Marketing Plan for Apple's iPad - Research Paper Example

Executive Summary In this marketing plan for Apples iPad, the purpose is to research the present situation on which to base suitable future strategies. The iPad is a newly launched revolutionary device that is in the form of a tablet computer, and compares with e-readers but lacks some expected functionality compared to Netbooks. Analysis of the customer environment shows strong demand for the iPad but high prices, and analysis of the industry shows there is no direct competitor at present and uncovers the existence of a whole Apple centred closed eco-system. The iPads potential has also been highlighted for use in the education sector and publishing industry. On the other hand, the iPad in its present state has known connectivity issues but there is time for it to be improved and evolve before the likely emergence of other tablet computer devices. Recommendations for future marketing strategies concentrate on providing the greater functionality, especially the inclusion of a built-in camera, improved connectivity, allow multi-tasking, and cater specifically for those in the education sector, publishing industry and the non-technology savvy. In addition, it was recommended to lower prices to more competitive levels, adopt open standards and remove DRM limitations. The four Cs are also discussed, the marketing mix is summarised, and recommendations are made for further research. Part 1: Introduction and Overview 1.1 Purpose and Content This paper is a marketing plan for Apple’s iPad. This aim is to analyse the present situation and based on the findings, to recommend strategies for the future that could be used for an effective marketing plan. We begin with a brief overview of what a marketing plan is, and the role of research, communication and relationships in a marketing plan. The analysis then includes pertinent information about the iPad, and an analysis of the customer environment, and analysis of the industry and competitors. Further analysis has been made of two important sectors that could potentially take advantage of the iPad, namely the education sector and the publishing industry. The strengths, weaknesses, opportunities and threats facing Apples iPad line of products is then summarised in a SWOT analysis. Part 3 builds upon the research to make recommendations for future strategies so that the iPad can be successful. We discuss the main objectives and issues, and give precise details of different aspects of the marketing strategy including product, pricing and distribution strategies, and the targeting of particular groups of users. Descriptions are also given for the four Cs (Care, Choice, Community and Challenge) and the four Ps (Product, Price, Place and Promotion) that are essential for marketing. We conclude with recommendations for further research. 1.2 The Role of Research The whole concept of marketing is to match a company’s capabilities with what customers want so that the objectives of both parties can be achieved (McDonald, 2007: 3). Thus, we are getting to know what the iPad is and what it is capable of, and what customers want and expect or need. For this, the marketing plan must begin with some research, which plays a central role in marketing. To put it another way, the strategies have to be justified based on the analysis of the present situation. 1.3 Communication, Relationships and Action Even with increases in communication and technology, Apple shows traditional views about marketing. As Ailloni (1998) states, “In spite of all the intellectual legerdemain involved in repackaging old terms in new age catch phrases, the marketing of consumer packaged goods was, is, and will remain concerned with only one basic objective: the profitable movement of as many cases as possible.” “From the manufacturer’s point of view, consumers and the trade are the two poles anchoring what should be viewed as a continuing process with product development, advertising, and promotional efforts providing the necessary fuel to keep the process in play” (Ailloni, 1998). Thus, this report will consider both environments and in terms of their relationships with Apple’s iPad. The overall objective however should be to make a link between the iPad and information retrieval in marketing terms. “To the extent that the information is made public and transparent, it will make people better informed and able to make better choices. New economy organizations tend to be flat, decentralized, and open to employee initiative” (Kotler, et. al, 2002, p. 4). The establishment of new marketing principles not based on rigid rule structures; rather, they are based on being more able to respond dynamically to an ever-evolving present. This report has thus focused on market responsiveness predominantly. Part 2: Analysis of the Present 2.1 Situation Analysis About the iPad Apple’s iPad was introduced in January 2010. It is the company’s latest product and the first generation model is still being marketed. The iPad enjoys a high profile, especially in terms of media product placements. The iPad is light in terms of its weight at 11/2 pounds, and thin in terms of its dimensions at half an inch. The size is comparable to a standard magazine. Its screen has multi-touch capabilities and it has wireless connectivity using Wi-Fi and 3G. The iPad is basically a larger version of the iPhone because it uses the same version of the Mac OS X operating system, but with a more powerful custom-designed A4 processor and currently without phone capabilities. The design of the iPad is based on simplicity. Although it is not as feature rich as small laptop computers known as ‘Netbooks’ it is more versatile and easy to use. Moreover, it has en entirely different form factor. A obvious distinction is that Netbooks have a traditional keyboard separate from the monitor as with laptops, whereas the iPad has an integrated virtual keyboard instead accessible via its touch screen interface. In this respect, it is similar in some ways to Amazon’s Kindle as well as other existing devices known as ‘tablet’ or ‘slate’ computers. However, it is still different because the iPad has much better integration of hardware and software, and has features like a colour display and backlighting (Gewirtz, 2010). Like Netbooks though, the iPad is best used as an additional computing device rather than as a complete computer replacement. The iPad is clearly therefore, “a whole new kind of device”, as described by Apple (2010) itself. Analysis of the Customer Environment The standard retail prices of the iPad in U.S. dollars are $499 for the 16GB model, $599 for the 32GB model and $699 for the 64GB models. The UK prices range between £429 and £699. All these come with Wi-Fi connectivity. The 3G models are priced at $629, $729 and $829 for the same capacities respectively. For actual 3G access, the subscription with AT&T for U.S. users costs $14.99 per month for 250 MB of data and $29.99 for unlimited access. (Apple Store, 2010) Various accessories are also available for the iPad. On the first day alone, Apple sold over 300,000 units, making the iPad “on par with other handhelds” though Steve Jobs described it a “game changer” (Conneally, 2010), of which over 50,000 were sold in the first couple of hours (Lane, 2010). This was complemented by 250,00 sales of e-books from Apple’s iBookstore and one million applications from the iTunes store (Graham, 2010) although the latter figure possibly also includes software for other Apple products besides the iPad. Nonetheless, these statistics show the popularity of the iPad despite the fact that it is still a new product as of 2010. In terms of customer satisfaction for those who have already bought the iPad, one survey revealed a rating of 91% and that demand is greater than it was prior to the launch (Marsal, 2010). The strong demand is most evident when long queues are seen outside Apple stores whenever new products are released as well as major iterations of the Mac OS operating. The release of the iPad enjoyed the same tradition as shown in the picture below. Despite the apparent successful start of the iPad, technical problems also exist, although this is not untypical for the first models of new products. The major teething problems with the iPad include Wi-Fi connectivity issues (Tabini, 2010) due to weak Wi-Fi signals, charging issues, crashing apps, difficulties with typing on the device, and sluggish syncing (Post, 2010). According to Apple’s support forums, the most common problems being reported are “weak and intermittent Wi-Fi signals and overheating” and charging issues (Hopkins, 2010). The Wi-Fi issue has been acknowledged by Apple but it occurs when using third party routers and appears to be a software side issue (Lynn, 2010). Analysis of the Industry and Competitors The market in which Apple operates is very competitive. There are high entry barriers and only a few established competitors offering similar products. Furthermore, switching costs have been increasing because many companies are using long-term contracts with harsh penalties against customers who try to switch products. However, this is still an industry in which competition fuels innovation and progress, and in which many customers are looking for the ‘next big thing’, which the iPad is trying to be. The main competitors to the iPad are e-readers such as Amazon’s kindle, other tablet PCs and Netbooks as shown in the table above. A survey by comScore (2010) involving over 2,000 Internet users, compared awareness, attitudes and opinions of the iPad with other e-readers and tablet devices. Netbooks were not included. In terms of ownership, Amazon’s kindle currently enjoys the highest position as of March 2010. However, both the Kindle and iPad had equal awareness of 65%, but in terms of seriously considering to purchase one of the devices, the iPad scored slightly higher than the Kindle. The other devices that were included in the survey were Barnes & Noble’s Nook, Sony Reader and Samsung’s Papyrus. As for uses of the iPad, the respondents were interested not only in its e-reading capabilities, but also for browsing the Internet, checking emails, listening to music, watching movies, storing photos, and playing games. This shows the popularity of the iPad as a multi-function device, which is more than what e-readers can do. Although Netbooks are mentioned as one of the classes of competitors to the iPad, there is a significant difference of approach. As Steve Jobs pointed out in the introduction keynote for the iPad, Netbooks are designed to compromise on the laptop form factor. They are essentially cheaper versions of laptops but of lower quality. Thus, they retain the complexity of computers albeit in a smaller sized device. This reduced functionality does not make them a serious competitor to the simplicity of an entirely new kind of device as the iPad. On the software side, it is not Microsoft that is a concern, as they have no real solution, but open source platforms and systems that have been specially designed for mobile devices like Google’s Android. Nonetheless, it is only Apple that has a complete integrated hardware, software and distribution eco-system. For this reason, it can be safely said that there is as yet no serious competitor to Apple’s iPad. 2.2 Analysis of the iPad’s potential The education sector The iPad has a great potential in the education sector because it is cheaper than desktop and laptop computers (as Netbooks also are), yet far more convenient to carry around and hold (which Netbooks are not). The e-reading capabilities for example, are useful in classrooms because (like the Kindle) the iPad can hold numerous textbooks in a single device (Dodson, 2010). Moreover, it supports colour, zooming in an out, and viewing the page in both portrait and landscape orientations as well as handle images, and instructional audio and video content (which the Kindle cannot do) (Stansberry, 2010). Several applications are available for the iPad and these include common word processing, spreadsheet and presentation applications in the form of iWorks, and other educational applications that are already available for the iPhone (Stansberry, 2010). Thus, students can work on simple documents just as they can on normal desktop or laptop computers and also use from a range of learning software. In fact, the potential in education is so huge that the iPad has been described by one education administrator as “a game changer for education” (Dawson, 2010) because of its suitability for handling a variety of data in a convenient manner. For example, it can be used to hold and organise textbooks, create worksheets, manage assignments and schedules, hold records of student performance and behaviour, and so on. For students with special needs, the iPad can function as a useful assistive device through the macintosh system’s speech capabilities. Furthermore, education administrators can benefit from time and cost savings as compared to setting up and using a computer. Normal computers including Netbooks can also do all these things, but the point is that the iPad can do it much more conveniently and easily. The touchscreen capability makes it particularly useful for example in teaching and learning geometry. Neither netbooks nor e-readers can do this. Dawson (2010) thus found the iPad able to meet all the functionality requirements of education, and concluded “The iPad not only fulfills a wide-range of functions tin the school setting but does it in a manner we have not previously seen”. On the other hand, the problems he foresaw is with the pricing and content controls in the form of DRM (Dawson, 2010b). The publishing industry The publishing industry in general is in dire straits and a product like the iPad is seen by some as a saviour (Brauck et al., 2010). However, most in the industry are “being exceedingly cautious and ... taking a wait-and-see approach” (ibid). With the iPad, readers are able to interact more with the content through its touch screen interface and this is what makes it attractive. This could for example mean “the ability to examine an event, relive it and almost experience it directly themselves” (ibid). Apple therefore has the potential to seriously position the iPad to take advantage of the publishing industry’s situation so that both parties can benefit. 2.3 SWOT Analysis Based on all the information gathered above, we can now analyse Apple’s strengths, weaknesses, opportunities and threats for its iPad product line from the marketing perspective. This has been done using a SWOT analysis, shown below. Strengths Weaknesses Apple’s reputation for greatness yet simplicity Part of an unparalleled eco-system Popularity of Apple products and high initial demand Perception of high price Lack of expected features Glossy display makes it unreadable in all lighting conditions Glitches of some features such as Wi-Fi connectivity Possible fragility of device Opportunities Threats Catering to specific sectors such as education and publishing Leading the changes in IT trends Netbook makers who can provide greater functionality Emerging tablet and slate computing devices The greatest strength of the iPad is in establishing a new form factor for computing devices. This is its major appeal. “There’s something natural and seductive about the idea of a tablet computer. Something to do with the form factor, portability, implied intuitiveness and non-computery quality of the thing.” (Gemmell, 2010) Apple has latched onto a great concept and again pioneered the way forward for a new generation in computer technology as it did with the desktop computer in the first place in 1984. Moreover, the iPad is part of an unparalleled hardware, software and distribution eco-system as mentioned earlier. The early models of the iPad do have certain shortcomings. The most serious include screen glare, lack of multi-tasking capabilities and flash support, poor html page rendering, and connectivity problems (Enderie, 2010). The iPad also lacks a built-in camera and has limited storage capability. Together these are all a lack of expected features. The glossy screen for example, makes the iPad unable to compete with e-readers such as Amazon’s Kindle, which can be used in all lighting conditions including outdoors. Regarding standards, although Apple’s iPad does adopt the ePub standard for reading books and other such content, it implements a layer of DRM (Digital Rights Management) on top, thereby effectively making it proprietary. Part 3: Strategies for the Future 3.1 Objectives and Issues The overall objective of the strategy is to make it clear that Apple must move on from what it has brought out and focus now on improving the iPad as well as satisfying the needs of particular users. The major issues identified above in relation to the iPad have been the lack of certain features and some initial glitches. 3.2 Marketing Strategy Segmentation and Basis Type of person/target user Details of strategy People who want to read e-books Improve screen display i.e. change from glossy to matte, and allow backlit display to be turned off People who want greater functionality Include expected features like a built-in camera People who need greater connectivity Include support for standard USB, media card readers, bluetooth and ethernet People who want to be able to work on more than one task at the same time Introduce multi-tasking capability as soon a practicable The education sector Making the iPad specifically suitable in terms of capabilities and price for teachers, students and education administrators The publishing industry Assist in the creation of interactive reading content The non-technology savvy Making the iPad specifically suitable for the less or non technology savvy The above analysis in part 2 has led to the identification of certain categories of people that still need to be targeted or satisfied properly, and will therefore be the focus of the marketing strategy. They are listed in the table above along with brief descriptions of the strategy pertaining to each. We now describe the strategy in more detail for each target category of iPad user identified above before giving details of other parts of the strategy. People who want to read e-books would like improved screen display so that they can use their iPads under various lighting conditions including outdoors. This means either a change from glossy to matte or at least the ability to somehow change from one to the other. This would make the iPad compete with e-readers, which are at present better able to be used for longer periods of reading, outdoors and are easier on the eyes. In addition, there are users who simply want greater functionality or need better connectivity, and as mentioned earlier, until that happens, the iPad is quite limited in its present state. This includes things like having a build-in camera, support for standard USB, media card readers, bluetooth and ethernet. In particular, this also means allowing multi-tasking as the Mac OS X operating system is well capable of, for those who want to use more than one application at the same time. In order to satisfy the requirements of the education sector and the publishing industry, Apple must clearly differentiate the iPad for these purposes. This means for example, education pricing and improved e-reading capabilities. Other target groups of customers should be those who are less competent at using the traditional computers or who are not technology savvy, such as the young and the very old. The iPad is an ideal device for them because it does away with the need for devices such as the mouse for interacting with the computer and provides an easier interface. Positioning The iPad does not need to compete directly with Netbooks because smaller laptops can already do that like the MacBook. However, if Apple is aiming to compete with Netbooks albeit with the tablet form factor, then future versions of the iPad must come with greater functionality than at present. This is likely to be how the iPad will evolve but until it does, it does not yet seriously challenge let alone replace the Netbooks. The present focus should instead be on satisfying the target users mentioned above. In particular it should satisfy the needs of the education sector and the publishing industry, and it should target the less technology savvy. See also further below on care. Product The iPad is an entirely new kind of product that offers some computer functionality in a smaller and cheaper device as Netbooks do, but differentiates itself by having a different, more convenient, form factor. It is similar in appearance to e-readers but can do much more. It heralds a new era of tablet computers. Moreover, the company that produces it, i.e. Apple, is renowned for innovation and reliability. Future versions should compete better with Netbooks in terms of features and be based on open access and standards. The present lack of multitasking capability however is not as serious as it seems. This is apparently a compromise that brings improved stability to the iPad and allows it to have longer battery life. However, the operating system is certainly capable of multi-tasking, so in the next evolutions of the iPad, it should be possible to have the benefit of all three of the aforementioned features. As for the lack of support for flash, Apple needs to reconsider whether this is a serious limitation or perhaps there are some alternatives. The only major limitations that do affect the appeal of the iPad and could give potential competitors an edge, are connectivity and a built-in camera. It is highly likely that Apple will definitely incorporate a camera in a future version of the iPad and work on improving connectivity anyway, but it is still worth mentioning these once again as necessary features of a new product strategy. Pricing The present pricing does not compare favourably with Netbooks. The iPad like other Apple products is over priced. Apple must consider lowering prices to attract lower income people who cannot easily afford computers, such as students and the education sector in general, and developing countries. A suggested pricing scheme could be $299 for the future 64GB model, $399 for a future 128GB model and $499 for a future 256GB model. Future models should incorporate 3G connectivity as standard so they do not need to be priced separately. This scheme would keep the price range below the $500 mark and below the prices of the Mac Mini range and make the iPad more fairly priced with competing Netbooks. Distribution Distribution is a very important part of the overall strategy. Apple should build upon its success as with the iPod and iTunes complemented by the iTunes store. The latter and the App store in general serves as “an easy-to-use distribution channel for third-party applications” (Srinivasan, 2010). Apple should expand its options for distribution by selling the iPad through other indirect channels. Furthermore, restricting people to acquiring the application software only from the Apple online store will not go down well. The greatest inconveniences are not being able to transfer files and not being able to use files from other devices. For example, Apple should continue to employ the ePub standard for e-books but must remove the DRM applied to it. This closed structure around the iPad is a serious mistake. Confining users to only run applications downloaded from the Apple store will not go down well in the long-term. A future iPad must be more flexible in this regard as Apple’s other lines of computers and devices are. Marketing Communications Currently, Apple is enjoying a favourable period because the iPad is a new device, and this is reflected in the sales figures. In fact, there appears to be same level of enthusiasm as when unveiling the original Apple computer and the iPhone. However, Apple should promote the iPad to particular target customers and sectors as identified in the table of segmentation of customers and markets. There must be clearer focus to show who or what the iPad is for. Budgets and Control There remains a great deal of internal difference in the ways in which companies institute and perpetuate financial control systems. Just as every individual is not the same, every company has different parameters and guidelines it follows in implementing financial control. Some companies have strict and transparent controls, while others do not. The new economy is based in part on an improved access of consumer information. These traditions are also financial, which can potentially mean less dynamism when a structure is dividing marketing into advertising and promotions with different short- and long-term agendas for each function, in terms of profit. Since Apple is a strong-performing market leader, it has a large budget, and can afford the start up costs that disallow small start-ups in this industry. However, with a large budget, consumer expectations also increase. 3.4 Marketing Mix (Four Ps) A summary of the strategies pertaining to product, price, place and promotion is given in the table below. Product Price Greater functionality and connectivity Inclusion of basic features like a camera and USB Reduction of prices below the $500 mark Lower prices for students and senior citizens Place Promotion Support for open standards and removal of DRM Allow iPads to be sold through non-Apple distribution channels Clearer product differentiation by targeting the particular groups of customers identified 3.3 Critical Marketing Variables (Four Cs) Care The publishing industry especially is facing tough times with dwindling readership of newspapers, magazines and books. Given that the iPad has a huge potential due to its form factor and touchscreen capabilities, Apple could take advantage of this situation to help provide interactive reading contact and making the iPad more reader friendly comparable to e-readers. Similarly, it should be improved keeping in minds the education sector, students and seniors as well. Choice As for choice, greater choice is demonstrated by the sheer amount of applications already available for the iPad so the policy for the application development side is doing well. But the lack of openness will inhibit longer-term choice, so this policy must be reconsidered. Community The iPad is attractive for both existing Mac users and others alike though Mac users are typically at the forefront of leading technologies. Regardless, the iPad can develop a community of its own due to its uniqueness as long as there is clearer focus on what the iPad is for and for whom. Challenge The greatest challenge will be in maintaining the momentum Apple has already set itself for the iPad, and consolidating the iPad’s position in heralding a new age in computing. Apple is well placed to lead the new trend for tablet computing devices but sooner or later, serious competitors will emerge, so Apple must continue its efforts to position the iPad firmly at the forefront of the change. Care Choice Support for particular sectors such as education and publishers Greater openness and adherence to standards Community Challenge Identification of particular groups for whom the iPad is best suited and their support Maintaining momentum and consolidating iPad’s position in leading the new trend 3.5 Recommendations for Further Research While the research in this paper has been fairly wide ranging, further research to justify suitable marketing for Apple’s iPad could examine the points already covered in greater detail and moreover involve conducting primary research. This could involve general consumers, who have already purchased the iPad or are thinking of buying one, or would like to but are deferring it for some reason, and insiders in the education sector and publishing industries. A survey format would be suitable for gathering data from a large sample but in the case of the latter, some interviews could also be carried out. Works Cited Ailloni, D. (1998, March 16). 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