in that core end benefit with such energy that it jolts straight through to the wallet. The animation of the albums flowing into the iPod Nano as the screen precisely cycles through them, displaying the artwork at the same time is brilliantly realized.

What Doesn’t:
While this is an iPod spot, the end benefit being promoted is a category benefit not exclusive to the iPod. We do not see this as a problem, however, as Apple has a dominant share in this category. Category advertising is appropriate for a category leader like iPod. While some consumers will choose to buy other players, Apple will get more than its fair share of sales from category advertising. The choice of music may not be ideal for part of the audience that Apple is trying to woo - older consumers who are late adopters of this type of technology. Apple has been very good at using other types of music with the iPod in other spots, however.

Branding Bottom Line:
Apple reminds us that great advertising can be fun.