Nivi · September 9th, 2009
Steve Jobs is the ultimate visionary. He has a vision, he implements it, and the world pays him tens of billions of dollars for it. He doesn’t ask customers what they want because they would ask for a faster horse, not a car. He knows what customers want before the customers do. He is the quintessent entrepreneur — the ideal that every founder strives to become.
Right? Wrong.
Even Steve Jobs does customer development:
David Pogue: “You put a camcorder on the iPod Nano. Why not on the iPod Touch?
Steve Jobs: “Originally, we weren’t exactly sure how to market the Touch. Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine. Because a lot of the games were free on the store. Customers started to tell us, “You don’t know what you’ve got here — it’s a great game machine, with the multitouch screen, the accelerometer, and so on.”
“We started to market it that way, and it just took off. And now what we really see is it’s the lowest-cost way to the App Store, and that’s the big draw. So what we were focused on is just reducing the price to $199. We don’t need to add new stuff — we need to get the price down where everyone can afford it.”
Apple has changed the positioning of the iPod Touch twice. First, it was a multitouch iPod. Then it was a “game machine”. Now it’s the “lowest-cost way to the App Store.”
What does positioning have to do with customer development?
Refining the product’s positioning is the second step in Sean Ellis’ Startup Pyramid:
“Once you have achieved product/market fit, it’s time to accelerate through the next steps of the pyramid and then begin scaling your business. Here’s a brief description of what to do at each of the steps before scaling:
“Promise: Highlight the benefits [positioning] described by your ‘must have’ users (those that say they would be very disappointed without your product).”
In this step, you use a combination of surveys and interviews to talk to your customers and ask questions like “In your opinion, what is the best reason for using our product?” If they say the best reason is playing games, start testing that positioning with new customers and see if it performs better than your current positioning.
How do you position a product? #
In Four Steps to the Epiphany (page 111), Steve Blank developed a model for positioning products based on market type:
“Existing Market: Compare your product to your competitors. Describe how some feature or attribute of the product is better, faster — an incremental improvement.
“New Market: It’s too early for customers to understand what your product’s features will do for them. Instead, describe the problem your product will solve and the benefits that the customers will get from solving it — a transformational improvement.
“Resegmented Market: Compare your product to your competitors. If it’s low cost, describe price and feature set. If a niche, describe how some feature or attribute of the product solves the problem your customer has in a way comparable products do not. Describe the benefits that the customers will get from solving their problem this new way.”
The iPod was initially positioned in a resegmented market — it was a multitouch iPod. Then it was positioned in an existing market — portable game players. Now it’s positioned in a new market: a way to the App Store (although Steve Jobs probably should have said “pocket computer” instead of “way to the App Store” — pocket computer is the new copy at apple.com).
If Apple wants to create a new market of devices that access the App Store, they’ll have to educate prospective customers who don’t know what the App Store is — or why they would want to access it. New markets always require customer education. Fortunately, Apple has been bombarding us with “there’s an app for that” ads for some time now.
Quiz
Jobs makes a second, subtler, point about customer development in the quote above. Can you find it? The best correct answer gets a shout-out in our next post.
Read part 2 of this series: No new features.
Photo: Jeff Chiu/Associated Press
Topics Customer Development · Positioning
Jobs says “…they started to see it…” and “…Customers started to tell us,…”, which tells me they were watching for developing trends in their customer base, trying to determine where the leading edge really was heading.
Apple must have a huge stream of customer information coming in, I wonder what methods they use to detect those sorts of trends?
Doug
They didn’t focus on “adding new stuff” for the sake of adding new stuff. They found the appropriate positioning — selling their existing product to the right market, and making sure (by lowering the price) that they make the product more accessible to that market.
The subtler customer development point from Jobs is “We don’t need to add new stuff.” He realized the feature set is fine – instead of cramming in new features that most users won’t touch, Apple can instead focus on positioning the product via marketing and pricing.
“So what we were focused on is just reducing the price to $199. We don’t need to add new stuff — we need to get the price down where everyone can afford it.”
Mr. Job is relating that they’ve achieved MVP with the current feature set. Rather than tacking on a video camera or other feature that’s not relevant to the core product, they are reducing price to swallow up customers and market share. Brilliant.
Another point they made was that the customers knew better what they were going to do with an iPod Touch better than Apple did…
Jobs and co. tracked and observed peoples behavior. Found that a good segment of iTouch buyers download a lot of *free* games and apps.
I think he found that these aren’t people who spend $60 on average on games and apps (like iPhone buyers do). A different segment chasing freebies. So it makes sense:
i. Positioning the iTouch as a game machine
ii. Lowering the cost of iTouch
iii. And getting folks accustomed to the app store
“You don’t know what you’ve got.”
That’s it, right there. Far too many awesome products have withered and died because the “visionary founder” had a big success on their hands, but didn’t want to admit that it was a different success than the one they thought it was. A good example is Flickr, which as many people know was originally an online game, but users kept focusing more on the sideline functionality of sharing photos easily, until eventually Flickr saw the light and changed their strategy to meet their market, rather than trying to change their market to fit their vision.
Much of Jobs’ brilliance is that he does the former while making people think it’s the latter. He’s not really creating demand, he’s just meeting demand that’s so latent that you didn’t really know you had it, so it *seems* like he’s creating demand.
These phrases stand out; “games were free”, “lowest-cost”, “reducing the price”, “get the price down”. These are not attributes that Jobs has historically emphasized and reflect new insights that Apple has into the price elasticity of this class of product.
Thought-provoking post! My guess at the second point is this:
Apple had hypothesis A & B, but collected ‘open’ customer feedback, rather than asking them ‘is this A or B to you?’. The answer was ‘C’.
“lowest-cost way to the App Store.”
– Once you are in the store and start using free samples, you are likely to pay for some apps hoping for better user experience.
– Once you get a hang of the eco-system, you are likely to opt for a faster model and upgrade.
His subtle comment is that it is the cheapest way to the app store, implying there will be a much more expensive way to the app store. They also had to drive the price down for all touches to leave a gap between a touch and any tablet that will ultimately come out and be based on the app store.
“Originally, we weren’t exactly sure how to market the touch.” They didn’t know exactly how to position it but put it out there anyway.
Here is the subtle point that I see.
The quote overall implies that the Touch is being positioned in a new market as a way to access the App Store. Adding a camera would lead to confusion about what the Touch really is about and make educating prospective customers that much more difficult.
When Steve says “We don’t need to add new stuff — we need to get the price down where everyone can afford it.”, he is indicating that they have moved out of the iterative process of discovery and validation, and into the customer creation step where the focus is on ramping sales, and “crossing the chasm” to the mass market now that they know how to position, explain and sell the Touch in a clear and focused way.
I think the subtler point about customer development that Jobs made was in this quote”
“Originally, we weren’t exactly sure how to market the Touch.”
Even Jobs and the Apple team realized the fact that they don’t know how to correctly market something before customers start interacting with the product. Knowing and stating that, you don’t know, even as a major brand with hundred of successful products is a pretty powerful insight to me.
“You don’t know what you’ve got here”
Jobs admits that his company builds amazing products but doesn’t really know what direction the market will take them until he sits and listens to customer feedback.
He’s not a god, he’s just a good listener.
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