IPhone 3GS Marketing Plan - Research Proposal Example

iPhone 3GS Marketing Plan The company has now developed the third generation smartphone called the iPhone 3GS and is about to launch it in the United States. This paper is a marketing plan for the proposed product and will provide a detailed report on marketing it. This report will first provide a detailed description of the product along with the current market situation. The product has many outstanding features for leisure, business, and entertainment apart from basic and internet communication. The SWOT analysis of the company and product shows that even though there exists some weaknesses and threats, there is nothing to postpone or stall the launch. The main concern is the increasing market share of some competing products. The market is also quite saturated with a negative growth rate. But the innovative ability of the company in bringing out new features is an advantage. Moreover internet browsing is extremely fast using broadband and the battery life is excellent. The target market is primarily male between the ages of fifteen to forty nine. Studies show that more than 70% of the customers are male. There is stiff competition in the mobile phone segment in the country. But the iPhone is much more than a mobile and comes second to Blackberry in the smartphone category in market share. There are relatively few players in this segment even though competition and substitutes are increasing slowly. Pricing has to be based on competitor’s prices and the product is placed approximately in the mid range in this category. The concept of dual pricing (subsidized for locked phones and non-subsidized for unlocked phones) is a problem in arriving at a balanced pricing. The product is distributed by one single service provider namely AT&T. It is also available from the company’s own distribution channel in traditional and online stores. It is hoped that more and more service providers will offer their services though the iPhone 3GS in the future. Any product launch by Apple creates wide publicity in the press and other areas. Hence promotional expenses can be minimized. It is proposed to use print advertising and PR exercises to promote the product. It is also proposed that the product makes its presence in the corporate segment also which is now dominated by RIM (BlackBerry). The total promotional budget comes to approximately $ 1,400,000 which comes to around $1.10 per expected iPhone 3GS sales over the next two years. Product description and situational analysis The iPhone was a revolutionary product when it was introduced by Apple Computers in the year 2007. Company chairman, Steve Jobs wanted to introduce a product that had all the features of a personal digital assistant and a mobile phone combined. The product should also be multifunctional with regard to net connectivity and multimedia applications. He also wanted it to be a high tech device and instructed his engineers to use touch screen technology for ease of entering text and selecting menus and they in turn came up with a stylish product with a large and easy to use touch screen. It still continues to sell well and has the second best market share in its class in the United States. The latest model to be marketed is the iPhone 3GS where 3G stands for third generation. The phone has extensive features which will be described in this section followed by a situational analysis and SWOT analysis of the product and the company. (Apple iPhone 3GS photos, 2009) The large screen practically occupies the whole face of the product and shows the many diverse applications that can be used by the owner. All applications are selected by tapping or touching the appropriate area (menu) on the screen. Phone: The primary use of the product is for communication as a mobile phone using GSM, High-speed Packet Access (HSPA) and Universal Mobile Telecommunication System (UMTS) technologies. It has all the features that a modern mobile phone has like voice communication, SMS, managing contacts, sending and receiving voice mail, downloading ring tones etc. iPod: The product has the famed iPod of the company featured in it. It can be used to watch video or listen to audio. Another feature is that video can be watched in wide screen mode by holding the product horizontally. The product can be synced with a PC and can also copy music from the hard disk onto the phone. Moreover, users can purchase and download audio from the Apple iTunes online store. It can also create multiple play lists and even has a music mix feature. Safari: The product has incorporated Apple’s proprietary software for browsing the web. This latest model is twice as much faster when compared to older versions of the iPhone. What is special here is that users can experience full content web pages and not the stripped down browsing experience as seen in other mobile phones. It provides almost all the features and applications that are seen on browsers on a regular PC. Bookmarks and favorites can be created and stored on it and the product even has a facility to zoom visuals. Email: The iPhone has facility to send and receive mails with regular attachments like in a regular PC. The software has the ability to accept and use mails from all regular service providers like Yahoo and Gmail. Users can read formats like PDF/Word documents, Power Point presentation, image files, and spreadsheets. They can enter text by tapping on QWERTY format keyboard that appears on the touch screen. A mail search facility is also available for reading the mails stored in the inbox. Videos and stills: The iPhone has the ability to record and edit high quality video clips. Users can send the recorded clips via the MMS facility. Moreover they can also send the clip to others while they are being recorded. Videos and photographs can be enjoyed in wide screen format by holding the set horizontally. Editing is easy because of the drag and drop facility provided by the software. Taking stills can be done in the same way as videos and its autofocus feature enables users to take sharp high resolution pictures. Voice control: This facility enables the user to communicate with the product using voice. It can be used, for example, to make a call or listen to music. The user can say a number or name into its mouthpiece and the phone activates the correct one stored in the contact list. Messaging: The iPhone is also an instant messenger and can be used to transmit and receive text and visuals. The built it software has the ability to suggest text as it is being typed using the QWERTY on-screen keyboard. The keyboard can be viewed both vertically and horizontally (wide screen). GPS: The global positioning system software has a tie up with Google maps and is also synced with mobile phone towers. This facility enables the user to find directions or the layout of a city in the United States. It can also provide step by step directions to arrive at particular destination. Editing: The iPhone provides the user with the facility to easily cut, edit, and paste text and images. Another interesting feature is the shake to undo facility. If the user does not want the change made to take place, all he has to do is to shake the phone and the unchanged text or image is brought back on screen. Voice recording: The product has a recording facility that can be used to store memos or even to record a moment or event. It can then be sent to others as an MMS. The recorded clips can be labeled using predetermined or custom names. Net connectivity for PCs: Its tethering facility allows the product to be used as a modem for PCs to be connected to the internet. The phone and other features will remain activated even when the product is being used by PCs for this purpose. Accessibility: The large screen format and zoom facility is useful for those with sight impairments. It also has a voice over facility by which users can listen to audios of menus and other text on the screen. The earphones can be made to play sound in either the left or right speakers if the user has hearing impairment in one ear. The iPhone 3GS is the fastest with regard to all applications till date and includes web browsing and playing games. In other words, the “iPhone 3GS is up to 2x faster and more responsive than iPhone 3G” (Introducing iPhone 3GS, 2009). It is an extremely sophisticated instrument and is one of the best in its class and still remains one of the market leaders. The situational analysis of the iPhone 3GS has to be done on different planes since it is a multifunction gadget. Apart from being a phone, it also is being used for a variety of functions as described in the previous section. Marketing the iPhone 3GS may become a challenging and tough task in the future if the market conditions are any indication. According to John Barrett, a research analyst for the market research firm Park Associates, “the market is extremely tough these days and there is tremendous uncertainty over the new phones, features, and services that are now available” (Barrett, 2009). It would also appear that the market is becoming saturated if the figures shown in the following graph are an indication. (Total mobile phone subscribers and growth rate, United States (1997-2007), 2009) Even though the number of subscribers has grown steadily over the years, the growth rate is actually negative. Harry Wang who is director in Parks Associates state that the market is in a ‘survival of the fittest’ state. The number of users of mobile phones in the country is around 250 million and comes close to eighty percent of the total population in the country. But this does not provide a correct picture since there are people who use multiple cell phones while there are many those who do not own one at all. Moreover, there are a large number of manufacturers and a relatively smaller number of service providers. The competitors to the iPhone will be discussed later in this paper. Another factor that is peculiar to the country is the locked handsets policy followed by service providers. They are comparatively cheap because of high subsidies on products allowed by the service providers. The two major GSM service providers at present are AT&T and T Mobile and customers who buy from such vendors can get phones at much cheaper rates compared to buying them from the open market. The downside is that they are forced into a two year contract to use only the vendor service provider. So an 8GB iPhone costs around $400 if bought from Apple or other retailers while it will only cost $199 if purchased from AT&T with a two year contract. Plans vary and average at around $70 per month to be paid to the service provider to use the phone. So, customers on the whole may prefer to buy directly from service providers rather than from outside. But what customers do not realize is that the overall expenditure including the cost of the handset may be equal or more than the original price of $400. According to a gizmo website “over two years, the iPhone 3G will cost $160 more than the original iPhone. This includes the unlimited data plan plus the additional $5 SMS plan you need to get to match the original's 200 included messages” (iPhone 3G’s true price compared, 2008). This situation is ironical and it would be better if service providers and manufacturers have their own sales channel rather than going in for tie ups like the one between Apple and IT&T. “By combining several communications and entertainment tools in a single, artfully-designed device, Apple has with its iPhone challenged the manufacturers of other portable communications devices, and service providers, to raise the bar on the products they offer” (iPhone technology, 2008). Statistics about application usage (other than the phone) is also provided here which shows that the popularity of smartphones in increasing in the market. Usage of smartphones for web browsing is higher than what is found in Europe. With regard to the iPhone, nearly 85% of owners use the product to send/receive mails and an equal number browse the web. Nearly 60% regularly use other applications and widgets while more than thirty percent watch videos. Only around five percent of other smartphone users watch videos on their handsets. Another positive trend for smartphone manufacturers is the steady growth of mobile broadband at the rate of nearly seventy five percent per year. But competitors are growing in this category and Apple will have to innovate and improve its marketing factors to retain the position it holds today. SWOT Analysis Strengths: Highly innovative company and products Well established brand name Visionary leadership Wide range of products, applications, and services Ability to develop new products and models iPhones are easy to use and attractively designed Wide range of applications in one single product Speed in browsing the web Long battery life Availability of compatible products like iTunes, PC sync etc Weaknesses: No great improvement in quality when compared to previous iPhone models Signal strength (GSM) is not evenly available everywhere Dissatisfaction due sudden decrease in prices from those who bought handsets earlier Lack of compatibility of OS is a disadvantage for owners of earlier models Previous errors in judgment by top management in the past. For example, removal of Steve Jobs Competes with Apple’s own products like iPod and PDAs Opportunities: Increasing preference for smartphones Increased usage of smartphone application like internet, mail, games, multimedia etc Increased mobile broadband penetration Technology integration is growing resulting in multiple applications on a single product. Threats: Highly competitive industry High technology and innovative industry. Apple needs to continuously innovate on the iPhone Competing products eating into Apple’s iPhone market Saturation of ownership and declining growth rate of mobile usage Cheap phones from Chinese manufacturers Possible Health and radiation hazards from mobile devices Target market The iPhone is primarily a consumer leisure and entertainment product given the features and applications currently available. It is logical to assume that the primary target audience will be the youth and the middle-aged. Studies have shown that this assumption to be correct as seen in the following diagram. (Apple, AT&T neophytes to define iPhone audience – report, 2007) There are four age groups namely 15 – 24, 25 – 34, 35 – 49, and those above fifty. It can be seen that ninety four percent of the customers fall within the first three classifications. Each of these age groups share practically the same percentage of purchase and usage. It is evident that those above fifty are not interested in the diverse applications found in the phone. It is possible that they are primarily interested in communication rather than on leisure and entertainment. Another important segment is gender. It is seen that nearly seventy two percent of the customers are male. It is also seen that the preferred service provider is T-Mobile followed by AT&T. But at present, only AT&T provides services through the iPhone. Thirty percent of the customer base prefers a service provider contract and will probably be favoring the subsidized price. But since sixty percent have not shown a preference, it is also possible for the company to target them directly and sell the phones through it own outlets and other retailers. This will be elaborated in the section on advertising and sales promotion. The present target customer segment is clear from this. Apple should focus on males that come under the first three age groups mentioned above. The company can ignore the above fifty age group for the time being since it will be a waste of time and resources. The 15-24 target audience will prefer the gadget’s entertainment and leisure applications. This will also hold good for the next age group (25-34). But this age group will mostly be employed and they may use it for official communication also. The next age group (35-49) is primarily interested business communication. Hence the most promising customers will be among the 25-34 groups because they will be interested in both leisure and business as well. Hence the maximum efforts at marketing should be on this age group followed by the other two. Another factor is that the phone will be more affordable to the older of the above two age groups. Hence the next focus can be on this group followed by the 15-24 age groups. The company has an opportunity to target an entirely new segment and it is the corporate market in the country. The iPhone models are not seen as a corporate gadget and hence not a serious player in the market. But incorporating certain business applications (as seen in BlackBerry models) can be made and efforts at marketing the product as a business device can be undertaken. According to an article in CNNMoney.com, “while Apple's computer and iPod sales are healthy, analysts believe the popular smartphone has the most growth potential - and business buyers could be the key to its success” (Fortt & Lev-Ram, 2008). Hence a new customer segment will come into the marketing plan. This will again be discussed in the advertisement and promotion section of this paper. Competitors and substitutes The iPhone 3GS can be classified as a niche product and not just as a mobile phone. This is obvious due to the multiple applications that the gadget holds. Hence competition is limited except in the phone utility category. In this category, there are a large number of manufacturers in the market. The major brands of handsets available are given below and include well-known international brands as well as and local ones. The major brands are Nokia, Motorola, Samsung, Kyocera, LG, Sony, Audiovox, and Handspring (Barrett, 2009). But it should be noted that these are primarily mobile phones, many with some of the applications found in the iPhone. But none of them are in the same class in terms of sophistication and diversity in applications as the iPhone. Hence they cannot be termed as competitors or even substitutes. No one will buy an iPhone just for the sake of communication and it is evident from the situational analysis above that users of the product make use of the many diverse applications available (mail, music, games, internet etc). But recently a range of substitutes or competitors of the iPhone has arrived or may be launched in the US market. According to PC Quest, the main rivals for the product at present include HTC Touch (unlocked mobile), Helio Ocean, Nokia N95, BlackBerry Curve and Samsung Upstage (Larkin, 2007). Motorola and LG too have competing models. But market analysts feel that the iPhone range along with BlackBerry still remains the market leaders and its innovations are being copied by other brands. But some specific models are becoming popular and eating into the market share of the iPhones as can be seen from the following graph. (US Smartphone market share, 2008) It is to be noted that RIM stands for Research in Motion and they are the manufacturers of BlackBerry range of smartphones. At present RIM and Palm are the biggest threats, but the iPhone 3GS may well correct the situation. Pricing Pricing the iPhone 3GS is a complicated matter due to two factors. One is the practice of dual pricing through subsidies and normal retail price. Service providers have a different price while manufacturers are forced to sell brands at a higher price. Since the product operates in a consumer’s market, competitive pricing is a big factor. It should be noted that Apple does not have a say in how service providers AT&T price its products. The HTC Touch is priced at $235 and its high end Diamond model costs more than $500. The Helio Ocean model range is priced between $80 and $250 while the Nokia N95 range costs between 350 to 650 dollars. The BlackBerry Curve models are priced in the $300 range. Finally the Samsung Upstage models are priced between 100 and 140 US dollars. The iPhone 3GS has two models based on capacity namely 16 GB and 32 GB. It is proposed to price $199 and $299 respectively. This will place the product in the middle of the price range of the competitors and with its high performance and application, will be very attractive for the customers. But the above princes can be profitable only if they are sold as locked and subsidized AT&T phones. Customers have a choice of unlocked and contract fee phones which then will cost $599 and $699 respectively. The advantage is that even though customers may have to pay a larger amount of money upfront, they may save on contract fees in the longer run. The profit margin for the company is five percent of cost and the number of units to be sold will be dependent on the promotional budget given later in this paper. It should be noted that all the models except for Helios Touch are being also being marketed by service providers also and hence a balanced pricing is difficult in such a market. Channels of distribution A proper and efficient distribution channel is essential for the success of any product. Manufacturers should see to it that the product is available in all parts of the country including spares, accessories and service. A company can have its own excusive distribution channel like Dell Computers. This company sells its products only through the internet. Companies can also have traditional exclusive outlets to market their products. But in most instances, a company will take the service of a channel partner in the form of wholesalers and retailers. This makes it easier for the company to service its customers. It is also easier with regard to logistics if there are external service partners. Moreover the company can save on its resources as well. The downside is that a share of the profits will have to given to the channel partners. There are three distinct channels of distribution at present for the iPhone. One is through AT&T stores and AT&T authorized stores. It is possible to identify these brick and mortar stores through the AT&T website for almost all the cities in the United States. The second one is through Apple stores and other Apple authorized retailers. The third one is through the internet, again primarily though Apple online stores. Apple can increase its distribution channel and sales if other service providers like T-Mobile and Verizon begin to provide iPhone services as well. Apple is at present talking to some providers regarding this and hopefully a deal may come through. If that happens, a larger distribution channel with a partnership with new providers and other channel partners will come into existence. But at present, there is only one service provider for the iPhone. Since the company is also providing unlocked contract free handsets, it can now increase its retail outlets by adding more channel partners. Promotion The importance of marketing can be summed up in the words of the world famous economist Peter Drucker as quoted by Jack Trout in Forbes. He has said that “Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs” (Trout, 2006). Marketing can traditionally be done through several channels and they include advertising in print and visual media, sales promotion, public relation activities, direct marketing and personal selling. As mentioned earlier the primary focus will be male customers between the ages of fifteen and forty-nine. But since each of three age groups that fall under this category have different tastes and interests, promotional activities will also vary. Advertising the phone as a leisure and entertainment will be effective for the first two age groups and promoting it as business tool will be effective for the second two age groups. One advantage here is that the product needs no introduction and hence only its presence and innovations needs to be advertised. Only the new features like speed and battery life need to be promoted. Another factor is that the phone will also be promoted by service providers like AT&T in their own promotional campaigns. This can cut down the promotional budget to a large extent. The promotional budget and costs will be discussed in detail in the section of budgeting costs later in this paper. It is proposed to use the print and visual media along with hoardings to promote the product. Direct approaches like public relations (PR) can also be used since a new corporate segment has come into the picture. For the existing market, a month long campaign is to be undertaken. Advertisements in the Time Magazine and Esquire magazine will be effective since it will cover the two older age groups. The advertisements can appear once a once a week for a period of one month. A press conference to announce the launch will also be conducted. It is not intended to use television advertising since massive press publicity, and promotion by fans and other interested groups will certainly be there. Estimates show that interest for the new product is immense since the launch is expected to come soon. There is no point in targeting potential customers between the ages 15-20 since the phones they may use will mostly be bought for them by their parents. The marketing slogan ‘Life on the Go’ can be used everywhere since the phone has many useful applications that were once used in stationary situations. Now they can be done while the person is travelling or on the go. As mentioned earlier, the customers of the iPhone are mainly youth/middle aged and that too males. But the current strategy is to target the business segment also where Blackberry is the market leader. This is primarily because, if it gets corporate acceptance, bulk orders will follow. For this certain changes in applications have to be done in the first place. For example, it has to have business applications just like in the case of Blackberry. What the company should do is to incorporate the necessary changes and promote the product through a massive public relations approach. The software should be provided to all the Fortune 500 companies and other large corporations for their opinions and suggestions. Executives in these companies should be approached and encouraged to try out the software for a year. Five hundred executives should be selected for regular follow up by Apple’s marketing team. They should visit the executives once a month for feedback and suggestions which then should be handed to the research and manufacturing people for incorporating the practical and useful suggestions. By the end of the year the product should be ready and each of the participating executives should be provided with the new business class iPhone. Those willing to buy a non-subsidized handset will be free to do so even though most may prefer to go in for a contracted purchase. Each advertisement will also carry the fact that iPhones are available contract free, but at a higher price. Details of pricing are given in the next section. Promotion budget Product design …………………………………………………………..$ 45,000 (from existing iPhone model base) Print media advertising Time Magazine (Four full page B&W ads at $178,000 each) As per Time Magazine rates………………..$ 712,000 Esquire Magazine (Four full page B&W ads at $70,000 each) As per Esquire magazine rates……………. $ 280,000 $ 992,000 Public relations Marketing team costs for visiting Fortune 500 executives (12 visits once a month for one year)………………………………………..$ 120,000 Salary for temporary recruits…………………………………………………$ 80,000 Free handsets to the five hundred participating executives ($350 x 500)…………………………………………………………………$ 175,000 Press conferences ……………………………………………………………..$ 10,000 Miscellaneous expenses……………………………………………………….$ 10,000 TOTAL $ 1,387,000 Operational notes: Time Magazine guarantees a readership of nineteen million five hundred thousand. This comes to only $0.04 of advertising cost per reader. Since the Magazine is a weekly, the cost per reader will actually be one fourth of the above amount since there are four issues in a month. Esquire Magazine shows circulation and not readership which is around 713,000 per issue. The cost of advertising per issue will come to $ 2.50. But since readership will much higher than circulation, the cost per reader will be much lower. The price of handsets to be provided free of cost to the Fortune 500 executives may vary after a period of twelve months. Hence the cost shown is an approximate value. Expenses of the marketing team include travelling, food and stay in places where the executives are based. The cost of conducting press conferences is also an approximate figure. The development and design costs are based on those provided by the audit and accounts department of the company. Previous models of the iPhone averages around 1.5 million units per year. A more cautious figure of 500,000 units of the iPhone 3GS is expected over the next 12 months. The corporate market will increase the figure once the period of testing the business model phone is over and the modified product is launched. It is expected that an additional 250,000 units can be sold in the year 2011 bringing the total sales to 750,000 units. Hence, the total sales for the coming two years will be 1,250,000 units. The advertising and promotional costs for the will average at around $ 1.10 spread over the next two years. (500,000+ 750,000) = 1.10 1,387,000 This can be considered to be reasonable and the company can recover the investment within two years References Apple iPhone 3GS photos. (2009). CNet Reviews. Retrieved September 20, 2009, from http://reviews.cnet.com/2300-6454_7-10001060.html? Apple, AT&T neophytes to define iPhone audience – report. (2007). Apple Insider. Retrieved September 21, 2009, from http://www.appleinsider.com/articles/07/06/06/apple_att_neophytes_to_define_iphone_audience_report.html Barrett, J. (2009). Parks Associates. Retrieved September 20, 2009, from http://www.parksassociates.com/research/reports/tocs/mobile_market.htm Barrett, J. (2009). Park Associates. Retrieved September 21, 2009, from http://www.parksassociates.com/research/reports/tocs/mobile_market.htm Fortt, J. & Lev-Ram, M. (2008). CNNMoney.com. Retrieved September 21, 2009, from http://money.cnn.com/2008/06/19/technology/corporate_iphone.fortune/ Introducing iPhone 3GS. (2009). iPhone. Retrieved September 20, 2009, from http://www.apple.com/iphone/iphone-3gs/ iPhone 3G’s true price compared. (2008). Gizmodo. Retrieved September 21, 2009, from http://gizmodo.com/5015540/iphone-3gs-true-price-compared iPhone technology. (2008). iPhone.TMCnet.com. Retrieved September 21,2009, from http://iphone.tmcnet.com/ Larkin, E. (2007). PCWorld. Retrieved September 21, 2009, from http://www.pcworld.com/article/133536/in_pictures_iphone_competitors.html Total mobile phone subscribers and growth rate, United States (1997-2007). (2009). Parks Associates. Retrieved September 20, 2009, from http://www.parksassociates.com/research/reports/tocs/mobile_market.htm Trout, J. (2006). Forbes.com. Retrieved September 21, 2009, from http://www.forbes.com/columnists/2006/06/30/jack-trout-on-marketing-cx_jt_0703drucker.html. US Smartphone market share. (2008). ARS Technica. Retrieved September 21, 2009, from http://arstechnica.com/apple/news/2008/06/us-smartphone-market-share-down-for-apple-in-2008.ars Read More