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. Marketing is the process through which companies create, communicate and deliver value to actual and potential customers to increase revenues (Vieceli and Valos 66). Cravens, Charles and Crittenden define marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit” (Cravens, Charles and Crittenden 112). Thus it is the process through which companies establish and sustain the 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, 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 Para 8). 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.
The challenge is more critical when a product is new and is entering a mature market which 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 some few years ago. 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 that targeted all segments of the market including low-end and high-end.
Despite this, iPhone’s 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 (Maxcer para 11). The purpose of this paper is to critically examine the marketing strategies that Apple used in marketing the iPhone, their strengths and weaknesses as well as 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 softwares. 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 Inc. Para 2).
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 Inc. Para 4).
It is a well-designed smartphone product that has an innovative interactive touch screen; advanced software that allows personalization through its applications. 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 Currently it is estimated that over 100 million units have been sold worldwide (Warren 111).
Vision and Mission of Apple Inc
Apples Vision
“Man is the creator of change in this world. As such he should be above systems and structures, and not subordinates.” (Apple Inc., Para 1)
Going by Apples innovativeness in the technology industry, they live by their mission statement. Apple Inc has been a leader in technological innovation where it has developed various technological products for the benefit of both individuals and corporations. Its systems have been put in such a manner that the customers are perfectly handled while avenues for future innovativeness have been put in place. From the financial realms; the organization has excellent structures in place to guarantee future stability, a fact that adds to the success of the organization.
Mission statement
“Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and internet offerings.” (Apple Inc. Para 1)
The success of Apple Inc in production of various technological products that range from hardware to software is a pure indication that Apple lives by its mission statement. Apple Inc has successfully managed to provide people of all walks of life from students to corporate entities with various technological solutions which make them to be an all round provider of technology.
Marketing philosophy of the Apple Inc
Over the past few years, the success of Apple Inc in marketing cannot be rivaled by any other group. This has been enabled by various reasons such as its philosophy that calls for products of aesthetic designs and a distinctive advertising approach that leaves its brand image among the audience. Coupled with the successful knowledge of the importance of unrivaled quality of products, Apple Inc has managed to generate a special marketing approach that has made its products to be liked by the majority in the market. This success in the market is guided by a specific philosophy that uniquely unites various departments of Apple Inc. Apples distribution policy is simply summarized as “If you build it, will they come? When they come, will it be in stock?” (Apple Inc. Para 2). This philosophy looks forward to ensuring that whatever the group has produced is marketed to the consumers in such a manner that they come to the market to look for it. With the knowledge that whatever is made for the clients may get depleted as far as stocks are concerned, the company utilizes the second part of the philosophy to ensure that all its resellers have enough stocks to ensure that at no time clients miss Apple’s products.
Marketing Strategies: Literature review
Marketing strategies are the processes trough 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, 115; Malonis 200). Marketing strategies evolve from marketing plans which broadly outline how an organization will achieve its marketing objectives. Marketing strategies often have longer implementation time frame that is usually more than a year as they are developed after a careful analysis of both the internal and external environment.
According to Porter (24), 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 sustainable competitive advantage that is possessed by the Company. Thus, scope of a company can either be intensive or limited. The strength of a Company on the other hand can be strong where for instance it is the market leader or 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 (Porter 26).
According to Porter the other way that a Company can define its strategy is by undertaking a market evaluation; this could either be a narrow or broad Porter (26). 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 wide range of products, or few products or just one standard product for the whole market. There are three strategies that can emanate from market definition; these include product differentiation, cost leadership which involves broad dimensions and market segmentation which focuses on a particular segment also referred as 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 116).
The process through which a Company grows can also determine its strategies. There are four ways through which a Company can grow. There is horizontal growth; this is where a Company grows by expansion in similar product or related markets while vertical growth is where a Company extends their business ventures to activities that precede or follow their normal activities in the supply chain (Treacy and Wiersema 98). For example, a manufacturer can expand into retail business or the production of raw materials when vertically expanding.
Marketing Audit for Apples iPhone
When Apple launched its first generation of iPhone in 2007, it did not only create a new line of revenue in a crowded mobile phone industry, but managed to bring a new innovation in the mobile phone industry. Apple’s smart phones are five years ahead of all the competitors. The position of iPhone in the mobile phone market has remained to be that of a leader due to superior qualities of the product. The iPhone 3GS has outstanding features that gives it a special position in the market. For instance it has an autofocus camera that has 3 megapixels, ability to record videos and edit the same, longer life for its batteries among many other niche features that differentiates it from its main competitors. Apples third generation iPhone therefore prides on its unique features that make it not to have any competitor in its caliber.
Another core competence the iPhone has over other smart phones is its storage capacity. The 3GS iPhone has a high storage capacity which has made the product to superior to its competitors. iPhones multi-touch screen also is a distinct advantage for Apples 3gs iPhone. Although there are many Smartphone’s that utilizes the touch screen technology, iPhones approach is great than all its competitors. The 3GS iPhone also come with the accelerometer which quickly adjusts the screen to either portrait or landscape depending on how the user twists the phone. The phone also has an ergonomic design which couples the smartness of the phone with users contort when handling.
Main competitor analysis
Although iPhones were launched in a market that had no competitors, there are several new entrants into the market. The main competitors include but not limited to the following smart phones;
- Samsung Omnia,
- Sony Ericsson Xperia,
- HTC Touch,
- Blackberry Pearl,
- Nokia N97.
All the above smart phones were developed as a reaction to the market popularity of Apple’s iPhones. However, Apple being a pioneer in this field, it still enjoys distinct advantages as it has already curved a market niche in the smart phone industry.
Financial analysis
Although Apple has performed exemplary well in the market, its market share has been surpassed by that of Google powered Android, for the last quarter of 2010. However on average Apple’s iPhone commands a 19.5 market share which makes it one of the leading producers of smart phones in the United States. The iphone has been marketed more on the American market leaving huge parts of Europe uncovered. An arc of three hundred and fifty million people, a figure that is higher than the United States estimated population of three hundred million, has been ignored by Apple in its marketing mix. This therefore denies this group of potential buyers the chance to benefit from Apples’ superior products while Apple denies herself the desired revenue.
Porter’s theory on the attractiveness of an Industry
According to Porter (22), the attractiveness of an industry is what draws potential investors to an industry; if an industry is attractive such as having 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 dynamics of the industry. According to Porter, there are five forces of attractiveness in an industry. These are 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 21). Porter also explains that for a Company to acquire and sustain competitive advantage it must study and understand how these forces interact within their 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 customer 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 of entry in an industry normally include; initial cost of investment, economies of scales and the level of government regulation amongst others (Porter 34). In general industries with high level 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 26).
The bargaining power of buyers
The buying power of the customers is realized when they organize themselves into groups and demand for better terms and prices. The bargaining power of buyers increases when the number of competitors are high and customers few and 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 in 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 where the switching of costs from one supplier to another is high or 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
PEST analysis on the Smartphone industry
PEST analysis stands for Political Economic, Sociological and Technological factors that affect a certain product or industry. The Smartphone industry PEST analysis indicates that there are some strengths as well as weaknesses as far as the product is concerned.
Political
The smart phone industry operates in a volatile industry that may easily be affected by changing government policy. Being a relatively new phenomenon, political interest may underpin the tax policies thus affecting the average pricing of smart phones. For instance the operations of smart phones in the United States have been affected by president Obama’s corporate tax policy. This shift in tax policies are costly to all organization dealing with the smart phones as they have to adjust their prices to fit on the new prices.
Economic
The main economic factor that bothers the smart phone industry is the fluctuating international currency especially when products are to be destined for outside the United States. Another major huddle for Apple’s iPhone is its pricing strategy that targets the rich in the society hence cutting off a huge number of potential buyers. Monetary policies as well as fluctuating rates of interest that are a common phenomenon in the recent past also have a huge potential to greatly affect this industry. In an effort to curb the economic crisis, most central banks of the developed nations reduced their interest rates in order to encourage more spending to improve the economy. The decreased interest rates have the tendency to encourage more consumption as opposed to more savings. This would result to increased sales on the part of the smart phone companies.
Sociological
The communication industry has rich connotations of sociological factors. Use of smart phones connotes a social clout in the society which makes them to be greatly valued by people. The Smartphone makers therefore should focus on ensuring that they offer the masses with products that meet their social class expectations. On the negative side, the fears that use of mobile technology is not entirely safe have not been resolved. People have some speculative fears that use of mobile phones may have health effects such as development of cancerous tumors among other complications. These fears jeopardize the industry’s quest to reach to all corners of the masses.
Technological
This presents a real challenge to all manufacturers in the technological industry. All phones are in a constant journey to ensure that they develop the best phones as the pioneers. Any new innovation in the industry is also quickly followed by items of replicating nature produced by the rivals thus denying the original producer to recover the amount sunk in the product development process.
Porters five on smart phone industry
Bargaining power of buyers
The bargaining power of buyers in this industry is generally weak. There are only two categories of buyers which are the corporate buyers and the individual buyers. The entry of new competitors however may alter the bargaining power of buyers.
Bargaining power of suppliers
Due to the limited number of suppliers in this industry, their bargaining power is strong as they can easily influence the prices of the products that they supply. Notable suppliers include AT&T, Linux and Intel.
Threat of new entrants
The threat of new entrants is real in this industry. For instance after Apple Inc released its smart phones; there was a massive proliferation of other smart phones from Apple’s competitors.
Threats of substitutes
Substitute products are a real threat in this industry. Smart phones are differentiated by very little features and thus a potential product can substitute one product with another one. This may deny a company form getting an absolute advantage over its innovativeness.
Rivalry of existing competitors
The smart phone industry is characterized by intense competition among the existing competitors. Each competitor has product differentiation approaches with an aim of cutting the competitors bid which makes the industry to poses intense competition. Due to this rivalry, any new innovation is quickly countered by the competitor denying the initial innovator revenues for being a pioneer in innovation.
Explanation of the two analyses
From the PEST and Porter’s Five analysis conducted above, it is evident that the smart phone industry requires constant evaluation of the available strategy to ensure that one does not become irrelevant in the industry. It is also evident that various forces have a direct effect to the prizing strategy that must be adopted. As evidenced by the porter’s five analysis, stakeholders must compete based on the prizing strategy as this is the only possible avenue for effective competition.
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, data storage amongst others that have become very popular with the current X-generation (Apple Inc. Para 6). 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 66). Apple is well known and respected for producing innovative, stylish computer products and it has not disappointed the market expectations of similarly spectacular product.
The price of 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 smart phones which directly competes with it. In terms of quality, it’s a high quality product with a well designed slim shape and utilizes advanced software system that can be upgraded.
Weaknesses
In the past, Apple products were associated with entertainment which meant it was difficult to convince the corporate customers that the phone was designed with business people in mind. In addition its introductory prices were much higher than average smart phones. The Company realized this and slashed the prices from $599 to $399 dollars in the first 3 months which was a strategy that alienating early adopters who felt cheated. 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 demand for the product globally 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 into new markets such as Asia and Africa.
Threats
The level of competition from other smart phones manufacturers is high; new entrants into the market such as Google, HTC and Samsung are posing a big threat because of their innovativeness (Thompson Para 8). Thus, increased competition is pressurizing the Company to reduce its phones prices which might affect profitability and revenues. The Company has also experienced difficulties in entering foreign markets such as China, India amongst others which has reduced its sales revenues.
Execution of Apple Marketing Strategy
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 Inc. Para 11). 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 Inc. Para 16). 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, business professional phone that has added values such as communication and entertainment. It is also a versatile and convenient product, with superior features than most of its competing brands and its stable price of $399 dollars, was above other competing products but reinforced the product superior position and reaffirmed its primary target as high-end market
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 network 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 Buys and RadioShack. Consumers could also acquire the product from online market sites such as Amazon as well as the Company’s own site, Apple Inc. A similar strategy of marketing is used by the Company it 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 demonstrations 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 of sensitizing the public about the product, its price and availability. The internet was extensively used to create the 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 had 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 market that the Company has been entering (Kravit 48).
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 on strong and established brands such as Blackberry and Palm phone products which have gradually revolutionized the phone industry
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 it first major mistake as it disappointed early adopters who felt alienated. The price was reduced further after two years to $199 dollars; 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 Para 14). 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 the phones to use them in other network leading to loss of expected revenue for apple. The company also delayed in entering the global market after its first launch in the US, this delay resulted in lost sales opportunities during that period.
A Strategic marketing plan for the next three years
Situational analysis
The Company 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 in respond 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 a steady growth in the market share and the Company product’s is now among leaders in the smart phone 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 financial position is strong. It has a highly motivated and skilled technical and marketing staff that drives the company’s strategies, this is a critical asset. The Company’s reputation and integrity is excellent and its commitment towards customers and their satisfaction is well demonstrated and recognized in the market.
Current and anticipated cultural and structural issues
The organization 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 require stylish, versatile, well designed phone with unique features that reflects and complements their lifestyles. These professionals use the product primarily for communications but also needs the 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 relative high price and the exclusive contract that have to be signed with selected carriers.
Strategic Focus
An analysis of the company’s SWOT analysis (prepared in 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 42).
Marketing objectives and goals include
I propose the following marketing objectives and goals for Apple Company over the next 3 years;
- To grow market share from the current 10% share of the smart phone segment to 20% in the next 3 years,
- to introduce new variants of the iPhone as opposed to the current standard product,
- 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 as Apple and it’s well known logo will appear in 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 smart phones with advanced capabilities. Its features and benefits should remain: Innovative touch screen, light weight and slim body for easy portability; I will also suggest high speed internet connectivity and advanced software that allows customization by end user 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 phone such as camera, video, entertainment, internet and multiple applications. The phone should also have the option of a key pad 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 smart phones. 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
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 Buys; the phone will also be available at selected mobile phone operators such as AT&T, 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 and print media as well as on 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
Works Cited
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