Mac Sales Raise Apple Quarterly Earnings 48 Percent
Justin Sullivan  /  Getty Images
An Apple Store employee, right, helps a customer with her Apple laptop. As Apple pulls in millions more customers with its varied products, it's getting harder to keep them all happy.
updated 10/12/2007 7:46:08 PM ET 2007-10-12T23:46:08

For Apple, there may be a downside to success. Sales of the Cupertino, Calif.-company's Macintosh machines are growing three times as fast as the overall PC market. Its iPod music player is burying the competition. And the stylish iPhone is setting the wireless industry on its head. But as Apple pulls in millions more customers with different kinds of products, it's getting harder to keep them all happy.

By broadening its share of the computer market and diving into whole new businesses, the company has become a case study in the challenges of taking a cherished brand with a devoted (some would say cult) following into the mainstream. "The customer base is now more diverse, including students and mainstream consumers, and it's harder to satisfy as a whole," says Lopo L. Rego, a marketing professor at the University of Iowa who studies the impact of customer satisfaction on financial performance.

Apple still tops all of the big measures of computer-customer service. But there are signs that it is vulnerable to the service struggles of other big companies. A widely watched study of customer satisfaction, released in August by the University of Michigan, showed Apple slipping 4 points from last year's score, to 79 on a 100-point scale. That still leads the industry, but it's the company's first decline since 2001.

Heated complaints
Meanwhile, the vitriol of complaints on some Apple-related blogs and Web sites, such as macintouch.com and tuaw.com (The Unofficial Apple Weblog), is approaching that usually reserved for cable TV. Commentary gets especially heated around such issues as iPhone pricing and restrictions, but ranges across all Apple products. An August posting on BusinessWeek's Byte of the Apple blog from a self-described "huge fan" read: "I, personally, will NEVER purchase an Apple computer EVER again, specifically BECAUSE of their support," which the writer claimed had been sullied by unhelpful store employees and call-center reps.

Such anecdotal tales of woe may be more strident because of the hype surrounding Apple's recent product launches. And it's all but impossible to weigh them against complaints leveled at rivals. The company, for its part, cites an array of internal metrics in claiming service has never been better; wait times at its 185 Apple stores and on its phone support lines are holding steady, for instance. Chief Operating Officer Timothy D. Cook says Apple's customer satisfaction surveys show a rise of two to three percentage points from a year ago. "We've invested enough to be No. 1, in some cases by a large margin," says Cook. "And we're seeing a rise, so that makes us feel good."

Even small cracks in a pristine reputation, though, can be a sign of larger problems. Just ask Dell. Many shoppers complained bitterly about its service for years before the PC maker began losing market share in the fall of 2006. And any problems are more noticeable for Apple because high-quality service has always been part of its mystique. Its stores each have a service desk (the "Genius Bar") that offers free face-to-face help on everything from how to transfer music to the iPod to tweaking a Mac's hard drive. Customers can walk in or schedule appointments up to 48 hours in advance.

Growing market share
While Dell and some other PC makers staff overseas call centers with technicians who are sometimes hard for Americans to understand, Apple funnels calls from U.S. customers into North American centers. Cook says the average wait time before a technician picks up a phone call is just two minutes, in part because the company continues to open a new call center every two months. Problems, he claims, are resolved in a first call more than 90 percent of the time, a standard that's "on a different planet" from typical industry rates. Apple is adding more personnel to each store, says retail chief Ron Johnson, as part of a remodeling that will create more interactions between customers and staff.

For years, the computer maker survived on its core of tech-savvy fanatics clustered in fields such as education and design. They were intensely loyal and thrilled to CEO Steven P. Jobs' unveiling of the smallest tweak in the Mac or iPod lineups. If there was an occasional glitch, it was the price of membership in the club. Apple products "bring so much joy that even if there's a snafu, you tend to be more forgiving," says longtime customer Nigel Ashton, a photographer in Lawrenceville, Ga.

Today, Apple is selling huge volumes of products to a much wider, and perhaps less patient, audience. The iPod, starting at just $79, has put its name in the hands of millions of mainstream consumers, many of whom, analysts say, have gone on to buy Macs and iPhones. In the most recent quarter, ended on June 30, Apple sold 1.76 million Macs, up 33 percent from the prior year. That gave it 5.6 percent of the U.S. PC market, up from 4.8 percent, says researcher IDC.

Customer dissatisfaction
Those new customers, lured by the company's sterling reputation and marketing power, may feel deceived when they encounter bugs. Catherine Temple, a Boonton, N.J., homemaker and musician, had heard all sorts of great buzz about Macs. So she drove 10 miles to an Apple store last April and plunked down about $4,000 for an iMac. Three months later, the hard drive failed, sending her back to the store with the PC for a replacement part. Days later, Apple had to fix the logic board and some memory chips. Then it discovered the optical drive wasn't working right. Besides the legwork, Temple says she waited days for replies to faxes and e-mails and made long calls to the help desk; one of them ate up 90 minutes. Her experience with Apple "left a bad taste in my mouth," says Temple. "I have no confidence in them."

Some problems reflect the changing composition of the company's product mix. Laptops far outsell Apple desktops, and analysts point out that portable machines get more wear and tear as users tote them around. Also, the more tasks a gadget handles, the more that can go awry — and the more service reps have to cover. The original iPod plays music. The iPhone plays music, makes calls, stores and displays photos, and connects to the Internet.

Plus, not all those customers live close enough to get the vaunted high-touch service from an Apple store. In February, Michael Levin, a graduate student in Lubbock, Texas, bought a MacBook laptop. Several times it cracked on the area near its built-in mouse. But with no nearby Apple store, Levin had to make lengthy calls to Apple reps, who initially balked and insisted he must have dropped the machine before they agreed to fix it. "That makes it easier for them to say no," says Levin. "I'm this nameless, faceless customer."

Copyright © 2012 Bloomberg L.P. All rights reserved.

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