Consumer Theory

Discussion on “Why a simple product line is integral to Apple’s success” (Edible Apple, 2009).

The article, “Why a simple product line is integral to Apple’s success” details Apple’s approach in determining which products it supplies to customers and why it has found its method of limiting consumer choice beneficial. Apple keeps its product line sparse by offering only its “all-star” products that the company believes it can easily market to consumers or professionals. For example, Apple’s product lineup for a laptop consists only of the MacBook, MacBook Air, and MacBook Pro. These three products make it easy for customers to delineate between laptops with their unique, yet comprehendible names. However, by only offering a small number of options, Apple limits consumer choice. Apple claims that limiting consumer choice has been a key factor in their success because it makes purchasing decisions less confusing for customers, allows Apple to offer only its best possible products, and makes it easier for the company to provide technical support for customers due to the simplicity of the models. 

Consumer theory is a method of analyzing how customers might reach equilibrium between expenditures and preferences by maximizing utility. Determining equilibrium depends on many variables including tastes and preferences and opportunity cost. Apple’s experiences lead top directors in the company to believe consumers value their time and the quality of their product. They place focus on these two aspects because the company considers them imperative to maximizing customer utility.

Consumers are able to benefit from limited consumer choice because with fewer options, their choice is made simpler. Most likely, they will spend less of their valuable time shopping around through varieties of each product or researching the value in different features of models. In addition, consumers are able to determine exactly what they are getting when they purchase an item and are likely receiving the best possible quality product from the producer. With Apple, their simplification of product names, like “Air” and “Pro,” also allow consumers to make a quick and easy decision regarding which product is best for them. In our society people value their time, and the opportunity cost associated with researching products may be leisure time. Consumers can appreciate simplification of product lines so they can spend more time doing whatever else they want to.

On the other side, producers are also able to benefit from limited consumer choice. By focusing on certain products that the company is very skilled in producing, they are able to put forth their best effort and time into these systems. This narrow focus allows talent and resources to be used more efficiently. Simplifying their product lines will cut down on costs as well by making it possible to fulfill orders faster. With fewer choices, it is easier to make customer specified products and quickly ship them out. Additionally, a simplified product line benefits producers because consumers will view their product line as easy to navigate through. Apple has shown that by limiting consumer choice, their revenue and profits have increased.

A similar example of companies simplifying product lines in order to increase profits has been Cisco’s decision to further simplify not only consumer choice but market channels. While Cisco deals primarily in Business to Business transactions and Apple deals with Business to Consumer transactions, the simplification is similar in that it is making it easier for their clients to choose the correct product. Rather than offering a multitude of operating systems, Cisco has chosen only three: IOS (for routers), NX-OS (for data centers), and XR (for service providers). The names may not be as user friendly as those Apple has chosen for their products, but Cisco has managed to make the choice between operating systems much easier as their intended purpose is clearly defined. Additionally, Cisco has decided to focus on their strengths by dropping some of their consumer products, such as their consumer flip camera. This demonstrates that even when dealing in business to business transactions, there is still value in simplifying product offerings. This may go to show that certain industries, primarily the technology sector, may benefit by restricting consumer choice. This may be due to the inherent complex nature of the sector. We have clearly seen how companies and consumers benefit by making the decision-making process easier for consumers while allowing companies to focus on their strengths and provide better products.

Posted by Sam, Paul, and Cindy (Section 2)

Resources:

http://www.oup.com/uk/orc/bin/9780199286416/lipsey_chap05.pdf

http://www.channelbiz.co.uk/2012/02/01/cisco-promises-simplified-product-line-and-market-channels/

http://www.techweekeurope.co.uk/news/cisco-live-advances-promised-on-all-fronts-57517

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