Sometimes it’s about deciding who your customers aren’t

On a recent Apple earnings call, CEO Steve Jobs took a question from an analyst wondering why

Apple did not introduce a lower priced laptop. Jobs’ response (thanks to CNet):
What we want to do is deliver an increasing level of value to these customers, but there are some customers which we choose not to serve. We don’t know how to make a $500 computer that’s not a piece of junk; our DNA will not let us do that. We’ve seen great success by focusing on certain segments of the market and not trying to be everything to everybody, and you can expect us to stick with that winning strategy.

You can always expand your market by going after “adjacent” segments. But sometimes that expansion causes you to lose focus on the value differentiators in your core market. Dell suffered a similar fate when it finally moved into low priced PCs. For years, Dell basically sold great (high-end) PCs at a reasonable price. When it started selling reasonable PCs at great prices, it had to cut costs and lost a lot of the product and service quality that had made Dell so popular in the first place.

From a pricing perspective, the question is not “can we grow our volume?”, or “can we grow our revenue?” or even “can we grow our profit?” by entering new markets. It’s “can we grow the value we deliver to customers and the value we can capture?”

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