Hardware Gone Soft: Apple Integrates the ‘Experience’

Quartz: “Apple’s big surprise in its quarterly numbers isn’t the end of 13 years of go-go growth but the emergence of Services as a very large revenue category … Services grew 10% in 2015, 15% in the December quarter, and now 20% in the last three months.” Consequently, “many on Wall Street and elsewhere have started to ask if Apple is going to treat Services as a separate business with its own profit & loss statement.”

“For Apple, this would be a momentous cultural shift away from its praised functional structure—one Tim Cook sees as fostering effective collaboration across groups such as operating system software, built-in apps, hardware, developer relations, and retail operations. The idea is for everyone to work together on the customer’s experience, as opposed to concentrating on an isolated goal: hardware revenue, App Store profits, or retail numbers.”

Apple “wins or loses through the experience it delivers to its customers. Once upon a time, revenue came mostly from its personal computers, small, medium, and large. Software and Services had one and only one purpose: pushing up personal computers’ volumes and margins. Hardware, software, and Services coalesced into what we now call an ecosystem. Over time, as a result of the size of the installed base of Apple devices, Services became substantial, the number two revenue category.”

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The Future is Platforms, Not Products

Quartz: “A trait shared by the fastest growing and most disruptive companies in history—Google, Amazon, Uber, AirBnb, and eBay—is that they aren’t focused on selling products, they are building platforms … A platform isn’t a new concept, it is simply a way of building something that is open, inclusive, and has a strategic focus.”

“Think of the difference between a roadside store and a shopping center. The mall has many advantages in size and scale and every store benefits from the marketing and promotion done by others. They share infrastructure and costs. The mall owner could have tried to have it all by building one big store, but it would have missed out on the opportunities to collect rent from everyone and benefit from the diverse crowds that the tenants attract.”

“What has changed is that technology has reduced the need to own infrastructure and assets and made it significantly cheaper to build and scale digital platforms … Companies such as Walmart, Nike, John Deere, and GE are working towards building platforms in their industries. John Deere, for example wants to be a hub for agricultural products … Building platforms requires a vision, but does not require predicting the future. What you need is to understand the opportunity to build the mall instead of the store and be flexible in how you get there.”

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Designing Virtual Assistants: Poetry in Automation

The Washington Post: “As tech behemoths and a wave of start-ups double down on virtual assistants that can chat with human beings, writing for AI is becoming a hot job in Silicon Valley. Behind Apple’s Siri, Amazon’s Alexa and Microsoft’s Cortana are not just software engineers. Increasingly, there are poets, comedians, fiction writers, and other artistic types charged with engineering the personalities for a fast-growing crop of artificial intelligence tools.”

“As in fiction, the AI writers for virtual assistants dream up a life story for their bots. Writers for medical and productivity apps make character decisions such as whether bots should be workaholics, eager beavers or self-effacing … Even mundane tasks demand creative effort, as writers try to build personality quirks into the most rote activities … many developers of artificial intelligence make a point of adding a weird element to their avatar designs — such as an asymetrical face or an odd joke — something that signals that the virtual assistant isn’t human and doesn’t aspire to be … At the same time, the imperfections are meant to be endearing. A robot without such flaws could seem cold and alienating.”

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Chipotle ‘Loyalists’ Are Most Unforgiving

The Wall Street Journal: “Foursquare Inc. analyzed traffic data from its location-sharing mobile apps and found that Chipotle’s most loyal customers have been less forgiving of the chain than infrequent visitors. Last summer, 20% of Chipotle customers made up about half of foot-traffic visits.”

Says Foursquare CEO Jeff Glueck: “Interestingly, it’s this group of faithful customers that have changed their Chipotle eating habits most dramatically … These once-reliable visitors were actually 50% more likely to stay away in the fall during the outbreak, and they have been even harder to lure back in … Losing 2–3 loyal customers is the equivalent of losing about 10 other customers.”

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Airline Travel May Be Better Than We Think

The Washington Post: “While customer grumblings abound about airline travel, a new report suggests that satisfaction is actually at its highest in more than two decades … Highest rankings went to ease of check-in process and ease of making a reservation, while lowest scores went to quality of in-flight services (beverages, food, movies and music) and seat comfort.”

“According to the American Customer Satisfaction Index (ACSI) Travel Report 2016, top ratings go to JetBlue Airways and Southwest Airlines (which tie for highest satisfaction), followed by Alaska Airlines. Spirit Airlines brings up the rear, preceded by Allegiant Air and Frontier Airlines … Except JetBlue, all of the airlines’ scores went up from last year (JetBlue is down 1 percent), and some did so substantially. Budget airlines Spirit and Frontier, which rank last and third from the bottom, respectively, both had double-digit improvements in customer satisfaction, at 15 percent for Spirit and 14 percent for Frontier.”

“The overall customer satisfaction ranking in the 2016 survey increased 4.3 percent, to 72 out of 100 points, over last year’s score. This year’s score ties with the highest one that airlines have received since the survey began … American Airlines’ score went up 9 percent, to 72 points, and United Airlines’ score rose 13 percent, to 68 points … both airlines recently returned to serving free snacks in economy class … Customers’ embrace of airline loyalty programs slipped one point, to 73 this year, and the report points out that travelers find it challenging to redeem rewards.”

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Lucky Charms: Colors Sans Chemicals

Quartz: “Removing the artificial ingredients while retaining the classic flavor of a bowl of Lucky Charms has sent the food scientists at General Mills back to the proverbial drawing board time and again. After all, how does one retain the vibrant hue of the blue crescent moon without Blue #2? … And the moon is just one marshmallow type in the bowl. There are multi-colored rainbows, pink hearts, yellow hour glasses, and neon-green leprechaun hats, too.”

“It has turned the quest to get Lucky Charms to look and taste right into an art form of its own … For each marshmallow conquered, the food scientists must then step back and consider the state of the entire bowl, paying keen attention to any small difference in taste. The subtlety of Lucky Charms—versus the loud, fruity flavors one would find in a bowl of Trix—makes the task of achieving vibrant colors with muted flavor all the more challenging. General Mills hopes to introduce the new, all-natural Lucky Charms to market by the end of 2017.”

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Luxury Today: Big Data & The Rising Velvet Rope

The New York Times: “Today, ever greater resources are being invested in winning market share at the very top of the pyramid, sometimes at the cost of diminished service for the rest of the public. While middle-class incomes are stagnating, the period since the end of the Great Recession has been a boom time for the very rich and the businesses that cater to them.”

“In many ways, the rise of the velvet rope reverses the great democratization of travel and leisure, and other elements of American life, in the post-World War II era. As the Jet Set gave way to budget airlines, in places like airports and theme parks even the wealthiest often rubbed shoulders with hoi polloi … What is new is just how far big American companies are now willing to go to pamper the biggest spenders.”

“Many companies … have discovered that offering ordinary customers just a whiff of the rarefied air can actually enhance the bottom line, even if it stirs a certain amount of envy and resentment … And with the rise of the Internet and big data, companies can pinpoint and favor these wealthiest customers in ways unimaginable even a decade ago.”

“For companies trying to entice moneyed customers, that means identifying and anticipating what they want … But for people at the lower end of the market, as well as in the middle, plenty of friction remains. The trade-off is that the amount of hassle is precisely calibrated to just how much you are willing to pay.”

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The ‘Margaritaville’ Experience is a State of Mind

“Margaritaville, with its themed restaurants (erupting volcanoes, boat-shaped booths), started as a tropical cousin to T.G.I. Friday’s,” The New York Times reports. “Through trial and error, Jimmy Buffett and a partner, John Cohlan, have since expanded Margaritaville Holdings to include four booming divisions: lodging, alcohol, licensing and media. Now, as they pursue growth for the first time overseas … they are trying to recast Margaritaville as a broad, aspirational brand — the Ralph Lauren of leisurely escape, if you will.”

“The stroke of genius was making Margaritaville a feeling, not a place,” said Mindy Grossman, the chief executive of the home-shopping behemoths HSN and Frontgate, where 400-plus Margaritaville items include a $799 hammock and $159 penny loafers. “If you don’t take the name so literally, growth could be endless.”

Margaritaville is “building a unique corporate culture — employees all use the same valediction in emails: ‘Fins Up!’ — and drawing fanatic customers like Carol and Butch Wayland … ‘We’re not Parrot Heads,’ Mrs. Wayland said. ‘We’re just normal, everyday people who happen to be residents of the Margaritaville state of mind.’ Mrs. Wayland, who is in her 50s, added that she had ‘spent a fortune’ on Margaritaville products, including hats, flip-flops, dress shirts, shorts, clocks, coffee mugs, barware, a blender and underwear.”

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Quote of the Day: Prince

“I’d rather give people what they need rather than just what they want.” – Prince Rogers Nelson (1958-2016)

It’s kind of the inverse of Mick Jagger: “You can’t always get what you want,” where what you need is something less than what you want. Prince (and David Bowie for that matter — and the Stones to be fair!), understood that what we need is something more than what we want.

Isn’t this also true of great brands? They take us somewhere beyond what we want. The magic is in what we need, whether we know we “want” it or not — until we experience it.

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The True Cost of Good Content

Jesse Weaver: “We want our web and we want it for free. However, the inconvenient truth is that there is a cost to doing business and at some point companies have to make money …. And so we sacrifice the magic. We devalue content and products by refusing to pay for the work it takes to create and maintain them. We are satisfied wading through poorly designed, ad-based experiences. And we allow our most precious resource, our time, to become a commodity to be traded, sold and manipulated. Our data is mined, our privacy discarded and our actions tracked all in the name of more targeted advertising.”

“And it’s not even the best scenario for companies either. In Q4 of 2015 Facebook brought in $5.9 billion in revenue with 1.59 billion active users/month. That’s roughly $1.23 of revenue/user/month. If, in the same quarter, Facebook moved away from ads and instead charged each active user just $1.50 a month for the service, their Q4 2015 revenue would have increased by $1.2 billion dollars, from $5.9 billion to $7.1 billion.”

“Now, what if Facebook started using that extra $1.2 billion to pay content creators for posting quality content on the platform? … Suddenly the revenue sources for content creators starts to diversify. The reliance on advertisers wanes. Feeds … are designed to promote connection and shine a light on creators. Bloated, ad-filled UIs start to disappear … Creators develop more immersive content experiences focused on the people using them. The balance of power flips back to the user … we stop being the commodity and we start being the driver. And when users are the driver, companies will focus on adding value, not just grabbing our attention.”

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