Chasing The Customer … Apple’s Sun Tzu Strategy

Apple’s Sun Tzu Stategy

Supreme excellence consists in breaking the enemy’s resistance without fighting. Sun Tzu

Steve Jobs was a master strategist.

Simply put, he changed things.

Apparently, the Jobs spirit still persists at Apple. Faced with the introduction of an improved but not Jobs imagebreakthrough iPhone, yet the necessity to ramp sales, Apple management offered to directly ‘lease’ an iPhone to customers with the promise of yearly trade ins for evolving models. The plan also allowed users to switch carriers each year.

The most dreaded scenario for a carrier is … customer churn!

Apple offered, for $32 per month, to let users ‘lease’ an iPhone with the opportunity for a yearly upgrade. New accounting rules which go into effect this year have an impact upon the accounting protocol for such offers. Depending upon demand, Apple’s P&L’s will show the impact of a leasing program.

But the Sun Tzu moment, the Zen influence was not to disturb the Apple aura, but to get the carriers to disturb theirs. Apple forced the carriers to make a competitive customer offer.

Thus, Sprint Corp and T-Mobile US Inc. are racing to outdo each other. T-Moble ran a full page ad today in many markets offering the phone for ‘Zero upfront. Only $5/month with JUMP! On Demand.’ Jump! On Demand means the customer can upgrade anytime, up to 3 times a year. Sprint CEO Marcelo Claure told his team to come up with a better plan. Sprint’s response … a $1 lease plan. AT& T and Verizon are offering up to $300 or $400 if a customer switches carriers and trades in an old phone.

Therefore, Apple got the carriers to make the $649 iPhone … essentially free to consumers and literally guarantees an upgrade pipeline for their new models in the future.

Where does that leave the other phone makers? With a problem!

Strategy:

Very Sun Tzu —Very Zen!

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