The business news circuit has been buzzing with Apple Co’s very unique position: decent revenue growth in the last 2 quarters ($43.6billion for Q2 2013), a huge cash-at-bank stash ($145 billion), the largest dividend payout in history ($11.47billion) in the works. All of these against a backdrop of perceptions of an innovation glut since its living zeitgeist, Steve Jobs, passed on.
Interesting times. The company is already strong and entrenched across Europe and the Americas. Asia is its new stomping ground as it makes a very focused play to dominate the smartphone market in China. As a nation, China is clearly worthy of attention. Heavy industrialization, a dedicated and relatively well-educated workforce earning low wages and possessing a strong work ethic has endeared China to Apple as both a manufacturing and consumer market hub.
An interesting news story last week identified the iPhone 4 as the device Apple is banking on to gain a strong foothold amongst the emerging middle class in China. This is a device that already has two successors, the 4s and iPhone 5.
“We’ve seen a significant interest in iPhone 4 there and have recently made it even more affordable, to make it more attractive to those first time buyers. China has an unusually large number of potential first-time smartphone buyers and that’s not lost on us” CEO Tim Cook is quoted as saying.
It got me thinking.
I have been a student of marketing choices for many years. I believe strongly that mastering the interplay of markets, products, positioning and customer understanding is a necessary mix for a company to ensure long term profitability and continuous growth.
Clearly Apple Co. has identified opportunities for investment growth in China and is acting on this, but I remain puzzled as to why, in its quest to ensure long-term profitability and growth especially in the smart phone category, a similar focus on the African market is not forthcoming.
I will try to show similarities in the investment opportunities between China and the African continent as a whole. The irony is not lost on me though, i.e. comparing a single country to a continent but I believe this comparison should still go forward.
The estimated population of China is 1.3 billion; the estimated population of all African countries is 1.033 billion. Both are roughly similar by population and have indeed begun engaging on strong economic trade in a way that now worries other “first world” nations.
Apple’s closest competitor in the smart phone wars, Samsung has driven a stake into Africa and has been rewarded quite handsomely in volume sales and brand appreciation. They have deployed considerable marketing budgets, mobile operator agreements and after sales support to ensure they are regarded as being here to stay and play.
I recently heard from a reliable source that Samsung’s overall performance in West Africa in the first quarter of 2013 alone was close to their overall West African financial performance in 2012! This is with smartphones and tablets taking a major chunk in volume contribution.
Don’t get me wrong, Apple is present on the African continent but seemingly in a half-hearted way. They are present and supportive of the iPad, iPod and Mac sales but have hesitated to support the iPhone with major marketing focus. By marketing focus I’m talking about locally relevant advertising, retail outlets i.e. Apple stores and bundled device deals with mobile operators
In Nigeria, they have been puzzled by the “prepaid first” and mobile neutral behavior of phone customers. They have sent teams to access the size of the market, even discovering that a lot of the sales volume accounted for in Europe and America makes its way into the Nigerian market, where it’s quite well received.
I don’t want to rehash the “Africa Rising” argument, but if the news is good, it needs to be shared. In 2011 the McKinsey and Co. Africa Consumer Insights center commissioned a study titled “The Rise of the African Consumer” across 10 countries, speaking with 13,000 consumers in Africa’s largest cities.
The survey resulted in 4 major insights:
- Africans are exceptionally optimistic about their economic future; 84 percent say they will be better off in two years
- Internet use is far greater than anticipated—more than 50 percent of urban Africans say they have accessed the Internet in the last four weeks, on par with reported usage in Brazil and China
- African consumers demand quality products and are brand conscious, belying the view that the continent is a backwater where companies can sell second-rate merchandise.
- African consumers want the latest fashions and a modern shopping experience.
(“The Rise of the African Consumer” – A report from McKinsey’s Africa Consumer Insights Center 2012)
If there ever was a clear business case for Apple to take on Africa with the iPhone it’s the report above. The potential to grow a data-loving customer base is quite clear, the opportunity to sell the Apple brand with its focus on simplicity, style and superior performance is clear.
Apple has marketing mix competencies (Product, Price, Promotion, Place, Processes, People) that are transferrable and will enable it compete and win the smartphone war across Africa if it chooses to.
PRODUCT and PRICE POINT CONSIDERATIONS
Barely two days after the iPhone 5 went on sale globally; a friend of mine had the device with him in Abuja, Nigeria’s capital city. Africa clearly has its own share of “fan boys” who make sure they get the latest Apple devices not minding the fact that we don’t have enough Apple retail stores on the continent to support global launches. I have no doubt that the iPhone models and their existing price points will easily fit into the spend bands of the African market.
If the iPhone 4 can be sold at a low price point in China, it would sell in large quantities across Africa’s major cities with the right marketing push. Rumors of an “iPhone mini” release in September 2013 give even more confidence to predict healthy volume sales in Africa.
According to AppleInsider, the iPhone Mini could cannibalize about 30% of existing iPhone sales in a worst case scenario. A rumored price point of $300 would carry a gross margin of 30% for Apple, compared to 55% for existing models. An Apple smart phone retailing at that price point would have significant traction across the African continent.
POSITIONING AND UNDERSTANDING THE CUSTOMER
I have been writing and implementing marketing plans for different types of businesses in Nigeria for a while and in my view, none of them is ever complete without a mention of the aspirational bent of the average Nigerian. We believe we deserve the best and will not settle for less.
I remember years ago when BlackBerry was about to launch on mobile networks in Nigeria, this was 2007. Our brief from the client in the ad agency where I worked was to create a campaign for Blackberry that would address not just the business market (the obvious target at the time) but indeed youth and high-spending prepaid subscribers.
In a few years, Blackberry became a lifestyle buzz product, totally defying its classification as a business tool. Today, Nigeria and indeed Africa has become front and center of Blackberry’s “last stand” for profitability. As a people, I believe the functionality of the device range was secondary to the “cool factor” ownership of a Blackberry conferred.
This character trait, our inherent aspiration for the good life means that the iPhone models will be embraced if Apple makes a concerted marketing play to own this market.
When you have a good product that has been accepted in your most obvious markets, further growth can usually be found in new markets with consumers who can afford them
(Source: World Bank statistics, CIA Factbook)
In sheer numbers, the population of African countries is growing faster than any other continent apart from Asia. Nigeria alone is 160 million strong. An African Development Bank report estimates about 170 million people make up a stable African middle class (The Middle of the Pyramid: Dynamics of the Middle Class in Africa. African Development Bank Market Brief Report 2011). They posit that this is roughly the same size as the middle class in China and India.
By way of balance, the only countries where Apple has a strong collaboration with a mobile operator to offer the iPhone is Kenya (Population: 41 million). Leading continental economies South Africa (50 million) and Nigeria (160 million) do not have any such defined agreement with an operator. The African Development Bank estimates 23% (36 million) of Nigeria’s total population can be termed as being middle class. Am I missing something here? The size of Nigeria’s middle class alone is nearly as high as the total population of Kenya! The numbers don’t lie: volume and value can be achieved in many more countries in Africa than Apple is currently pursuing.
In conclusion, these indicators I have assembled have led to my consideration of a strong “Africa Next” strategy for Apple in its drive to surge into the next level of growth, leveraging its existing product portfolio.
For die-hard Apple followers, I believe innovation, as well as an ambition to change the way people interact with technology, will remain the ultimate heritage the Palo Alto Company can bequeath to lovers of technology.
(Caveat: In the smartphone wars, I have chosen the Apple ecosystem. I believe the iPhone models are arguably the best devices out there bar none. This article was written from this bias position)