Apple's Segmentation Strategy - Case Study Example

Introduction Marketing plays a vital role in mediating between the producers and the consumers of goods and services. Without marketing, the consumers would not be able to get information regarding the products that the producers are producing and hence be bereft of the information needed to make informed purchases. Without marketing, the producers of goods and services would be unable to communicate the benefits of owning products and hence they would not be in a position to relay the necessary information to the consumers. Ever since the advent of the mass produced modes of production and patterns of mass consumption, marketing has been regarded as the indispensable medium through which the “conversation” between the producers and consumers happens. This is the reason for the huge marketing budgets that producers have and the way in which the media is used to broadcast images and advertisements is another facet of the consumer society that we live in (Mooij, 1998, 15). This paper addresses the question, “what is the role of marketing in a consumer society?” by analyzing the case of Apple Inc., which is renowned for its innovative and sophisticated approach to marketing. The readings assigned for the course as well as the textbooks that are prescribed are referred to for this paper as well as external research into the marketing methods of Apple and the way in which it has established a position for itself in the contemporary hi-tech marketplace. Marketing can be said to have both positive and negative effects on society and hence the study of marketing strategies must include both effects if one were to take an objective and reasoned approach to it. As the readings make it clear, the era of mass produced goods and the consumer society we live in has seen marketing as a force for good as well as something that has negative connotations. The focus of this paper is on a critical examination of how marketing is practiced in a consumer society with an emphasis on how Apple has used marketing to further its interests. Segmentation Apple focuses mainly on users who are 30 years or younger and as a study by Rubicon (2008) found out, 50% of the users who use Apple’s products fall into this segment. Hence, it makes sense for Apple to orient its marketing strategies towards this segment and as can be seen from the branding and marketing strategies that Apple employs to target its core customer base. Further, it has been found that Apple has one of the highest return customers or customers who buy another Apple product and hence can be considered as giving repeat business to the company. The typical strategy followed by Apple is not horizontal marketing like making a special type of peanut butter for every customer but in engaging in vertical marketing where it produces a specific product for each type of use. This can be seen in the way that Apple has produced an IPod for listening, IPad for reading and IPhone for apps. The point here is that Apple does not add features to target individual customers in each segment. Rather, they target specific user experiences and build the product around that user experience accordingly. This approach of Apple towards market segmentation makes for a study by itself. Apple’s approach of targeting a specific market and then producing high quality products for that market segment is novel and something that has been successful for the company. As the following quote about market segmentation shows it is the conventional theories of segmentation that usually dictate the strategies of the companies, “In the real world of building products and attacking market opportunities, market segmentation is the process of defining and sub-dividing the aggregate, homogeneous market into addressable, targeted needs and aspirations buckets, which are in turn, defined by thresholds according to demographic, psychographic and/or budgetary constraints. Market segmentation strategy enables a company to drive complete, unified product solutions that are harmonious with messaging, customer outreach, and channel strategies for selling and supporting customers.” (Sigal, 2010) As has been discussed in the preceding paragraphs, Apple combines brand loyalty among its core customer segment with specific user experiences for each segment instead of following a conventional path. Apple’s strategy is indeed illustrative of how marketing when practiced differently can serve the needs of the consumer society in a better manner than others. This aspect must be combined with the normally straightforward manner in which Apple reaches out to its consumers. Branding The idea behind Apple’s marketing and branding strategies is to create an impression of “belonging” to a niche segment where the premium that they pay on Apple’s products is realized through a feeling of being part of an exclusive club. I had already mentioned that most of the core group of Apple’s customers are below 30 and technologically sophisticated. The targeting of this segment through branding strategies is to reinforce the message that Apple’s customers derive “meaning” from consuming its products in a way that its competitors products do not. For instance, Apple has long prided itself on being “different” from its competitors and this reflects in the use of symbols and logos that set Apple apart from its competitors (Wired, 2002). The launch of the Apple IPod, ITunes and IPad along with the IPhone reflected the philosophy behind Apple’s marketing and branding strategy. To own these products meant that the consumers were participating in a user experience that was exclusive and unique. The focus of Apple’s branding strategy was to be a cut above the rest and make the customers feel that they were not targeted by mass produced images and rather that they were being wooed with something unique and personal. It is a different matter that in recent years, Apple’s products have taken on the characteristics of mass produced products like Windows etc. The point here is that Apple’s branding has been successful to persuade consumers about the intrinsic worth of its products (Info Tech, 2007). Branding, as Naomi Klein reminds us, operates around the principle of constructing brands instead of products. What this means is that companies like Apple need to create an aura of a brand replete with image, recall and sublime production of images and symbols that consumers would associate with the product that they are buying (Klein, 2000). It can be said that Apple has been extremely successful in creating such a brand around its offerings. Consumers associate Apple with technological sophistication, innovation and quality and as I have pointed out earlier, the huge amount of repeat business as well as unprecedented top of the mind recall of Apple’s products by the consumers attest to the success that Apple had in creating a brand image among the consumers. Further, Apple has convinced its consumers about the shared meanings inherent in consuming the product as well as the individualized nature of the products it markets. For instance, the consumers of the Apple IPod find meaning in a cultural sense of belonging to a niche base whereas the provision of accessories means that they can satisfy their individual preferences as well (Info Tech, 2007). The section on segmentation pointed out Apple’s strategy of targeting user experiences rather than market segments. If we combine this with the aura of the brand that is built around Apple’s products, we find that the merging of user experiences and the connotation of “cultural belonging” that Apple conveys through its marketing produce a unique brand which has translated into success at the marketplace. If we add the way in which Apple has succeeded in convincing its consumers that owning an IPod, IPad or IPhone is a status symbol then we would be able to appreciate the way in which marketing has been used by Apple to further its interests (Wired, 2002). Pricing The pricing strategies of Apple can be said to combine what are known as “skimming” and “temporal price differentiation” (both of which would be explained in greater detail). The practice of skimming refers to selling a product at a higher price initially so as to gather quick profits and recoup the investments made in Research and Development that the company would have made in the course of development of the product. This can be seen in the way Apple has sold its IPod at a higher price initially and then reduced the price subsequently and then arriving at a price that it maintained at that level. For instance, the IPod was sold at $399 initially in 2002 and then at $299 in 2003 and 2004 before reducing it further to $249 in 2005 (Apple.com, 2011). This strategy is aimed at the core target customers of Apple who are loyal to it and hence would be willing to pay the higher price along with the “early adopters” who are similarly willing to try out the product at the higher price (Stole, 2003). Combined with the “temporal price differentiation” that Apple employed by giving a store credit of $100 to early IPhone customers in response to complaints, the pricing of Apple’s products is done in such a way as to entice the wealthy as well as the not so wealthy as can be seen in the different versions of IPod such as classic, nano and shuffle versions. The bottom line is that the combination of these pricing strategies is aimed at persuading the early adopters, its core target base and converts and others who would like to own an Apple product. The differential pricing that Apple practices is not unique in the industry though the prices are definitely higher when compared to similar products. A reason for this might be the premium that Apple’s customers are willing to pay for its products as well as the fact that the niche brand image that Apple cultivates helps it greatly in following this pricing strategy which has proved to be successful (Hadley, 2004). Encoding and Decoding The cultural theorist, Stuart Hall, critiqued the practices of channelling messages through advertising in popular media like Television and developed a theoretical model to explain the influence of broadcasts and sitcoms on Television. The theory of how producers of advertisements encode their messages and how the consumers or the recipients of such messages decode the meanings is known as the encoding decoding model that Hall proposed. The basic premise of the encoding decoding model is that producers of content in the media have a vested interest in furthering their objectives through use of advertisements and that the overwhelming need for increasing sales and revenue is the driving force behind message production and reception in a capitalist world. The process of decoding that the consumers do to interpret the messages is according to the positions of 1) dominant-hegemonic position 2) the oppositional position and 3) the negotiated position (Hall, 1980, 129). I shall examine each of these positions with reference to Apple’s advertising in the succeeding paragraph. If we analyze Apple’s strategy from an encoding and decoding perspective with reference to the advertisements that Apple had broadcasted for its different products, we find that the overriding objective of Apple’s advertising strategy is to ensure that the consumers who have decoded the advertisements in an oppositional position (being openly hostile as in the case where users have objected to Apple charging for services for simple things like batter replacement) and the negotiated position (those customers who wanted to wait till the brouhaha over the IPhone recall died down) are “converted” to the dominant hegemonic position where the consumers go all out in expressing their preference for the products that sold by the encoder. Hence, the conclusion from the perspective of encoding and decoding theory as applied to Apple is that it has a significant number of consumers in the dominant hegemonic position and that its advertising is targeted towards those in the oppositional and negotiated positions (Apple.com, 2011). Apple’s marketing in a Consumer Society The preceding sections have shown how the different aspects of Apple’s marketing strategy relate to each other in creating the brand that Apple is. If we combine all the elements of Apple’s marketing strategy, the overriding conclusion is that the integrated marketing strategies of Apple are geared towards making the consumer feel special and privileged by owning an Apple product. However, as the readings that have been referenced show, this can be construed as an intelligent marketing strategy by Apple aimed at persuading its customers to consume its products. The guiding principle of marketing in a consumer society is to satiate “unmet” needs as well as sell visions of hope and happiness. In this conception of things, the consumer is treated to a wide variety of messages (overt, covert and subliminal) which attempt to seduce the customer into buying the products (Mooij, 1998, 17). I have chosen Apple as the case study since over and above the normal marketing hype that advertisers propagate, Apple delivers value to its customers in ways that are far superior to its competitors. However, there are some downsides to its strategy as can be seen in the fact that Apple requires its customers to pay the charge for the part as well as for service for simple things like battery replacement. This highlights the fact that no matter how well meaning companies like Apple are in their marketing efforts, at their core they represent commercial interests aimed at furthering their capital and bettering their revenues. This is not to pain a bleak picture of the consumer society but merely to highlight the downsides of living in one. The point here is that it is finally up to the customers to make reasoned choices about the products that they purchase and only when the customers have adequate information can they actually make those choices. Hence, my point is that marketing should be a mechanism where the transmission or the encoding is done in such a way so as to be not overbearing and at the same time the decoding of the information by the consumers must be accompanied by a sense of discernment. Further, the advent of the internet has been a game changer in so far as the ability of the consumers to gather diverse and different sources of information is concerned. It is hoped that as we evolve into a post industrial society, both marketers and consumers alike realize the importance of conscious marketing as well as reasoned buying respectively. This is the underlying message that this paper has sought to convey. Conclusion The preceding section has conveyed the salient points that this paper has sought to illustrate. In this brief conclusion, I turn to the social responsibility that marketers have and the way in which this responsibility needs to be encouraged. As the case with the recall of the Apple IPhone shows, the company has to be honest and straightforward in its dealings with the consumers. Though the consumer society that we live in would always find adherents and converts to Apple’s products as long as they satisfy basic norms of quality and reliability, marketers should not take the consumers for granted especially when it concerns the ethical and normative rules of product marketing. It is in this context that the readings that have been surveyed for this paper present the various aspects of consumer society and the role that marketing plays in such a society (Mooij, 1998, 12). References Apple. 2011. Apple. [ONLINE] Available at: http://www.apple.com/. [Accessed 23 March 11]. Hadley, J. (2004, March 16). IPod Problems — Bad iPod, No! [ONLINE] Available at: http://jon.blogs.com/mopho/2004/03/ipod_quirks.html [Accessed March 23 2011] Hall, Stuart. 1977. “Encoding/Decoding” Storey, Reader, 36:236-49 – Gledhill Hall, Stuart. (1980). Encoding and Decoding in the Television Discourse. In S. Hall, Culture, media, language: working papers in cultural studies. London: Hutchinson. Info Tech (2007). “Welcome to Planet Apple.” Business Week. [ONLINE] Available at http://www.businessweek.com [Accessed March 23 2011] Mark Sigal. 2010. Apples segmentation strategy, and the folly of conventional wisdom. [ONLINE] Available at: http://radar.oreilly.com/2010/09/apple-segmentation-strategy-an.html. [Accessed 23 March 11]. Mooij, M. d. (1998). The Paradoxes in Marketing Communications. In M. d. Mooij, Global Marketing and Advertising (pp. 1-15). Thousand Oaks: Sage. Naomi Klein. 2000. No Logo. [ONLINE] Available at: http://www.guardian.co.uk/books/2000/nov/27/firstchapters.extract/print. [Accessed 23 March 11]. Stole, Lars A. (2003). “Price Discrimination and Imperfect Competition.” [ONLINE] Available at: http://web.mit.edu/14.271/www/hio-pdic.pdf [Accessed March 23 2011] Leander Kahney. 2002. Apple: Its All About the Brand. [ONLINE] Available at: http://www.wired.com/gadgets/mac/commentary/cultofmac/2002/12/56677. [Accessed 23 March 11]. Read More