How Apple conducts Market Research and keeps iOS source code locked down

Recent court filings have revealed the extent of Apple's in-house market research along with how it keeps iOS source code locked down

In an interview with Fortune a few years ago, Steve Jobs explained that Apple never does market research. Rather, they simply preoccupy themselves with creating great products.

We do no market research. We don’t hire consultants. The only consultants I’ve ever hired in my 10 years is one firm to analyze Gateway’s retail strategy so I would not make some of the same mistakes they made [when launching Apple's retail stores]. But we never hire consultants, per se. We just want to make great products.

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And when asked about the market research that went into creating the iPad, Jobs responded, "None. It isn't the consumers' job to know what they want. It's hard for [consumers] to tell you what they want when they've never seen anything remotely like it."

So while Apple may not assemble focus groups or conduct market research about what consumers are looking for in future products, you better believe that they do market research on their own customers and what draws them to Apple products in the first place.

The type of Market Research Apple engages in

As part of the ongoing Apple-Samsung trial, there has been a furious flurry of court filings wherein both Apple and Samsung are looking to have all sorts of confidential data and trial exhibits sealed and safely stowed away from the prying eyes of the public. As it relates to Apple, the data in question pertains to all types of proprietary information, from iOS source code to sensitive financial data encapsulating items such as product-specific revenues, profit margins, and manufacturing capacity.

On Monday, Apple's Greg Joswiak - the company's VP of Product Marketing - submitted a declaration to the Court explaining why documents relating to Apple's market research and strategy should be sealed.

Yes, gasp!, Apple does engage market research. Quite a bit of it actually.

Every month, Apple surveys iPhone buyers and Joswiak explains what Apple is able to glean from these surveys.

The surveys reveal, country-by-country, what is driving our customers to buy Apple's iPhone products versus other products such as the Android products that Samsung sells, what features they most use, our customers' demographics and their level of satisfaction with different aspects of iPhone.

And as you might expect, Apple conducts similar surveys with iPad buyers.

Note that Samsung is planning to use these reports as trial exhibits and Apple wants to make sure that they never see the light of day outside of the courtroom.

Again, Apple wants all of these tracking studies sealed. Joswiak explains that if a competitor were to find out what drives iPhone purchases - whether it be FaceTime, battery life, or Siri - it would serve as an unfair competitive edge to rival companies. Further, competitors, as it stands today, have to guess as to which demographics are most satisfied with Apple products.

Joswiak adds:

Certainly, they do not know how the preferences of customers in, for example, Japan differ from those in Australia, Korea, France or the United States. perhaps most importantly, they are unable to observe trends over time. All of that information is set out in exacting detail in the proposed exhibits. No other entity could replicate this research because no other entity has access to the customer base that Apple has.

And equally as important as the data, Joswiak explains, is the conclusions Apple deduces from said data.

Recently, the Wall Street Journal highlighted some of the types of questions and answers that appear in these research reports:

One chart lists responses from customers in seven different countries, asking them why they bought an iPhone after considering an Android device. “Trust Apple Brand” emerged as the first or second most popular reason in most regions, including in the U.S and China where 54% of respondents cited it as a factor.

Some 67% of Chinese respondents said they bought the iPhone because they liked the physical appearance and design, the highest percentage across the group, which also included Japan, the U.K., France, Germany and South Korea.

Least important, almost universally, was the ability to easily transfer music and other media across multiple devices. “Greater availability of apps I am interested in” was a significant factor in South Korea, where 47% cited it as a reason.

Interestingly, Joswiak notes that Apple's iPhone and iPad research data is only circulated to a small select group of Apple executives.

No iPhone-related surveys or iPad-related surveys are allowed to be distributed to anyone outside this group without my personal express permission, which I regularly refuse. When I do approve further distribution, it is almost always on a survey question-by-survey question basis, and even then distribution is limited to individuals  who have a demonstrated need to know.

Joswiak runs a tight ship!

In sum, Joswiak asserts that if this information is made available to the public, Apple would suffer significant competitive harm and that competitors would subsequently be able to focus on the features that primarily attract both iPhone and iPad customers.

The need for confidentiality is even exacerbated, Joswiak argues, with respect to the iPad.

When iPad was first released in April 2010, there was no other product of its kind.  Obtaining information from July 2010 would be incredibly valuable to companies who are trying to put forward competing products. It shows in great detail how customer preferences have evolved over the time that iPad has been sold. Even if competitors could reliably survey Apple’s current customers (they cannot) to determine their preferences today, they certainly cannot reliably reconstruct what Apple customer’s preferences were in the past.

Accordingly only Apple has access to the extremely valuable time series of information that shows how customer preferences have evolved. As the first company to successfully launch a tablet computer with broad consumer appeal, Apple is far ahead of its competitors in understanding this important new category of mobile electronic devices. Both the underlying data sets and the insights Apple has drawn from them are carefully guarded Apple trade secrets. Disclosure to Apple’s competitors would give them inside knowledge of the market and what Apple's customers are thinking and valuing.

Lastly, Apple says that it's not seeking to seal market research data conducted on its behalf that surveys customers outside of Apple's user base. In other words, Apple made the "difficult decision" to allow these third party research reports - along with Apple's internal marketing research department - to be fully revealed.

Keeping iOS source code on lock down

As I mentioned earlier, Apple is trying to keep certain portions of iOS source code - which Samsung is planning to use as trial exhibits - sealed as well.

To that end, Apple submitted a declaration from Henri Lamiraux to the Court. Lamiraux may not be a familiar name to Apple watchers, but he's currently the VP of iOS Apps & Frameworks for Apple.

As part of the declaration submitted to the Court, Lamiraux explains the sensitive nature of iOS source code and how he's responsible for managing the employees who develop the source code, applications and frameworks that form Apple's mobile OS.

 Part of his job includes maintaining the security and secrecy of Apple's iOS source code.

Lamiraux explains:

Apple source code is provided the highest level of protection and security within Apple. Physical access to the iOS source code is limited to select groups of authorized Apple employees, with access being provided only to portions of cod on a need-to-know basis. Acess is limited to employees directly involved in software development, management, and security. The employees with such access must be approved by management as authorized employees, their accounts must be specifically granted access.

With Apple admitting to having invested billions in the development of iOS, the disclosure of said source would cause Apple significant competitive harm, Lamiraux adds.

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