Shareholder meeting shows how Apple Inc. (AAPL) uses secrecy as a selling tool

Apple Inc. (NASDAQ:AAPL) is famous for keeping very close guard over information about upcoming products, and a joke from Tim Cook at today’s shareholder meeting reveals just how effective that strategy is at building excitement over the brand, and thus demand for its products. Mr. Cook stated that he was planning to announce new products during the meeting, a declaration that was met with thunderous applause. A moment later he said that this was a joke, but the response was revelatory.

Mr. Cook’s audience was at least partly made up of staid investors and financial power brokers, yet their response to hearing that new “goodies” were to be revealed was one of immediate enthusiasm. Though it could be argued that this response was simply because they saw the potential for increased share value following such releases. However, the response appears to be more a psychological reflex of eagerness when a mysterious treasure is about to be revealed, quite independent of the simple calculus of a slight, possible future rise in portfolio value.

Directly put, Apple increases the value and cache of its products by making people wait for them, and telling an absolute minimum about their plans, even (or perhaps especially) those destined to bear fruit in the very near future. Thus, every decision and minor action by the electronics firm is pounced on and analyzed to see if it can reveal the next Apple product or invention. The suspense of waiting makes people willing to pay more for Apple electronics when they finally are released. The mystery and mystique surrounding new releases makes the products special beyond their intrinsic usefulness, boosting the acceptable market clearing price and winning an extra premium for the manufacturer.

One final detail about Apple Inc.’s (AAPL) use of silence as a marketing tool stands out. Besides building anticipation and suspense, and adding a “specialness premium” to each item’s price, it is free. Simply dropping a hint and letting it stand for months costs the Cupertino, California enterprise literally nothing, yet it generates as much or more ongoing buzz as an expensive advertising campaign.

Empirical proof of the effectiveness of “advertising through silence” is not hard to find. A chart prepared by Asymco reveals that Apple spent slightly more than $1 billion on advertising in 2013, while Samsung expended around $4.25 billion. Net profits for the same period were $37 billion for Apple Inc. (AAPL), and $34.6 billion for Samsung. This translates to $37 of net revenue earned per dollar of ads for Apple, and around $8.14 of net revenue per dollar of Samsung advertising. This puts a tangible value to the unique position Apple has maneuvered itself into – where even its silence is, essentially, golden.

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