Does the iPhone have a branding challenge?

Interesting post from Laura Ries, guru and blogger on The Origin of Brands. She examines the issue of convergence, a common theme found in her writings, as well as her father Al Ries and occasional collaborator, Jack Trout (two of the best branding books I've read are Positioning: The Battle for the Mind by Al and Jack, and separate book by Jack titled Trout on Strategy).

This time, she takes on the iPhone. Arguably a highly successful product launch in 2007 and the follow up 3G/GPS version in 2008. Yet, Laura highlights two problems -- convergence of technologies ... trying to cram more and more features into a device and wayward focus at Apple.

The primary premise of both Ries's and Trout is that the best marketing and positioning strategy is divergence, not convergence. It's not an issue about cool products. It's about long term competitive positioning by applying relentless focus, not in attempting to have all things for all people, especially all in one device.

How do you argue that the iPhone is a mistake in branding when it's sold so well? Laura's blog entry is long, so you'll want to read it with time, but note some interesting points she makes.

To predict the future, one only has to look at the past. There was a time that everybody thought Apple, Sony and Motorola could do no wrong. Apple had the Mac, Sony the PlayStation and Motorola the RAZR.

But in the late 1990’s, Apple was a mess and nearly sold for scrap. Today, Sony is a mess. And Motorola is spinning-off its ailing handset division. Why? Because they went after too many markets, because they focused on convergence not divergence and they put their name on everything.

My fear for Apple is that they take for granted and neglect their very valuable iPod market. All this time, money and development cost on the iPhone has shifted the company’s attention and focus away from the iPod. Remember the iPod market is way bigger than the iPhone market, look at the recent sales figures:

In the last six months, (October 2007—March 2008)

Apple sold:

iPod ………………… 32,765,000

iPhone ……………… 4,018,000

And for those that bought the new iPhone 3G:

• 66% buy the higher capacity model.
• 51% will use an iPod in addition to the iPhone.
• 38% were upgrading from the original iPhone.
• 85% bought the new iPhone because of the new features 3G & GPS.

Are Apple's priorities misdirected? Sure, iPods probably have lower margins, but Apple is also dropping the price pretty fast on the iPhone, which may increase sales units but at lower margins. A higher end device can command higher margins than mass-market devices.

I'm certainly not one to argue Apple made a mistake with the iPhone, but a look at history and analysis of where companies lose focus and their subsequent demise is fascinating nonetheless.