Apple’s Lisa, a Marketing Failure

Apple became the first publicly traded U.S. company to hit a $1 trillion market cap on Aug. 2, 2018. It hit a $2 trillion valuation just over two years later Aug. 19, 2020 (source: CNBC). And it became the first $3 trillion company in 2022. For this California based tech giant, success has always been their integral part. Every product & service they launched, becomes successful. People became so obsessed with Apple’s products that when they launched iPhone 4S, a customer waited outside Apple store for 240 hours (source: Atlantic) to get the first phone.

iPhone has been the most successful product they have in their product line, which contributes 52% of revenue (source: BoA). Along with iPhone, there are products like iPad, MacBook, Apple Watch, AirPods and other services, all are most desired consumer products. Since the launch of their first product Apple l in 1976, it seems that every single product they launch becomes instant success.

Apple was founded as Apple Computer Company on April 1, 1976, by Steve Jobs, Steve Wozniak and Ronald Wayne to develop and sell personal computer. However, they later expanded their product portfolio in many different products & services.

However, the history of Apple is not always all successful products, there were few products which failed miserably. One such product was “Lisa”, Apple’s first personal computer with graphical user interface (GUI) and a mouse which was launched in 1983. Despite being a superior computer comparing to its rivals and best efforts put by the company, it just couldn’t sale enough to become a success story.

Compared to Apple’s Macintosh, Lisa was a personal computer with superior technical features, but had a poor marketing strategy.

The Product

The first Lisa was launched in 1983, as a desktop computer, targeting the personal computing segment. This was the very first computer that had a mouse as human interface device and a graphical user interface. The computer itself didn’t have any issue at all, it was a finely crafted machine which was not only superior to its rivals, but superior to any Apple computers back then.

In 1981, IBM launched their personal computer IBM-PC, which was Lisa’s main rival. Below table compares Apple’s Lisa & IBM-PC’s technical specifications to give a fair amount of understanding on how technically advanced Lisa was to its biggest rival.

 Apple’s LisaIBM-PC
Release Year19831981
CPUMotorola 68000 @ 5 MHzIntel 8088 @ 4.77 MHz
RAM1 MB (1024 KB)16 KB
Operating SystemLisa OS, XenixIBM BASIC / PC DOS 1.0
OS InterfaceGraphical User InterfaceCommand based
Mouse IncludedYesNo
Table 1: Lisa & PC Technical Comparison

Prior to Lisa, computers relied only on text-based interfaces and keyboard was the input interface, making the Lisa was a remarkable step forward in the evolution of the modern Personal Computing. The computers back then were perceived to be a delicate machine and to be used in offices, by experts in lab coats. But Lisa’s graphical user interface made it easier to interact with computer, since it was built with personal computing needs in mind.

The Failures

Judging by the specifications and software features, Lisa should have been a great success. But unfortunately, it didn’t. There were several reasons why the market rejected Lisa, key reasons are highlighted below.

  1. High Price: The price of Lisa was $9,995 in 1983, taking inflation in consideration, price of Lisa would be $27,978.17 in 2022 (source: CPI Inflation Calculator). It was too expensive for the average household, putting it within reach of only the wealthiest. 
  2. Wrong Target Market: Apple was a consumer-oriented company and their intended target market for a Personal Computer was regular household, but their high price set this computer to target for large corporates only.
  3. Communication Disaster : At the time of launching Lisa, Apple put an advertisement in Wall Street Journal which was 9-pages long, filled with all jargons, which can only be interpreted by people like scientists at NASA.

Anatomy of the Failures

  1. High Price: From the Market Oriented Pricing model, we know that there’s not only one factor that decides the pricing, rather there are multiple factors which needs to be considered. Price should not be isolated from other elements, rather the mix should be rightly integrated. it seems that Apple did not consider all the possible mix for pricing Lisa. From their pricing, it seems that they have only considered “Product line pricing” and “Costs” to price Lisa. While Lisa was priced at $9,995, their competitor IBM-PC was priced at only $1,565.

2. Wrong Target Market: Apple did not seem to segment the market properly. They should have first segmented the market and then decide for which segment they are producing Lisa for.

Segmentation has two major factors, (1) Market Attractiveness, and (2) Capability to Compete. For Lisa, it may have the market attractiveness, since it came with Apple brand name, but it could not compete with right pricing for the target segment since the competitors offered similar product at a much lower price. Hence, only 10,000 units of Lisa was sold, in comparison to 750,000 PCs sold by IBM.

3. Communication Disaster

From the positioning perspective, Apple seemed to be confused. Since they were confused, their marketing and positioning was unclear to their communication team.

From the “positioning risks & errors” lens, it seems that Apple had a less believable product, but the uniqueness was portrayed in broader aspects. And that is why they had to publish an advertisement of 9-pages just to talk about what a great computer they have built.

What could have been done differently

All the failures discussed above could have been avoided if right marketing strategy would be considered before launching.

The new product design process

Apple didn’t seem to rigorously follow the New Product Design (NDP) process. This process contains step-by-step guideline for product development, however, there are two important aspects which should have been rightly evaluated.

i. Concept testing: When developing a new product, it is always a good idea to test concept with the end consumers, so that before going for full production, customer’s raised issues can be handled.

Apple should have tested Lisa’s concept with consumers, then they would have received the feedback on pricing and other related issues and Apple could have taken care of those issues before launch.

ii. Market Testing: Test marketing aims to evaluate marketing plan. It considers advertising, distribution, sales, and other important components of overall strategy, but it does this without fully launching the product and taking on all the associated risks.

Before launching Lisa, Apple should have tested their advertising, distribution, sale, and other aspects of marketing so that the flaws could have been identified and rectified before launch.

Segmentation: No company can support every customer’s need. That is why the best way forward is to divide the market into smaller segments and then develop products/services for the chosen segment only. This helps to focus better and to elevate product’s success rate. Apple is a consumer-based company, so their primary segment was expected to be consumers, but Lisa’s features, functionalities and price was not at all aligned with their segmentation. Result is a failed product for the target segment.

i. Differentiation: Since there was demand for desktop computer for corporate and household, Apple should have launched more than one version of Lisa. These different versions could have different features, functionalities, and pricing. Then, Apple could satisfy both customer segments.

ii. Tailored Marketing Mix: Again, the marketing strategy for corporate & household cannot be the same. Apple needed to tailor their marketing strategy, one marketing materials for corporates which may have highlighted more on the technical features. On the other hand, more simplified marketing communication could have been developed, so that it is easily understood by consumers.

iii. Opportunities & Threats: While selecting the market segment to serve, Apple needed to consider the available & potential personal computer options in the market. Then clearly articulate the opportunities & threats Lisa may face, and then they should have designed the marketing strategy around those understanding, especially as we have seen for pricing. IBM’s PC was Lisa’s biggest rival and price-wise it was nearly 1/8 of the price of Lisa. Identifying these kinds of threats beforehand would help Lisa to succeed.

Positioning: Successfully positioning a product in the right place of the market is an important part of product development. A company can develop great products, but if the product is not rightly positioned in the market, it may become a recipe for failure.

There are four components for successfully positioning a product, Clarity, Consistency, Competitiveness and Credibility. For Apple, they had clear process of developing quality products, they have been consistently producing good quality products. They established credibility in the computer market as well, with their durable products. But they needed to work on two other areas for Lisa’s positioning.

i. Clarity: Apple needed to have clarity on the purpose of Lisa. Although they were consumer company, they came up with features which were way ahead of their competitors, as a ripple-effect the price went so high, it went beyond buying capacity of intended consumers. If Apple could have brought more clarity on Lisa’s need, purpose and target segment, then they could have positioned the product in the right place.

ii. Competitiveness: A product’s right placement has influence from its competitors. In this case, IBM was their biggest competitor, and IBM had a product in the market which was developed keeping consumers in mind. IBM-PC was developed with lower technical specification, which helped them to be able to sale the computer at a much lower price (at $1,565), which is why they could preliminarily dominate the personal computer segment. If Apple would have analysed IBM’s position in the market, then they would have developed a comparable product with much lower cost. If such, then Lisa would have been rightly placed in the market to dominate the consumer market, especially with their graphical user interface & mouse.

Pricing: Rightly pricing a product is important so that the target customer can purchase a product, it is an important element for any product development process. A company can have great products, but if the consumers cannot afford the product, then the product is a failure. Lisa demonstrated that for its high price, it could not grab the market as expected. Lisa failed to integrate two major components in pricing.

i. Competition: While setting price for Lisa, Apple may have missed considering the market price of competing personal computers, otherwise they could not price Lisa significantly higher than the rivals. While IBM-PC was being sold at $1,565, Lisa was priced at $9,995. Lisa had better build quality, features & functionalities, but a consumer cannot be expected to understand all technical features and functionalities, rather a major decision driver for a usual consumer is pricing, which Apple should have taken into consideration. A computer with lower technical specification and lower price could help Apple to sale Lisa in much larger volume.

ii. Value to Customer: Apple’s products are perceived as higher quality products than its competitors, that is one of the key reasons for Apple to be successful. Because Apple has been producing high quality products consistently. However, when the price is significantly higher than its close rivals then consumers may not find much value to pay so much additional for a device which can be replaced with competitor’s low-priced device for similar functionality.

Apple needed to lower the specification of the computer and its associated costs so that Lisa could be sold at half the price, so that it could compete with IBM-PC. When the price of IBM-PC and Lisa would be very close, then the consumers would find value at purchasing Apple since this was a superior device. Apple should have focused more on building a relationship with customer, rather than considering them as a wallet.

iii. Premium on Flexibility: Apple could have sold Lisa with bare minimum specifications, features, and functionalities, at a price point that is comparable to IBM’s PC price. If any consumer needed additional features & functionalities, then Apple could charge them premium for the upgrades. Like the default RAM could have been 32 KB; if any consumer wants more RAM, Apple could sale the additional RAM at a higher price. This would have created a positive perception about Lisa, from the perception of an expensive product, this could have build the perception of a computer that offers flexibility.

Final Thoughts

Apple is one of the most influential brands in the world and the most valuable company by market cap (source: CompaniesMarketCap). From the beginning, Apple has been producing high quality consumer electronics consistently. All their products are highly desirable by consumers. They only have a few failed products and Lisa is one of those.

But these few failures do not define Apple. After Lisa, Apple never lost their focus from its roots as a primarily consumer-oriented company. Lisa was a great lesson for Apple and it should remain as a great lesson for all other companies. It teaches that along with developing great products, right marketing strategy needs to be in place to elevate the product(s) in the right position where it is desirable, as well as affordable by its intended consumers.

References List

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