The most interesting thing about the iPhone 7

In April 2016, Apple announced its first ever reduction in iPhone sales. The company played down the decline suggesting it was in line with slowing smart phone sales around the world but the reality is that Android is becoming an unstopable force and consumers are getting bored with the iPhone.

So the launch of the iPhone 7 is really important for the Apple brand. I haven’t played with the iPhone 7 so I can’t say how it is but it needs to be interesting, exciting and desirable and that’s going to be tough to deliver.

What I do find interesting is related to the removal of the 3.5mm circular headphone jack on the left side of the bottom edge of the iPhone 6. Instead of traditional wired headphones the iPhone 7 will work with wireless EarPod headphones which don’t, I am now told, ship with the phone. According to Apple, this move is part of the plan for a wireless future and that makes sense although the rest of the ecosystem is still wired so that might be an issue in many situations you find yourself in.

EarPods - wirelessly wired. Thanks customers
EarPods – wirelessly wired. Thanks customers

Traditionally, when Apple makes such a move – remember when it redesigned the MacBook and MacBook Air computers a few years ago, the MagSafe charger got a refresh too which meant you couldn’t use your old charger with your new laptop. And every Mac user will complain about Mac adaptors for monitors, Ethernet cables and God knows what else – it doesn’t think about the consumer.

Well this time, the new iPhone ships with an adaptor that plugs into the Lightning port which is normally used in its chargers. This means you can still use your expensive wired headphones. But you’ll still have to fork out for a separate adaptor if you want to charge your phone while listening to music.

Apparently, the new lightning EarPod headphones offer a better quality sound than ‘wired’ versions which tend to sound a bit tinny. This is something to do with an inbuilt digital-to-analogue music converter (DAC) present in lightning connector headphones.

What this tells us is that Apple listens to its customers and that’s something a lot of brands need to do. It also tells us Apple values the voice of the customer and that is a major step in the right direction for a brand that hasn’t really needed to in the past. It’s a small but important step for Apple and shows that even the most valuable brand in the world must and is listening to its customers. Are you?

Why it pays to build a brand

As they enter the season of contract negotiations, many Asian and Malaysian firms are finding their margins squeezed by the Western brands for which they manufacture products.

As they go through this painful process, the question of whether they should explore the possibility of developing their own brands will come to the fore once again.

It is well known of course that the cost of building a brand can be substantial but failure rates are high too – as high as 90% according to Ernst & Young.

But the rewards of developing a brand successfully are difficult to ignore and Apple is considered by many to be the poster boy of successful branding.

Almost bankrupt 15 years ago Apple’s stock reached US$369.89 in August 2011 when its market capitalisation hit US$342.8 billion. This put the tech superpower ahead of the previous richest company Exxon, whose stock fell to US$68.78 with a market cap of US$334.41 billion.

Although Apple only held the position of richest company in the world for a short time, it was some achievement.

The demand for Apple products continues and the company sold four million of the iPhone 4S in the first four days after the launch in November 2011.

Such demand allows the company to charge a premium for its products. But how much profit does Apple make on iPhones and is it really beneficial to build a brand?

A recent report from technology research firm iSuppli would suggest the answer is a definate yes.

iSuppli has carried out extensive research and recently announced that a 16GB iPhone 4S costs US$196 (RM616) to make whilst the 64GB costs US$245 RM770).

In the UK the iPhone 4S costs UK pounds 499 or RM2,520 out of contract. The iPhone 4S is not on sale in Malaysia yet but in Singapore an out of contract 16GB iPhone 4S will cost S$948 (RM2,526) and the 64GB will cost S$1,088 (RM2,669).

Nice margins indeed!

Individual component costs of an iPhone