Ballmer’s “Apple Tax” campaign

April 15, 2009

Like any good rivalry between competing companies, characters from both sides take shots at each other, hoping someone will take their word at face value and not challenge the validity of such claims.  When it’s done in humor, you tend to get a little leeway with the claims you make.  However, when you present such claims as fact, you’re likely to be taken to task.


 History of rivalry

Microsoft and Apple became competitors when the original IBM PC shipped with MS DOS back in 1981.  At that time though, Microsoft wasn’t really seen as a competitor.  Apple was competing with IBM.  Back then, competing with IBM essentially was a proposition doomed to failure, particularly within the enterprise market.  Microsoft wisely licensed their product to IBM rather than selling it to them outright.  In the process, Microsoft inherited the success of the IBM and future IBM compatible market.

In the meantime, Microsoft was also a developer for the Apple platforms, including the new Macintosh platform.  After developing products for the Mac, it was clear that the GUI was the future of operating system interfaces.  Microsoft promptly began to copy Apple’s designs.  Worse, as a developer for the Mac, they more or less had a blue print for the foundation of APIs and event models to copy from.  When Microsoft copied the Mac, the two companies truly became rivals.

Over the years, Microsoft was able to ride the wave of success on top of their operating system monopoly.  They were even able to extend that monopoly through unfair business practices onto their suite of business productivity applications, Microsoft Office.  During that timeframe, Apple’s market share continued to shrink to the point of near extinction in the mid to late 90’s.  

 

Times have changed

Back in 1997, Apple’s annual revenue had sunk to $7.1 billion.  By comparison, Apple posted $9.74 billion in revenue in the last quarter alone.   Instead of posting losses, Apple has been posting profits measured in billions on a quarterly basis.  Times are good for Apple.  In addition to increased market share on the desktop PC sales, Apple has enjoyed huge success with consumer electronic devices like the iPod and the iPhone.  

Microsoft is still the leader in the desktop operating system business by a large margin.  However, the trend has been in Apple’s favor for several years now.  Years ago, Apple’s 2 – 3% market share was considered insignificant.  However, according to NetApplications, Apple’s usage market share is pushing 10% and has demonstrated a steady increase over the past several years.

On top of that, Apple’s Safari and various other Webkit based browsers (along with Firefox) have demonstrated similar growth patterns at the expense of Microsoft’s leading Internet Explorer product.  Further, sales of the iPhone have now exceeded sales of Microsoft’s Windows Mobile sales.  Considering how long Windows Mobile has been in the market, this is not a good sign for Microsoft.


Apple’s advertising offensive

For years, Apple has gone on the offensive with various advertising campaigns.  While Apple happens to make great software, they are primarily a hardware company, at least with respect to their business model.  As such, Apple has targeted PC hardware in the past.   For example, during the height of the PowerPC era, Apple attacked Intel based hardware, etc. More recently, Apple’s “I’m a Mac” campaign has gone after the PC in general.  However, since Apple is now using similar hardware, the attacks have really been indirectly against Microsoft.   Like any good campaign, Apple attacks known issues in the PC world such as virus / malware issues, Vista’s annoying UAC security “features”, etc.  Apple does this in a humorous way without making any specific claims.  Apple just generically plays off of known stereotypes and tries to make a point with their PC and Mac people as metaphors for their respective platforms.

 

Microsoft had enough

While Microsoft is still hugely successful, one thing is clear, they are losing ground on multiple fronts.  Google has Microsoft beat on the internet search front and is challenging Microsoft on the on-line application side.  RIM and now Apple have surpassed Microsoft on the mobile OS front.  Vista has taken a beating in the press and Apple’s “I’m a Mac” advertising campaign has proven successful.   Apple has started to gain significant market share at Microsoft’s expense.  Clearly, Microsoft had enough and decided to retaliate with an anti-Apple campaign of their own.  After a failed Vista advertising campaign, Microsoft decided to hire Crispin, Porter & Bogusky for a $300 million consumer advertising campaign.   The intention was to give Microsoft an image make-over and to halt any traction gained by Apple.

 

So, how effective have they been?

Microsoft started out with their “Mojave Experiment”.  The premise of this part of the campaign was to get people to think that despite the problems they’ve heard about with Vista, if they just tried it for themselves, they’d want to use it.  While that sounds reasonable enough on the surface, in reality, they’re missing the point.  Most of the issues around Vista have to do with compatibility, installation, etc.  Likewise, it shouldn’t be so surprising that a few people working in a very controlled environment might actually like Vista.  It’s not hard to make any product look good in a demonstration – just ask Steve Jobs for example.  In the end, the overall take away message sent from this advertisement is that Microsoft refuses to acknowledge the faults of their own products and they call their user base a bunch of dummies for not switching to Vista.  Nice message Microsoft.  

Next came the Seinfeld commercials.  Microsoft apparently paid Seinfeld $10 million for this campaign.  I always thought it was common knowledge that Seinfeld preferred Macs.  In any case, both PC and Mac users alike ended up scratching their heads trying to understand what those commercials were all about.  They essentially had no message, nor did they make Microsoft look “cool”.   Result: Fail.

Next on the agenda was the “I’m a PC” campaign.   This was the beginning of the anti-Apple effort.  The first commercials just showed a bunch of different people doing different things and calling themselves a “PC”.  On one hand, it does provide the sense of everyday people using PCs.  That’s not a bad message in and of itself.  It’s certainly better than previous efforts from Crispin, Porter and Bogusky, but that’s not really saying much.  On the other hand, when you compare these ads to Apple’s ads, they just don’t match up.  Apple used the PC person and Mac person as metaphors in what was essentially a bit of humor.  Microsoft was neither using metaphors nor humor to make their point.  In that context, having people say “I’m a PC” simply didn’t make sense.  Nobody would call themselves either PCs or Macs in reality.  

Microsoft then went on to showing kids using various tools to create cool projects.  This was somewhat effective because it tries to demonstrate ease of use which Macs are known for.  Unfortunately, they’d end the piece with the kid saying “I’m x years old and I’m a PC.”.   Instantly, whatever I just saw and was beginning to fall for just became very fake and staged.  The “I’m a PC” comment from the kids made the entire commercial unbelievable.  The common sentiment is that these ads fail as well. 

http://daringfireball.net/2008/09/digging_deeper

And so what makes Microsoft’s new “I’m a PC” commercials so jaw-droppingly bad is that they’re not countering Apple’s message, but instead they’re reinforcing it. That the spots themselves jump between dozens of different people who “are” PCs, that the spots make a point of emphasizing that there are a billion Windows-running PCs worldwide, this only emphasizes that “PC” is not a brand name but a generic.

 

Finally, we get to the “Apple Tax”

Seeing as though Microsoft’s various commercials with Crispin, Porter & Bogusky have largely been considered failures, I had no real expectations of success for their “Apple Tax” campaign.  Steve Ballmer has made comments in public forums suggesting that when you buy an Apple computer, you are paying $500 extra just for an Apple logo.  Hence, you’re paying an “Apple tax”.   The assumption here is that Apple computers cost more for essentially identical hardware.

This line of reasoning and direction for an advertising campaign is wrong on so many levels, it’s astonishing.  In no particular order, I’ll provide a few reasons why this is a bad idea.

1.  Establishing a premium brand.

The whole point of an advertising campaign is to establish brand quality.  The retailers will advertise prices, etc. as necessary to make the sales.  Microsoft doesn’t even attempt to challenge Apple on quality, and for good reason.   Instead, they challenge Apple on price.  The reasoning behind this stems from the existing poor economic conditions, etc.  However, even in poor economic conditions, consumers often seek out better value as opposed to lower price.  This campaign basically concedes that the Mac is a better machine, but the PC is cheap.  Result:  Fail.

 

2.  This does nothing to promote Microsoft products specifically.  

Of course, given the monopoly position Microsoft has on generic PC hardware, Microsoft knows it doesn’t have to promote its own products.  If you buy a PC, you are indirectly buying Microsoft.  Result:  Fail.

 

3.   What about the “Microsoft Tax”?

There is a big problem with making price your primary consideration for buying a computer.  Logically, since the same PC could be purchased with Linux installed for an even lower price, you’re paying a “Microsoft Tax” when you buy a PC with Microsoft Windows installed.  Microsoft’s own line of reasoning can easily be used against them.  Result:  Fail.


4.  Consumers might actually do price comparisons.

When Steve Ballmer makes the claims that he does, he probably doesn’t expect people to actually check for themselves.  The problem is, exactly, identical hardware comparisons are difficult to find.  By just taking a look at Apple’s web site and Dell’s web site, I found Dell to be more expensive at the high end.  For example if you compare the Mac Pro to the Dell XPS 730x they are at least very similar in price (Mac Pro $3,499 – Dell $3,519), even after the Dell discount.  Now, to be fair this is not an exact comparison as they don’t offer the exact same hardware configurations.  They both used the new Intel i7 chips.  The Dell was factory over clocked but only had 4 cores, the Mac was clocked a little lower but had 8 cores.  They both had 6GB ram, Mac had a bigger drive (640gb vs 500gb), Dell had a crossfire ATI 4850, the Mac had the ATI 4870.  The Mac also had a keyboard, mouse, firewire ports, etc.

On the other hand, the point of this article isn’t to provide a detailed cost analysis across multiple price points and product types.  I would surely have to believe that a custom built machine could be had for less money as well if you’re willing to go through all the hassle associated with it.  I also don’t doubt there are some configurations where Macs do cost more for similar hardware.  The point here is that this notion of an Apple tax applying across the board simply isn’t true.

 

5.  The ads demonstrate the Mac as the first or preferred choice.

Microsoft’s first Apple Tax ad shows the customer, Lauren, going to the “Mac store” first to try to buy her desired machine with the $1000 budget.  Ultimately, Lauren comes out depressed because she can’t afford the machine she wants.  Then, Lauren goes on to another generic store and is happy again because she can buy a machine she wants within her budget.  That’s all well and good, but it demonstrates that the Mac was her first choice and that getting the PC was more of a consolation prize because it was “cheap enough”.  Is that really the message they want to send?


6.  The ads admit to not being “cool” enough.

In the same commercial, Lauren claims that she must not be “cool enough” for the Mac.  She says this while genuinely looking depressed about that realization.  Again, is that the message Microsoft should want to send?  If she’s not cool enough for the Mac, does that in turn make her a loser for settling for the PC?

 

7.  The market leader should never acknowledge the competition.

Generally speaking, it’s never considered to be a good idea for the market leader to acknowledge the competition.  On one hand, Microsoft has to do something to try to halt the market share erosion.  Microsoft has temporarily kept the numbers in check recently, but that’s almost entirely due to the low margin NetPC category.  Nobody is getting rich off of the sale of $300 PC systems.  By mentioning Apple or “Mac” by name, Microsoft is giving to much credibility to the competition.  That’s a no win situation for the reasons mentioned above.

This list could very well go one if I were to take the time to analyze every commercial that was part of this campaign.

 

Conclusion

Generally speaking, Microsoft’s most recent advertising campaign with Crispin, Porter and Bogusky is considered to be a failure by the industry.  Microsoft has not effectively enhanced their brand image, nor have they effectively countered Apple’s advertising campaign.  Worse, this campaign unintentionally ends up sending the wrong message for Microsoft.  The Mojave experiment called their existing user base a bunch of dummies indirectly.  The Seinfeld ads left everyone scratching their heads wondering what the point was.  The “I’m a PC” ads were neither funny nor effective and only served to reinforce the message communicated by Apple’s campaign.  The latest “Apple Tax” commercials have extremely questionable validity and only serve to make both Microsoft and the PC industry as a whole very generic.  Further, if you follow Microsoft’s point to its logical conclusion, everyone that buys a PC would be better served running Linux.  Afterall, Microsoft isn’t even trying to argue the quality issue.  Instead, they’ve made price their focal point of attack.  This advertising campaign is a disaster for Microsoft.   I can only imagine where they will take this campaign next.

Advertisements

2 Responses to “Ballmer’s “Apple Tax” campaign”

  1. Neil Anderson Says:

    Good article. Amazing that such a large company can have so little clue. But they never really got to where they are by competing. At best, they embraced mediocrity and that was good enough for most people. Times have changed.

  2. Hackintosher Says:

    And now that Apple has reduced its pricing dramatically for its entire range of laptops in this month’s WWDC, the pricing argument is shot to pieces as well, completing Microsoft’s failure….

    ….. niiiiice, Ballmer. Keep up the monkey imitations and chair-throwing tantrums; you may not have a job at Microsoft for too long, but any ringmaster would hire you.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: