Over my career thus far I had the privilege of being invited to quite a few “behind the curtain” top level meetings at AMD, Intel and Microsoft. In 2006 and 2007 there were a few of these meetings that stood out in front of all others even to this day.
At those I not only learned of the many contributing think-pattern forces behind current and proposed future endeavors at these market influencing companies but also hooked in to some subtle nuisances, side bars and underpinnings that once connected and digested have served me and Rain Computers well ever since. Among these little parable like teachings were, “the 55%” and “creation to consumption”.
The 55%: Though presented specifically to address the consumer desktop and mobile market space from hard evidence at the time, I suspect this may be applicable to many if not all consumer markets. Generally there are a percentage of buyers called the lunatic fringe that buy at much higher prices and performance levels. At the other end are the bottom feeders or zero chasers (you have heard me refer to chasing zero numerous times in other writings). These are folks that prefer a lower price and are willing to either sacrifice quality or just do not have the experience or expectation of any level of performance / dollar value. While the respective percentages of lunatics and zero chasers vary, they are indeed profitable in their own right. Yet, there is a clear, relatively unwavering and consistent 55% of buyers smack in the middle. This is where we have a sweet spot for both the consumer and marketer to make a decent performing product at a slightly higher price with better margins and overall profitability for everyone involved.
So given the fact that 45% of buyers are lunatic zero chasers, they are inherently fleeting and have varying reliability for sales velocity and profit levels. One wrong move and the game is over! The real consistent money is in the middle. Though the middle indeed has its own reactions to recessive forces, it is, overall, a more loyal, forgiving, consistent and reliable market segment for any given company savvy enough to win the hearts of these buyers to stake a claim and make a good living. For Rain Computers, Apple and Microsoft gaining the most market share in this reliably lucrative middle is to supply products that capture buyers over the entire food chain of content creation to consumption. When Apple introduced the iPod it not only had a sleek portable device that played music but also now had a consumption offering to supplement its desktop computers that, for the most part, were considered content creation devices. Hence, Microsoft’s anemic compete attempt at deploying the Zune!
It remains amazing to me yet, I suppose, very understandable that a company like Microsoft with literally 45 billion in available, spendable cash (in 2006/2007) could F-up the Zune deployment as an iPod compete. But alas, as much as I like Microsoft, Intel and AMD, they are indeed all too much like the Apple commercial that personifies the Mac and PC with Justin Long and John Hodgman. Apple is and remains just a sexier company with smart alluring products that create that “gotta have it” element of every marketer’s wet dream. However, Apple only ever achieved 9% market share in the desktop space.
OK, so now what the heck is Bill getting at? Although Apple only got to the cusp of 10% with overall market share for desktop/mobile computing in the consumer space, they had a whopping 91% share of computers over $1,000! And, like their nemesis Microsoft, created billions of dollars in liquid cash. Rain continues to be of the mindset that reverse engineering the good, the bad and the ugly of the Apple and Microsoft playbooks will very much further our bid to become a best-of-breed hybrid of them all.
“On the computer, GarageBand is mostly about recording and editing music. But on the iPad, the app targets folks who don’t know how to play music.”
–Jefferson Graham, USA TODAY
Below is a link to a thought provoking article. It is this article that spring boarded me into this exposition. As you read it keep in mind what I have advised and revealed. At first it might seem problematic to Rain. But much like those find-the-animals-hidden-in-the-picture games, there are numerous nuggets of good news for Rain in this article’s revelations.
Read the article: GarageBand for iPad aimed at non-musicians By Jefferson Graham, USA TODAY