Can Apple keep the well-above-smartphone-industry-average customer upgrade cycle going? With Steve Jobs gone, Apple is at risk of losing that magical Walt Disney feeling. This is what Apple had going for it. The dogs just wanted to eat the dog food -- no matter what. It was delusional at times. Apple could beat them and customers would come back and beg for more. But the company will lose this cachet. As I mentioned last week, almost all of a sudden, Apple's suite of products is becoming more expensive and no better to worse than other products on the market. Eventually, this will hurt Apple.
Importantly, Apple had really leveraged its unique customer position in a way that benefited revenue and gross margins. The company has been able to get away with some unfriendly customer practices. Examples include:
- proprietary connectors that lock people into Apple peripherals or third-party ones on which Apple gets a royalty (we would not have had this latest connector fiasco if the iPhone 5 was on industry standard micro-USB that is much more convenient for customers who can share chargers, same points of connectivity, etc.);
- leaving basic features out of phone launches to capture annual upgrades to the next phone (only 2 megpixel camera, no video recording, late with 4G/LTE by a year, etc.), generating excess revenue and margin from a much higher-than-average turnover rate; and
- other customer inconveniences that give Apple more margin -- no Nand card slot, can't change battery.