Why Steve Jobs Killed 70% of Apple’s Products: A Lesson on Range Architecture
Why Steve Jobs killed 70% of Apple’s products: A lesson on Range Architecture
You have probably seen the Steve Jobs movie that came out in 2015, and frankly, it's brilliant. Directed by Danny Boyle and written by West Wing writer/genius Aaron Sorkin, the movie is an exercise in tension as Steve Jobs confronts the people and demons of his past in the hours before three major product launches.
On several occasions in the film Steve confronts John Sculley, the Apple CEO who Steve recruited and was ultimately ousted by. In a twist of events, Steve returns to Apple in 1997, ousting Sculley and then killing 70% of the Apple product range. Did he do it out of spite? Revenge? Sculley certainly thinks so. Or was Jobs claim that he just “really hates styluses” the real reason?
Actually, it's a lesson in range architecture.
Range architecture is the structure of your products, sub-brands and price points. A well designed range architecture will help your customers pick the right product at the right price, helping them navigate sometimes countless choices.
One of the most famous range architectures was developed by Alfred P. Sloan of General Motors in 1921.
His so-called Ladder of Success gave each car brand a price point that wouldn’t conflict with any others.
It was said that you could tell who lived in which house by which car was parked out front — a Cadillac suggested a CEO, the Buick was the factory foreman. Sloan's range architecture made the question “which car is right for me?” a simple one, not a stressful one, and so General Motors thrived.
Of course General Motor’s range architecture was too beautiful to last. General Motor's incentive schemes rewarded each brand individually and ultimately tempted brand managers to try and capture just a few more customers by adding in just a few more options.
More options meant more prices, more models and more choice. This example of entropy lead to the very complex brand architecture that General Motors had in 2008, right as they were facing bankruptcy.
Barry Schwarz’s work on The Tyranny of Choice makes it clear that fewer choices lead to more purchases, faster and with less post-purchase regret. While common sense would say that more choice gives more utility, behavioural economics shows that complex choices usually result in no choice at all — and more importantly, no sale.
Which brings us to Apple. When Jobs returned in 1997 the company was, according to Jobs, “90 days from being insolvent". Sales were dismal. The story goes that Steve was asked by a friend which computer she should buy. Steve was stumped. Despite hundreds of products, there was no clear answer.
In fact, Apple’s range architecture was as messy in 1997 as General Motors’ was in 2008. The company had been making multiple versions of products to satisfy requests from retailers, including twelve versions of the Macintosh computer.
After weeks of meeting with product people he had heard enough. According to Walter Isaacson in the book Steve Jobs, Steve shouted “Stop!” in the middle of a product meeting and said, “This is crazy.”
Taking a marker he drew a chart that was to form the basis of Apple’s product range for years to come. The simple insight was to help people choose a computer using only two questions — are you an everyday consumer or pro? Do you want portable or desktop?
In this one bold move, 70% of Apple’s range was cut. One year later, the nearly bankrupt company turned a very healthy $309 million profit. Today the company is worth more than $520 billion.
So why did Apple really kill the Newton? Spite? Keeping fingers free? The real story actually points to simplicity. The simpler a product range, the easier it is to make a choice, the more sales you can get.
So what do these two case studies tell us about range architecture? At Step Change, we reviewed more than thirty range architectures last year and there’s one principle that surfaced time and time again:
Make it easy for the customer.
A range should only be expanded where it clearly makes the choice easier for a customer segment. In the right situation, adding a choice to the range can increase average weight of purchase, make the sales cycle shorter and even reduce post-purchase regret. But before you add anything new pull out the pruning shears and cut as much as you can.
Your customers won’t even notice just how much simpler things are — so they won’t thank you. But your finance team will.
Why People Buy: Here's What You Need to Know about Buyer Psychology
Learn how you can use buyer psychology to make people buy into your product and messaging.
KitKat wasn’t always the behemoth brand that it is today. It used to be floating around with all other Nestlé products, struggling to gain traction and make a name for itself. Like KitKat, many businesses often have a great idea or product but often find it difficult to get people to buy. Because the truth is, it’s often the best marketing, and not the best product, that wins.
#buyer #sales #psychology #business
And the reason for that is that people don’t take the time to understand why people buy. Now there’s only so much I can do in an article as we’ve distilled about 28 books, hundreds of articles, and thousands of pages into our Invisible Communications Capabilities Training Intensive, our session on buyer psychology and behavioural economics.
nyway, I’m able to give you a sniff of the magic of understanding why. We’ve boiled it down to a system that organisations can follow to maximise success in communication. The three parts are Trigger/Frame/Fuel, and I’ll cover them briefly below.
So one of the key challenges brands often face is how to get people to consider them in the first place…
The Currency of Attention
The first currency we need to focus on is not financial — it’s the currency of attention. This is because if you don’t get noticed, everything else is academic.
It’s easy to say but hard to do, and it’s not just about being noticed. It’s also about being noticed for the right reasons.
See, before people buy, they must first buy-in. Communication precedes action. And attention precedes communication. And communication isn’t sent — it’s what’s received. And most companies massively overestimate the ‘listening’ or the attention they’ve been granted by the audience. Effective communication is the messaging people don’t see (or invisible communications). And effective communicators start by asking, “What do I need to do to get noticed here?”
“What everyday concept can we attach our brand to?”
To get noticed, we need to find the right trigger in people’s mind so that everything else follows through. It’s Skinner’s Operant Conditioning meeting Pavlov’s Classical Conditioning. We don’t have time for a sideline into the nuances of psychological conditioning, but let’s just say the goal here is to get your audience salivating when your brand rings the metaphoric bell.
A trigger is something that attaches to a concept that we want. This means everytime we see that trigger, we associate something else to it. Think about triggers being real-world (objects or activities or in the mind) thoughts and ideas. The point is, we take something exciting in our audience’s mind, and in that moment, we augment or attach our message.
So if you want people to think about your brand, what you sell, and your service, look for triggers that are already in the mind or in people’s day-to-day life.
For KitKat, that trigger was coffee.
Because there were so many popular Nestlé products to compete against, KitKat decided that they needed the right trigger. They thought about something existing and of value to people that they can associate with.
But why coffee, you ask?
Well, we associate coffee with taking a break. It’s scheduled every day and highly valued.
KitKat realised that their chocolate bar actually went very well with coffee. By attaching to the idea of a coffee break, people soon associated that trigger to opening a KitKat bar.
And that was how they came up with the line “Have a break, have a KitKat.”
Even better than KitKat’s “break” and there’s a coffee “break” — genius!
The magic was not the line itself but finding the right trigger to associate to. And the rest was history. KitKat’s story proves the power of finding the right trigger.
A key concept here is the the diagnostic and effective frequency — but I can only cover so much here.
“
How do we frame the decision for advantage?”
Framing is all about drawing the right focus to your product and message.
It is changing the way information is presented to influence how people view your products to impact their decision making.
It’s about how the concept of the frame changes the way the picture looks. A large ornate gold frame makes a picture look very different than if it were in a slim-lined modern frame.
Same goes for people and how we ‘frame’ the information we’re looking at.
If we understand the frame our audience are using, we can reframe it. If we can change the frame, we can change their decision.
Daniel Kahneman won a Nobel prize in economics in this area, proving beyond a doubt that people make emotional decisions and make rational justifications. In fact, up to 23–47% of any audience might change their decision if exactly the same information is framed in a different way. Once again, I can’t do the concepts justice in a short article… But…
In the Invisible Communications Capabilities Training that we give to clients, we introduce eight essential framing tools that will help you frame buyer decisions.
In this article, we will dive into three of them.
Decoy Pricing.
When presented with two products with equally similar attributes, people often find it difficult to make a decision. It’s often complex to compare and hard work. People tend not to be stupid,
but
they are lazy!
Decoy pricing understands this. Decoy pricinginvolves influencing purchasing decision between two products by presenting a third option — a decoy ‘similar’ to one product but noticeably ‘worse’.
The less attractive decoy isn’t chosen in considered evaluation, but it makes the similar version look more attractive. So if there’s a choice between A and B and I introduce a C (which looks like A, but worse) more people choose A.
By adding a decoy product to the mix, you help your consumers rule out the lesser quality, same-price value product for the high-quality, same-price value product, making the choice a no-brainer.
Probability and Frequency.
Frequency gives the prevalence of an occurrence whereas probability gives a statistical percentage. In dealing with probabilities and frequencies, we can relate to data best when we say “1 out of 10” rather than use a percentage. People just cannot fully relate to a “0.1” statistic.
It’s because we can relate to the whole 1 in the 1 out of 10 (and we neglect the 10 — it’s called denominator neglect funnily enough). But we don’t have a sense of a “0.1 of something”. It’s not a real-world concept.
So when we have low probability events that we’re trying to get people to take precautions against, such as when we’re selling insurance packages, we’re much more likely to get a better response if we say “3 out of a 100 businesses experience this” rather than saying “3 percent of businesses.” Subjectively, audiences relate much more to the first statement.
On the flipside, we want to downplay the downside of an essential operation where a doctor needs to disclose risk, but you don’t want a person stressing out as that can cause even more problems. Here, operation risks are best disclosed as percentages vs frequency if we want to keep patients informed but calm. For example, “Only .003% have complications” vs “3 in every 100,000 have complications”. The same information is experienced very differently by most people.
So use probability over frequency when you’re trying to minimise a subjective experience over an event.
Providing a Comparison.
Let’s take a
look at these two offers below when drawing support to help fund underprivileged children around the world. You’d have seen it a thousand times but maybe just not asked why.
Offer 1 uses a lump sum amount that may overwhelm who you present your offer to. It just doesn’t give you any point of reference to actually relate to.
Offer 2, on the other hand, provides a good reference point with the use of the $3 coffee, which makes it relatable and easier to consider and say yes to.
The framing changes everything — and you know that successful charities know it. But the question is, do you think about this when you’re communicating?
“How do we amplify our message?”
There’s a bunch of thinking that goes into fuel. This section asks, “How can you amplify your success?”
Are you using your systems to scale effective communication?
We find that most businesses haven’t actually ordered the way that their customers or clients engage with them. They haven’t looked through to identify the minimum amount of steps that customers need to take to buy their products.
Where are the barriers?
Where are people getting stuck?
Where are people making decisions?
For the best chance of success, you have to make sure you’re using the right triggers and frames and remove any unnecessary steps for your customers.
Make it simple and personal first. Only then can you really make your products scalable.
So there you have it, the three parts of Invisible Communications, the factors that explain why people buy:
Trigger - How will we get them to think about us at the
right time
?
Frame - How will we get them to decide in our favour — the
right decision
?
Fuel - How do we keep the success going — the
right way
?
Easy say, but hard to do. Just remember, how people think they communicate often isn’t actually how they actually communicate.
Hopefully the above was a little taste into the hidden drivers that make people buy.
So always start with why, and you’ll end up increasing your chances your customers will end with buy.