A founder shared an article about Apple and how they deploy Apple Pay. It was interesting to read about the speed of execution and understand the strategy they chose.
In the conversation with the founder he said that Apple has always had a perfect execution of their strategy. I mentioned that this was not the same situation they are usually at and that I was surprised of well they have deployed the product through the channels of distribution.
Apple has partnered with carriers for most part of their distribution and also opened their own stores (more focus on branding). Because its premium product is so demanded by the market they have a strong leverage to decide prices, time of release and more important the quantities of the product.
The characteristics of scarcity and uniqueness that products as the iPhone give them to leverage does not necessarily apply to their Apple Pay product.
Apple Pay is a combination of market share, corporate credibility, and market-tested encryption. It’s not just a technology. Apple Pay is an ecosystem, decades in the making. This is very well explained by Ben Thompson on this piece. We will take from Ben’s piece the description of the different players involved and how Apple uses the “user experience” to leverage the distribution (bold mine & edited):
When it comes to Apple Pay adoption, there are five collective players that matter: Apple, Apple customers, credit card networks (Visa, Mastercard and American Express4), banks, and merchants.
Basically we have an interconnected and very complicated network of stakeholders participating on Apple Pay. Ben did a great job explaining the leverage Apple has had in every product they have launched and how they have efficiently negotiate their position with each “distributor” on each channel. Here is a summary:
Apple builds incredible user experiences, which gains them loyal customers who collectively have massive market power, which Apple can then effectively wield to get its way — a way that involves maximizing the user experience. It’s a virtuous circle. Understanding this circle and how it interacts with the relevant actors is the key to evaluating the prospects of Apple Pay
So we are not going to try to repeat the same and we will focus on why has Apple being effective in doing it instead of others: aka Google with their Wallet.
There are in a completely different position (Google & Apple) on the leverage they can use against retailers, carriers or other distributors. This said, with different leverage, the strategy of deployment through the channel could be use by either of them. Google could have use a strategy to roll its Wallet on retailers and carriers at the same time. The last news is they will now (carriers).
As Benedict Evans mentioned on this subject[bold mine]: This degree of integration gives performance and power management advantages but more importantly makes tightly controlled hardware-software user experiences much easier than for a disaggregated platform like Android. This is particularly important for Apple Pay because the unique thing about it is the experience, not the principle of using NFC for card payments, which has been around for years, both at Nokia and in Google Wallet.
So, what is the key difference on the distribution strategy if they both can use the same one? I believe its not the how fast you close the deals with the stakeholders, due that this negotiation can be just as fast in both of them. The difference essentially lays in the “speed of the product” in the channel of distribution.
So, let’s differentiate two things. One thing is how fast you obtain all the contracts with the stakeholders (Whole Foods, WalMart, CVS, Wells Fargo, CitiBank, MasterCard, Visa) and another is how fast your product runs through the distribution channel to be able to be used immediately.
Example: closing a deal between Apple and Whole Foods can be done in a week between top executives of both companies but being able to deploy the product (Apple Pay) in every store and have it ready to use ASAP on every iPhone 6 is a different issue.
How fast your product goes through the channel of distribution makes a whole difference for the user experience as for your credibility and strategy to be first.
On Ben’s piece he mentioned why it would be difficult for retailers to refuse, but he didn't add the network effect created by a product that is widely accepted in the blink of an eye.
In short, Apple could very well soon have an offer that might be too good for the vast majority of retailers to refuse: get the lift that comes with seamless transactions, plus a reduction in credit card fees, along with the seamless inclusion of pre-existing loyalty programs. Oh-and-by-the-way, if a particular retailer or three still wishes to hold out, then Apple’s loyal customers will sooner rather than later have a huge number of alternatives willing to take their business.
To be able to win the race of being the first and best phone payment system you need create a network effect that will let you build value out of a future commoditize service.
The network effect is created by the company that ensures first the experience to all users. Is not only being first, but creating an incredible experience that will lock the users.
Every company and startup should think about the “speed of the product” in their channel of distribution. It’s not how fast you sign the contracts but how fast your product is ready to improve the users experience. Remember that you are not trying to please your “distributor” but the end user. Think about who you serve and how to get to him as fast as possible.
PS: Hope you find this post interesting. It would mean a lot to me if you Recommend it. Also tell me on Twitter, I'm @JDcarlu
