Apple Marketing Objectives and Strategies: Iphone

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Introduction

The American marketing association defines marketing as ‘the activities, set of institutions and processes for creating, communicating, delivering, and exchanging offering that has value to its customers, partners and the society at large’ (Marketingpower.com, 2007).

Marketing is the process through which companies create, communicate, and deliver value to actual and potential customers in order to increase revenues (Stanton, Etzel and Walker, 2007).

Kotler defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit” (Kotler, 2000). Thus it is the process through which companies establish and sustain mutually beneficial long-term relationship between the organization and its customers.

In highly competitive markets such as the mobile phones market, which is characterized by countless products, rapid technological changes, short product life cycle, and pressure to reduce prices due to high competition, among others, companies have always resorted to creatively and rapidly developing marketing strategies in order to compete effectively (Constance and Gower, 2001).

The level of competition in this industry is quite high, and frequently companies that were previously leading in market share and profitability are quickly finding themselves being edged out of the market. A good example is Motorola which, a few years ago, occupied the top three positions in the global mobile phone industry (Wirelessandmobilenews.com. 2010).

The challenge is more critical when a product is new and is entering a mature market that has well-established and respected brands that are clearly defined in market share. Whereas the new product is unknown, the established players, on the other hand, have the experience and the resources to defend their market share and positions.

This is the situation that Apple found itself in when it introduced the iPhone into the market a few years do. At the time, the corporate mobile phone market had successfully established itself with global companies such as Research in Motion, Palm Nokia, and Erikson, having acquired significant market share targeting all market segments, including low-end and high-end.

Despite this, the iPhone company has managed to enter this industry where it targets the high-end market segment and has overall been successful; as a result, the company has been able to add a multi-billion product line into its portfolio (Schonfeld, 2008).

The purpose of this paper is to critically examine the marketing strategies that Apple used in marketing the iPhone, their strengths and weaknesses, and provide a detailed outline of its future marketing strategies that I will recommend to be used over the next three years.

Company Profile

Apple Corporation Inc. is a California-based company that is highly reputed and recognized for its high-quality computer products and software. In 1996, the company branched from computer products and started marketing innovative consumer products such as the iPod, which is a portable music-playing device, and currently, the iPad, which is an innovative touch screen computer tablet (Apple.com, 2011).

Product Profile: iPhone

It was introduced by the Apple Corporation in June 2007; the iPhone has been described as a cross between a laptop and a phone (Apple.com, 2011).

It is a well-designed smartphone product that has an innovative interactive touchscreen; advanced software that allows personalization through its applications (Apple.com, 2011).

It has an amazing 16hrs battery usage time and comes with headphones and loudspeakers for communication and entertainment; its main features are a phone that has a camera, PDA, internet connectivity, music player–iPod with downloading abilities, gaming feature, data storage, and a video camera (Apple.com, 2011). Currently, it is estimated that over 100 million units have been sold worldwide (Warren, 2011).

Marketing Strategies: Literature review

Marketing strategies are the processes through which a company uses to achieve its marketing objectives and goals by employing scarce organization resources efficiently and effectively to create and sustain competitive advantage (Craven, Lamb, 1993; Malonis, 2000).

Marketing strategies evolve from marketing plans which broadly outline how an organization will achieve its marketing objectives. Marketing strategies often have a longer implementation time frame, usually more than a year, as they are developed after carefully analyzing the internal and external environment.

According to Michael Porter (1984), a company’s strategy is defined by its scope or strength; scope refers to the extent that a company wishes to penetrate the market, while strength refers to a sustainable competitive advantage that the company possesses. Thus, the scope of a company can either be intensive or limited.

On the other hand, the strength of a company can be strong where, for instance, it is the market leader, a challenger, or a weak player.

Porter identified two strategies that could be used by a company. This included product leadership, whereby a company seeks to be a leader in producing and marketing products, or cost leadership, where a company excels in producing ordinary products but at a lower cost than its competitor, which it offers to its customers (1984).

According to Porter, the other way that a company can define its strategy is by undertaking a market evaluation; this could either be narrow or broad (1984). In this case, a company chooses to either focus on a segment of the market or the whole of it.

It can also choose to produce a wide range of products, a few products, or just one standard product for the whole market. There are three strategies that can emanate from the market definition: product differentiation, cost leadership which involves broad dimensions, and market segmentation, which focuses on a particular segment, also referred to as a narrow dimension.

The rate at which a company adopts innovation in new product development and business process re-engineering strongly determines its marketing strategies. This also ultimately defines whether a company is a leader or follower in innovation (Treacy and Wiersema, 1995).

The process through which a company grows can also determine its strategies. There are four ways through which a company can grow; horizontal growth is where a company grows by expansion in similar products or related markets, while vertical growth is where a company extends its business ventures to activities that precede or follow their normal activities in the supply chain (Treacy and Wiersema, 1995).

For example, a manufacturer can expand into the retail business or the production of raw materials when vertically expanding.

Porter’s theory on the attractiveness of an Industry

According to Micheal Porter (1980), the attractiveness of an industry is what draws potential investors to the industry; if an industry is attractive such as having an assured high level of profits or low level of risks, then it is likely to attract many players into it. The attractiveness of an industry is determined by the interaction of certain dynamic forces in the industry.

Porter identified five forces that determine the attractiveness of an industry. These forces include the following; the nature and intensity of the competition in the industry, the bargaining power of suppliers, the buying power of consumers, the threat posed by substitute products, and finally, the threat posed by new players who enter the market and take away the industry’s attractiveness(Porter, 1980).

Porter (1980) also explains that for a Company to acquire and sustain competitive advantage, it must study and understand how these forces interact within its industry; organizations must therefore identify each of these forces and plan their marketing plan accordingly.

Degree of rivalry with existing competitors

This is the most obvious and most important factor that determines the profitability of an industry; it determines the process through which value passes from the supplier to the market because of competition. Companies, therefore, create value for customers through competition. In this case, competition can be price or product based or through the provision of value-added fences.

The potential threat of new players entering the market

Whenever an industry is profitable, it tends to attract other players who are interested in operating in the same industry. The ease of entry and exit depends on the nature and intensity of the barriers to entry; typical barriers to entry in an industry normally include; the initial cost of investment, economies of scale, and the level of government regulation, amongst others (Porter, 1980).

In general, industries with high levels of barriers to entry are more attractive to existing operators but not new ones.

Threat of substitute products

Substitutes are products that are unrelated to the current product but are able to meet the needs satisfied by the current product; their greatest advantage is that they entail very low costs of operations (Porter, 1980).

The bargaining power of buyers

The buying power of the customers is realized when they organize themselves into groups and demand better terms and prices. The bargaining power of buyers increases when the number of competitors is high and customers few, and it is also influenced by the level of information that is available to all the players in the industry.

The bargaining power of suppliers

The bargaining power of suppliers is similar to the bargaining power of buyers.

As such, the bargaining power of suppliers increases when they organize themselves to secure better terms and conditions.

The power of suppliers is critical when the switching of costs from one supplier to another is high, the product in question is a strong brand, or when a supplier is highly specialized and equipped for a particular segment of the market. In the following section, let us now undertake a market evaluation of Apple iPhone.

Determinants of the attractiveness of a market segment

A SWOT analysis of Apple iPhone Product

Strengths

iPhone is an innovative product that utilizes an interactive touch screen. It also has multiple applications such as phone, camera, video, music player, high-speed internet connectivity, gaming device, PDA, and data storage, amongst others that have become very popular with the current X-generation (Apple.com, 2011). Besides this, it has touch screen technology which is one of the most advanced that also makes it easier to use.

The brand name Apple has a halo effect on the iPhone (Maxcer, 2009). Apple is well known and respected for producing innovative, stylish computer products, and it has not disappointed the market expectations of similarly spectacular products.

The price of the iPhone means that it is affordable, though slightly higher than others; it did closely match other products in its product class, such as Blackberry, Palm, Nokia, and Motorola smartphones which directly compete with it. In terms of quality, it’s a high-quality product with a well-designed slim shape and utilizes an advanced software system that can be upgraded.

Weaknesses

In the past, Apple products were associated with entertainment, which meant it was difficult to convince corporate customers that the phone was designed with business people in mind. In addition, its introductory prices were much higher than the average smartphone.

The company realized this and slashed the prices from $599 to $399 in the first three months, which was a strategy that alienated early adopters who felt cheated (Apple.com, 2011).

The company also doesn’t have lowly priced phones that target the vast mid-level and lower end of the market, and the user interface has been described by some of the customers as monotonous when the phone is used for a while. Finally, the phone lacks certain features which are present on its competitor’s phones since it will be impossible to incorporate all features in a single handset.

Opportunities

There is strong global demand for the product, which has been steadily growing over the years; the company can also enter into new market segments and environments by partnering with strategic global mobile operators to enter new markets such as Asia and Africa.

Threats

The level of competition from other smartphone manufacturers is high; new entrants into the market, such as Google, HTC, and Samsung, are posing a big threat because of their innovativeness (Thompson, 2011).

Thus, increased competition is pressurizing the company to reduce its phone prices which might affect profitability and revenues. The company has also experienced difficulties in entering foreign markets such as China and India, amongst others, which has reduced its sales revenues.

Apple Marketing Objectives

The initial Apple company’s goal was to achieve a 1% share of the market in two years and to grow it to 10% in 5yrs (Apple.com, 2011). The primary target market for the company was middle-income professionals who needed a phone they could use for multiple applications such as data storage, camera, and business-oriented applications, as well as for entertainment purposes (Apple.com, 2011).

The secondary market included college and high school students and any other person who could afford to buy the product.

The product was positioned as a high-end, professional business phone that has added values such as communication and entertainment. It is also a versatile and convenient product, with superior features to most of its competing brands, and its stable price of $399 was above other competing products but reinforced the product’s superior position and reaffirmed its primary target as high-end market (Apple.com, 2011).

The product was distributed through major telecommunication operators starting with AT&T, who were given exclusive rights to retail the product. Later it was expanded to other networks such as Verizon, Sprint, and Cellular One. The iPhone was also distributed through the company’s branded shops as well as all major electronics distributors such as Best Buy and RadioShack.

Consumers could also acquire the product from online market sites such as Amazon as well as the company’s own site, Apple.com. A similar strategy of marketing is used by the company in the international market.

The media strategy played a key role in raising customers’ expectations and creating a buzz around the product before its launch. There were well-organized media events in which the CEO, Steve Jobs, made a presentation of the new product to the media. Special demonstration events were held for industry analysts, opinion leaders, and professionals to evaluate it and provide feedback.

Advertising played a key role during product launches and sales since it played an important role in sensitizing the public about the product, its price, and availability.

The internet was extensively used to create buzz and for viral marketing effects. Multiple platforms were used, such as blogs, web PR, digital campaign sites, social media, and online videos. The company also relied on word of mouth from satisfied customers who had bought the phone.

The analysis of Apple’s strategy reveals that the company is a bold leader in innovation since it has introduced revolutionary products into the cell phone product market. The company is a leader in the market because it has the financial, technical, and human resources to execute a major strategy against major established companies that have been operating for years.

The Apple brands were well respected in the market, and that could have contributed to the good reception of this most recent iPhone product.

It is also clear that the company adopted an exclusive strategy for its product because it is seen to have deliberately targeted the middle-level to high-end of the market. This meant that it had to use particular retailers as its distributors were so as to enhance its exclusive status; this strategy is replicated elsewhere in other markets that the company has been entering (Kravit, 2007).

It is also clear that the growth model adopted by the company was horizontal since the company expanded into similar and related products, which are the cell phone business from its traditional computer products.

Based on the company’s performance over the years, there is no doubt that it is a strong leader, and this is demonstrated in its challenge to strong and established brands such as Blackberry and Palm phone products, which have gradually revolutionized the phone industry (MillennialMedia, 2010).

Apple effectively used the media to market its product by executing a well-planned media campaign that used multiple platforms to capture the attention of the market. Viral marketing techniques such as creative use of the internet, mass media, and publicized media launches all created a buzz around the iPhone, which contributed to the success of the product.

Apples marketing strategy mistakes

Apple reduced its introductory price from $599 to $399 just three months after the launch. This was its first major mistake, as it disappointed early adopters who felt alienated. The price was reduced further after two years to $199; this massive reduction in price indicates that Apple had not carried out adequate research before launching its product, but then again, this could be attributed to technology redundancy.

The use of exclusive distributors and careers also limited the number of people who could have bought the product because the market reach was limited (Kravit, 2007). This is because customers prefer to select their own carriers depending on costs and past experience.

The exclusivity strategy did not impress all customers, and it led to people unlocking their phones to use them on other networks leading to a loss of expected revenue for Apple. The company also delayed entering the global market after its first launch in the US. This delay resulted in lost sales opportunities during that period.

A Strategic Apple Marketing Goals for the Next Three Years

Situational analysis

The company’s current marketing goals, objectives, and strategies have brought phenomenal success in the recent past, and this will provide the foundation for future plans. The primary goal of the marketing plan is to increase sales and profits further and faster; it is also the intention of this strategic plan to grow the shareholders’ wealth as well.

The company should therefore be structured towards achieving these goals as well as responding quickly to any challenges in the environment.

Current market strategy and performance

The main objective of the current strategy is to grow sales and market share. This has been achieved through innovation and quality leadership. This strategy has been effective and has resulted in steady growth in the market share, and the company product is now among the leaders in the smartphone segment of the market.

Current and anticipated resources

The vast resources that the company has have been described as more than adequate, meaning that the company’s financial position is strong. It has a highly motivated and skilled technical and marketing staff that drives the company’s strategies, and this is a critical asset. The company’s reputation and integrity are excellent, and its commitment toward customers and their satisfaction is well demonstrated and recognized in the market.

Current and anticipated cultural and structural issues

The organization’s culture is innovation driven; this makes it more focused on customers and embraces ethical business practices.

Customers’ environment

The company’s primary target market is professionals who have been described as requiring stylish, versatile, well-designed phone with unique features that reflects and complements their lifestyles.

These professionals use the product primarily for communications but also need other features such as camera, video, high-speed broadband internet, and applications in their professional work. The people in the mobile phone market who do not buy the product do so because they cannot afford its relatively high price and the exclusive contract that has to be signed with selected carriers.

Strategic Focus

An analysis of the company’s SWOT analysis (prepared on page 4) is the basis for the development of a marketing advantage. It entails the utilization of a company’s strength to exploit marketing opportunities while at the same time trying to convert weaknesses into strengths (Porter, 1980).

Marketing objectives and goals include

The following marketing objectives and goals for Apple Company over the next three years; 1) To grow market share from the current 10% share of the smartphone segment to 20% in the next three years, 2) to introduce new variants of the iPhone as opposed to the current standard product, 3), to introduce new highly innovative products such as a portable phone that have higher computing capabilities.

Marketing Mix Strategies

Products: The brand name will remain Apple, and its well-known logo will appear on all products. The company should continue investing more in R&D in order to remain innovative and thereby position its product as innovative, stylish, superior smartphones with advanced capabilities.

Its features and benefits should remain: Innovative touch screen, lightweight and slim body for easy portability; I will also suggest high-speed internet connectivity and advanced software that allows customization by end users to maximize utility and increased storage capacity to reflect the growing data needs of the market.

I recommend the upcoming iPhone to have multiple functions that are not available in other phones, such as camera, video, entertainment, internet, and multiple applications. The phone should also have the option of a keypad to alleviate the monotony and strain of using the touch screen.

Pricing

The overall pricing strategy is to skim the market at the introductory stage but later establish a stable price that is above the price of other smartphones. Price should be profitable to the company while at the same time able to deliver value to the consumers. But effort must be made to ensure the price is higher than competing products to reinforce its position as a premium product.

Distribution

The product will be widely available in multiple locations across the world. This will be achieved through better stock planning and demand forecasting so as to match demand with supply. This will be achieved through the use of multiple channels of distribution, such as the company’s own distribution network, including its branded shops.

The company will use national retail distributors of electronics such as RadioShack and Best Buy; the phone will also be available at selected mobile phone operators such as AT&T, and Verizon, amongst others. The company will use national retail chains such as Wal-Mart, Kmart, and Target, amongst others, to increase accessibility and market penetration.

Integrated Marketing Communications

The company should use multiple platforms to communicate with the target market; marketing communication strategies will be used in pull and push activities which entails convincing the market about the superiority of the product and, on the other hand, persuading customers to buy the product.

This will involve the following; use of viral marketing strategies, which it will use by advertising on radio, TV, print media, and the internet. It will also utilize other advertising channels, such as outdoor advertising, billboards, posters, and point-of-sale advertising.

The company should undertake well-publicized marketing and media campaigns where it will make use of internet tools such as social media, online auction and shopping sites, blogs, and similar platforms to reach the target market. I expect that by using these marketing strategies, the company will retain its competitive position in the market for the next three years.

References

Apple.com. 2011. IPhone Technical Specifications. Web.

Craven, D., & Lamb, C. 1993. Strategic Marketing Management Cases. Boston: Irwin.

Constance, S. & Gower, J. 2001. A Value Chain Perspective on the Economic Drivers of Competition in the Wireless Telecommunications Industry. Web.

Kotler, P. 2000. Marketing Management: Millennium Edition. New Jersey: Prentice- Hall.

Krazit, T. 2007. Apple’s iPhone a tougher sell in Europe. Web.

Malonis, J. 2000. Marketing Strategy: Encyclopedia of Business. Web.

Marketingpower. 2007. American Marketing Association Defines Marketing. Web.

Maxcer, C. 2009. The iPhone’s Not the Cause of Apple’s Success, it’s the Effect. Web.

Porter, M. (1984). Competitive Advantage. New York: The Free Press.

Porter, M. (1980). Competitive Strategy. New York: Free Press. Stanton, W. J., Etzer, M. J., & Walker, B. 2007. Marketing Management. New York: McGraw-Hill.

Schonfeld, A. 2008. Apple sells one million 3G iPhones first weekend, ten million Apps downloaded. Web.

Thompson, A. 2011. Apple IPhone Software Loses Speed Test to Google’s Android. Web.

Treacy, M. & Wiersema, F. 1995. The Discipline of Market Leaders. New Jersey: Addison Wesley.

Warren, C. 2011. Apple: 100 Million iPhones Sold. Web.

Wirelessandmobilenews.com. 2010. Apple, Samsung & Motorola Top Makers, iPhone & Droid Top Smart phones. Web.

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