You don´t need to be a business expert to notice that many of the most successful companies of recent times are also among the most recognizable brands in the tech business. A brand can be a fantastic competitive advantage, and the tech industry is a fertile ground for growth and innovation. For this reason, the combination of superior technology and valuable brands can be a powerful thing for investors.
Not every big company with a well known brand has a competitive advantage in that brand. In order for it to be valuable to investors, the brand needs to be capable of producing a different reaction from consumers in comparison to other brands. If the consumer is willing to pay a premium for that product, or will simply choose that alternative versus a similar product from the competition, then that brand provides a competitive advantage.
The Apple Experience
Think about Apple Inc. (NASDAQ:AAPL) for example. You know that you can expect great design, a fantastic integrated ecosystem and friendly customer support when you buy something from the company. But where Apple Inc. (NASDAQ:AAPL) is much stronger than the competition is in the user experience, those things that cannot be described by words, but you need to actually use the products in order to understand – or feel – its advantages.
Once you know what Apple Inc. (NASDAQ:AAPL) brings to the table, and how different it is from other products, then you are more likely to pay extra for an Apple device. You will never convince somebody to pay extra for an Apple Inc. (NASDAQ:AAPL) product by discussing memory capacity, battery life or that sort of things. It´s for this reason that the Apple Store is of utmost importance as a marketing tool for the company: it puts customers in contact with the different user experience that the Apple Inc. (NASDAQ:AAPL) brand means.
In emerging markets, where store presence is limited and many customers have not previously experienced Apple Inc. (NASDAQ:AAPL)products, the company is in a disadvantaged position versus cheaper competitors. That´s why the company is sacrificing margins with the iPad Mini in order to bring in more consumers and increase brand awareness in those regions. From Tim Cook in the Goldman Sachs Tech Conference:
Over 50% of the people in countries like China and Brazil that were buying an iPad don’t own an Apple product. This is a huge thing for us to go out and show people what Apple is and introduce them to the company. Through the years, we’ve found a very clear correlation between people getting in and buying their first Apple product and some percentage of them buying other Apple products.”