Apple took investors through its numbers yesterday, but not all those numbers were financial results or product sales. Faced with slowing growth rates and declining margins, Apple focused on numbers from outside research firms that show the high degree of loyalty and engagement that is typical of Apple customers.
Not that that Apple’s core message was all negative: sales for its second fiscal quarter rose 11% year-on-year to $43.6 billion as the company sold 37.4 million iPhones and 19.5 million iPads. Two thirds of total revenue came from outside the United States. Earnings were down from the year ago quarter, partly due to a shift in product mix – the iPad mini is a lower-margin product than most other “iDevices.” Apple earned $9.5 billion, or $10.09 per diluted share. Earnings in the year-ago quarter were $11.6 billion, or $12.30 per diluted share.
“We acknowledge that our growth rate has slowed and our margins have decreased from the exceptionally high levels we experienced in 2012,” said Apple CEO Tim Cook. “Our fiscal year 2012 results were incredibly strong and that makes comparisons very difficult,” he continued.
“Last year we experienced high growth in demand for our products, along with corresponding growth in channel inventory, a rich mix of high gross margin products, a favorable foreign exchange rate, and historically low costs.”
Cook went on to tell his audience that Apple remains unique in the mobile ecosystem. “We are the only company in the industry with world class skills in hardware, software and services,” he said. “Most importantly,” Cook added “[Apple has] the highest loyalty and customer satisfaction rates in the business.”
Apple CFO Peter Oppenheimer reiterated Cook’s emphasis on the outstanding brand loyalty exhibited by Apple customers. He cited a recent study by Cantor showing a 95% loyalty rate among iPhone owners, and highlighted Apple’s 9th consecutive #1 ranking in smartphone customer satisfaction from JD Power and Associates.
Research shows that customer satisfaction does translate into earnings growth, if customers are happy enough with a product to recommend it to others. Bain & Company developed the Net Promoter Score (NPS) to measure how frequently survey respondents said they would recommend a company or its products. Bain says that on average companies with high NPS scores grow at twice the rate of their competitors. Currently, Apple has a very high NPS score of 72, higher than that of Amazon, Google or Facebook.
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