💰 How Apple Built A $3T Company

Statistically, over 57% of you are reading this newsletter using an Apple product.

On top of that, 60% of those Apple readers will have 4 other Apple devices.

50 years ago, Apple was a small commuter company running out of Steve Jobs’ parent's garage.

Today, it’s one of 6 companies to ever reach 1 trillion. 

Here are 3 strategies Apple used to build a brand worth $3T, and how you can apply them to your business.

Here’s what we got for ya:

• 🍏 The Apple Ecosystem

• 🪜 The Price Ladder

• 🔄 Consistency Bias

Read time: 4 min 9 sec

🍏 The Apple Ecosystem

Most businesses offer one of three things:

1. A product. Target → Clothes

2. A service. DoorDash → Food delivery

3. Access. Netflix → Access to movies

Most businesses operate in 1 category. It’s simple, faster, and easier to scale.

But, that makes them very easy to compete with.

All their competition needs to do is offer one or two features slightly better than yours at a lower price.

Then they’re stuck in a ‘who’s willing to work for less’ race.

But unlike most, Apple offers all 3.

Samsung may offer a better smartphone, but they don’t have access to FaceTime.

Microsoft may have a better computer, but users can’t answer text messages on their laptops.

By combining all 3 categories, Apple has become untouchable.

(For more on this, click here to watch “How Apple’s iPhone Traps You in a Walled Garden” by the Wall Street Journal)

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🪜 The Price Ladder

There are 3 types of people who buy iPhones:

1. Those who want an iPhone but can only pay the lowest price

2. Those wanting a nice iPhone and want to find the best deal

3. Those wanting the best iPhone on the market and are willing to pay top dollar for it

Apple caters to all 3 customers using a price ladder.

AKA offering the same product at different prices by adding small features.

Apple knows the BEST iPhone on the market would offer:

• Unlimited storage

• 24-hour battery life

• A crack-proof screen

• Strong speakers and microphone

• A great camera for photo resolution

Etc etc.

But the further down the list you go, the less buyers are willing to pay for it.

So every iPhone can call, access Apple services, and is water resistant.

Then Apple charges slightly more per extra feature.

Most will start with the cheapest phone.

Then Apple introduces tiny upgrades one at a time, pushing customers down their slippery slope…

For 5x more battery, it’s just an extra $149.

And what’s an extra $79 for 10x more storage?

Eventually, you’ve added enough in tiny upsells that you might as well buy the iPhone 15.

Most will upgrade. Some will take the cheaper option with 1-2 extra features.

Either way, Apple wins.

A few resources on this:

• iPhone vs Android stats and why more Android users are switching to Apple

• A 2010 article predicting the ‘iPad killer’ and why Apple can maintain high prices

🔄 Consistency Bias

Last but not least, the key to building a $3T brand is convincing people to come back for more.

Here are the 3 pillars of Apple’s recurring revenue:

#1 - Subscriptions

Bought a $3,000 laptop?

Get an AppleCare subscription for $10/ month.

New iPhone won’t hold all of your photos?

Get an iCloud subscription for $8/ month.

Bought a new TV?

Get AppleTV to watch Apple Movies for $10/month.

#2 - The Sunk Cost Fallacy

Sunk Cost Fallacy - When someone will not change course simply because they’ve put a lot of time and money into it.

This is what Apple thrives on.

If someone has 3-5 Apple products, it’s more convenient for them to keep buying Apple products.

Otherwise, they have to deal with:

1. Satellite tools like Apple Pens and adaptors becoming useless

2. Keeping track of which devices work together and which ones don’t

3. Buying new device insurance while potentially still paying for AppleCare on older devices

4. Building trust with a new brand

Once you enter the Apple Ecosystem, it takes more time and effort than most are willing to pay to switch to a new tech company.

#3 - FOMO

Apple makes it very clear who is in the ecosystem and who is not.

EX - Non-iPhone text messages appear green instead of blue.

Plus, Non-Apple users can’t:

• Use FaceTime and missout on group calls

• Access apps available only on the IOS Store

• Use Find My Friends

The lesson: Make it easier for your customers to keep buying from you, than it would be to buy from someone else.