Market and Customers: Apple - Case Study Example

Market and s- Apple of Segmentation, Targeting and Positioning Segmentation Segmentation is defined as a method of classifying the consumer marketplace in different segments based on various aspects of consumers such location, preference and psychology. Apple can segment its consumer market on demographic, geographic and psychographic basis. Demographic bases include classification based on age, education, income, occupation and gender. Geographic segmentation as the name suggests is based on location and psychographic segmentation depends on attributes such as interest, activities, lifestyle, attitude, opinion, value and so on (Cravens & Piercy, 2008). In context of Apple, the appropriate bases of segmentation will be demographic and psychographic segmentation. Apple is generally viewed as a luxury brand and is preferred by individuals of specific age groups. Furthermore, people also relate the product with their life style and personality; therefore, the selected segmentation bases are most appropriate for the company (Ferrell & Hartline, 2012). Targeting Targeting is a marketing strategy where specific group of individuals are viewed and aimed as primary consumer of a particular product (s). Targeting helps in narrowing down marketing strategies and enhancing its efficiency. Apple is usually perceived as a luxury brand comprising of trendy gadgets, thus its target market includes individuals between the age group of 16 years and 45 years, belonging to upper middle to higher social classes. Apple can further classify its target market on the basis of occupation such as student and working individuals (Ferrell & Hartline, 2012; Graham, 2008). Positioning Product positioning is a technique of developing a specific image of a particular product in consumer mind which can influence them in purchasing the product. For instance, Apple iPod shuffle is perceived as a compact and trendy music player while its higher versions such as nano and touch are considered by consumers because of their ability to meet music and video playing requirements. Apple is positioned as an innovative and luxury brand that further highlights social symbol of an individual. Consumers purchase Apple products because it distinguishes them from mass consumers. Unique features of its products have made Apple earn a brand image that reflects class, exclusivity and wealth for its buyers (Ferrell & Hartline, 2012; Kalafatis, Tsogas & lankson, 2000). Pricing Strategy In marketing, pricing is one of the important components of marketing mix. There are a number of pricing strategies that are implemented by corporations to market their products to consumers. However, pricing strategies can primarily classified as mark-up pricing, demand based pricing, competitive pricing and economy pricing (Mills, 2002). Mark-up pricing: Mark-up pricing, also referred as cost plus pricing, is the process of increasing the cost of a product by a standard percentage on the total cost price to determine the selling price per unit. The main advantage of this pricing is it covers the total cost as well as adds a profit margin, thereby reduces the scope of uncertainty. Cost plus pricing is useful for luxury commodities. However, in a perfectly competitive market, cost plus pricing may result in low demand of product as it does not consider competition. Demand-based pricing: Demand-based pricing is consumer focused and the product is priced according to the perceived value of the product to consumers. Demand pricing mainly focuses on economic condition of a market and purchasing power of consumers. However, such pricing may result in overall loss because it does not consider demand fluctuation and market competition (Mills, 2002). Competitive pricing: Competitive pricing is a very common pricing strategy where an organisation determines the price of its products based on that of its competitors’ products. Competitive pricing is advantageous for an organisation as well as for consumers. Due to this pricing strategy, companies do not get involved in price war and damage their reputation and consumers are able to pay a fair price. The potential disadvantages of competitive pricing are it does not take in consideration production cost and organisations need to work hard to attract consumers. Economy pricing: Economy pricing is the process of setting very low price for a product so that it is affordable by the mass. This pricing strategy is also known as value pricing where the indirect costs are kept minimum so that consumer get value for money in the product. However, the main disadvantage of this pricing is that the profit margin is very thin in this pricing strategy and luxury products cannot be sold at this pricing (Kotler & Armstrong, 2013). Pricing strategy for profit maximisation Apple is one of the renowned companies in the hardware and software industry and selecting an inappropriate strategy may harm its brand image and reputation. The products of the company are perceived as status symbol among many consumers. Therefore, the most suitable pricing strategy for the Apple products is cost-plus pricing. Since pricing is one of the prime aspects of marketing mix, it must complement other aspects such as product, promotion and place (Schindler, 2011). As cost plus pricing will be implemented for Apple Products, the product quality, overview and packaging should be of high standard. Apple must maintain exclusivity in its promotion and selling approaches. The promotional strategies should reflect class and be different from mass products. In addition, Apple should include innovative approach in selling and delivering the product so as to reflect premium quality in its overall service (Schindler, 2011). Pricing strategy for cost reduction For cost minimisation, Apple needs to price the product in such as manner that extra indirect cost related operational factors can be eliminated. An appropriate pricing strategy in this regard is competitive pricing where Apple will require minimise production cost to be able to compete with other market players. Competitive pricing will ensure that Apple does not compromise with product quality but innovate to reduce engineering and packaging cost. In context of promotion, the company will have to reduce its advertising cost and have to minimise its exclusivity in its selling approaches. The reason being with increase in exclusivity, the cost of a product increases (Constantinides, 2006). Increasing profit margin without compromising on consumers The decision of increasing profit margin without losing potential consumers is a very delicate situation and requires critical evaluation. The underlying rationale is that if Apple increases price of the products, a certain section of consumers will not be able to afford the product. To earn maximum profit without losing potential consumers, Apple need to price that product in such a manner that it is affordable to greater number of consumers. Alongside, it needs to reduce its production cost by eliminating and minimising nonessential costs such as packaging, promotion and distribution costs (Kotler & Armstrong, 2013). Market Research Types of market research and its benefits To analysis its consumers Apple can undertake primary as well as secondary market research. The primary market research techniques include online and face to face questionnaire survey and formal and semiformal personal interview. Questionnaire survey will enable the company access greater data which can be later interpreted and grouped as per requirement. Questionnaire survey is cost effective, specific and less time consuming in nature. On the other hand, personal interviews allow consumers to express their view point in a detailed manner. Personal interviews are generally prolonged but detailed and informative. Contrastingly, secondary market research involves accessing data that has been collected by other sources. Apple can access such data from business journals, newspapers and market research organisations (Schindler & Cooper, 2006). Importance of market research Market research is important from the perspective that it allows consumers to present their opinions and views freely and openly. Market research improves effectiveness of an organisation’s feedback mechanism as well as helps it in recognising its target market. In context of Apple, undertaking market research will inform the management about consumer requirements and preferences thereby help it in enhancing product and service quality. Additionally, market research will inform the management of Apple about consumer’s perception regarding competitors’ products (Malhotra, et al., 2000). Market research process Every market research is based on a specific objective or problem. The first step for Apple is to define the objective of market research. The objective can be assessment of sale, determination of market for new product and so on. Based on the research objective, the method and other necessary steps will be determined. The next step is to develop a set of questions based on the objective with respect to consumers, competitors and market which will help in serving the purpose of the research. The data collection method depends on the kind of information Apple need. For instance, qualitative data can be gathered through interviews while quantitative data can be collected through surveys and questionnaire. The last step is to analyse these data and draw conclusion based on findings (Schindler & Cooper, 2006). Research method for researching target audience for a new product The most suitable method for determination of target market for a new product by Apple is to conduct quantitative research. The qualitative research can be carried out through market survey. The reason for selecting market survey is to understand consumer requirement, perception about competitors’ products, expected price and expected services. Through the market survey, Apple will be able to identify its target market that is the consumers who exhibit strong purchasing motives. The quantitative data will also enable Apple to gather and present demand of the product in numeric terms which can be further used to predict sales and related profit (Schindler & Cooper, 2006; Malhotra, et al., 2000). Advertising and communication mix Elements of promotional mix Promotional mix is defined as a specific combination of various promotional methods for a specific product or group of products. A promotional mix generally includes direct marketing, advertising, personal selling, online marketing and point of purchase displays. The most suitable methods of promotion for Apple products will be online marketing and broadcast advertising. The present generation consumers are high technology savvy and are exuberant online shoppers. Therefore online marketing will be helpful in promoting the product. Broadcast advertising through television and media streaming will further help in developing product demand (G. Belch & M. Belch, 2001). Role of advertising in marketing communication mix Advertising is defined as any paid form of non-personal promotion of product (s) by a well-known sponsor. The main advantage of advertising is that it can easily communicate product message to geographically dispersed consumers. Advertising can be done through print as well as broadcast media. Advertising helps in triggering quick sale as well as building long term product image. Besides these reasons, the most important role played by advertising in marketing communication is creating demand for a product by stimulating perceived desire of consumers (G. Belch & M. Belch, 2001). Suitability of different advertising media There are primarily three categories of advertising media: print media (newspaper, magazines, catalogue and brochure), broadcast media (internet, radio and television) and outdoor media (events, billboard and banners). The products of Apple can be promoted through exclusive events, business and fashion magazines, internet and television. It has been observed that sponsoring exclusive events add leverage to brand reputation and boost demand. Additionally, promoting through magazines, internet and television will attract attention of corporate as well as household consumers. Since Apple is a luxury brand, promoting its products through billboards and banners may result in negative and flimsy publicity (G. Belch & M. Belch, 2001). Critical evaluation of elements of marketing communication mix for promoting Apple products and addressing its target consumers There are mainly five elements of marketing communication mix, namely, personal selling, direct marketing, advertising, sales promotion and public relation. Personal Selling: Personal selling involves face to face interaction between buyer and selling. It is a time consuming process but a very effective measure when the product is complicated in nature. Personal selling if used for marketing Apple products, it will enhance the product image of exclusiveness and make consumers feel privileged. However, this technique may not prove sufficiently cost effective. Direct marketing: In direct marketing, there is no role of ‘middle man’ and the marketing is done through fliers, brochure and catalogues. Direct marketing is comparatively cost effective but products such as iPod, iPhone and iPad may lose its luxurious impact on consumer’s perception. Direct marketing can also include info-graphics marketing where information regarding the products will be directly available to consumers through the internet (Schultz, 1992). Advertising: Advertising is one of the most expensive methods of marketing but has access to largest number of consumers in the form of viewers, listeners and readers. Any kind of advertisement for Apple products have to be highly innovative and should bear a touch of class and sophistication. Celebrity advertising can be considered as the most appropriate method for selling these products. Additionally, the products can be advertised in high profile business and fashion magazines for attracting attention of consumers. Sales Promotion: Sales promotion is a method of attracting consumers through promotional activities such as discount coupons, window display, samples, premiums, sweepstakes, contests and rebates. Studies suggest that consumers are highly attracted to sales promotion but every product require different promotional act. Apple products are part of a luxury brand and sales promotion techniques such as discount can affect the brand image. Therefore, the most appropriate promotional technique will be window display, contests, rewards and premium (Rossiter & Bellman, 2005). Public relation: Public relation is relatively different from other measures of marketing communication mix as it promotes public image of a brand, individual or company rather than just a product. Public relation will help in creating long term brand image of products of Apple in the mind of existing as well as potential consumers. Public relation can be considered as the most appropriate tool for marketing Apple products because the technique will not only promote the products but also the brand and the company. Packaging: Apple is a well-known brand and brand image should be reflected in every aspect of the product including packaging. The packaging can be creative as well as can be made of recyclable components. Such an approach can have positive impact on consumers’ perception (Schultz, 1992; Rossiter & Bellman, 2005). Personal selling and sales management Stages in personal selling The primary step in selling is preparation. The salesperson has to be prepared with extensive knowledge about the product as well as general queries that the buyer may ask. The salesperson has to initiate the opening stage by highlighting the organisational requirements that Mac book will meet. In the next stage, the salesperson has to identify and explain the various ways in which Mac book is better than the traditional desktops. The sales personnel must demonstrate the product and ask the management or representative of the same to experience the difference. Personal experience generally has a positive influence on consumers’ mind. The next step is effective management of objections, questions and queries. Once the queries and doubt are cleared, the final step is to close the sale and follow up. The follow up process include various after sale services (Weitz & Bradford, 1999). Role of personal selling in sales management Personal selling is an important part of product marketing. Personal selling adds personal touch in the process of marketing thereby enhance the scope of purchase. As direct interaction is involved in personal selling, it has a positive impact on consumer’s confidence and perception. Additionally, personal selling helps in clearing queries and doubts of consumer regarding a product and improves value sharing and relationship building (Weitz & Bradford, 1999). Benefits and limitations of personal selling The main advantages of the process of personal selling is it helps in creating long term relationship between consumers and company and enhances trust and confidence of the consumer. Personal selling is a useful technique when the products are complex in nature and consumer require assistance in understanding operations of the product. Through personal selling consumers can be provided more information regarding the product and credibility of the organisation can be enhanced. However, this method suffers from certain drawbacks such as time consuming, expensive method, level of productivity is comparatively less and it has limited accessibility (Goff, et al., 1997; Weitz & Bradford, 1999). E-Marketing/Internet marketing E-Marketing Technique recommended for Apple E-marketing is also known as digital marketing and it is a comparatively sophisticated method of building relationship with consumers. There are various internet based platforms through which Apple can market its new product in its potential market such as blogging, social networking sites such as Facebook and Twitter, Google advertising and webcasts. The method of using social media and blogs is also referred as info-graphics marketing. Google advertising is gaining significant importance in the present business world due to ease of access. Webcasts are streaming videos that can be uploaded by the company on YouTube regarding the new product and its utility (Urban, 2003). Benefits and drawbacks of digital market in context of the product In the world of technology based marketing, the primary advantage that Apple’s product will enjoy is that the product will not be judged by the size of the company rather by the strength of the campaign. In social media and blogs, the product will gain attention of demographically and geographically dispersed consumers within a limited budget. Google advertising and YouTube Webcasts can prove useful because the product will earn greater visibility and consumer engagement. The digital marketing strategies are not devoid of flaws and any minor mistake can cost the reputation of the product and brand. The main drawback is limited control. Apple cannot have complete control on the online advertisements. Furthermore, consumer criticism regarding the product will be accessible to mass audience (Urban, 2003; Wertime & Fenwick, 2011). Effectiveness of internet marketing over other broadcasting media It is expected that online marketing will be more effective than that through television and radio for Apple’s product because consumers are becoming increasingly busy and have limited time for television and radio. With increasing usage of mobile devices, events, shows, TV series and news can watched and read about in the internet. Thus, internet marketing will add greater exposure for the product as consumer surf the internet. In addition, internet acts as a great source of information as different consumers can upload their viewpoints. There internet can be a source of virtual word-of-mouth marketing (Peterson, Balasubramanian & Bronnenberg, 1997). Brand management and new product development Role and parameters of brand management in Apple Brand management is the process of maintaining, enhancing and upholding a branding so as to generate positive outcome in terms of sales from the brand’s reputation and position in the market. It has been observed that due to high brand value of Apple, its products are easily accepted among consumers. It is the brand value of the company that has resulted in positioning of Apple products as luxury commodities. Apple being a reputed brand, the name signifies quality, premium pricing, innovation, differentiated product and legal protection to consumers as well as distributers (Keller, Parameswaran & Jacob, 2011). Branding strategies of Apple Branding strategies or decisions can be of three kinds, namely, brand repositioning, multi-branding and own label branding. Apple has always following own label branding strategy, where the products are sold through one name, that is, Apple. The main advantage of this strategy is that superior performance of products not only enhances the brand name but also that of the company. Moreover, aggregate performance of all products sometime covers for inefficiency of a single product (Keller, Parameswaran & Jacob, 2011). Challenges faced by NPD team in Apple The gadget and technology market is innovative but it is also saturating gradually, as a result, competition is increasing rapidly. Apple’s NPD team may face problem related to imminent launch of similar products. Time has become a prime factor in the present competitive era, if Apple is slightly late in its production and launch, some other company may take away its market share. Another important challenge is market potential because the product that the company is about to launch may not be accepted by the market due to reasons such as high price, technological complexity and inexpensive substitutes. The other challenges include appropriate pricing, stock maintenance and anticipating sales (Urban & Hauser, 1993). Reasons behind Apple’s success The reason of Apple being a successful brand depends primarily on the products and to some extent on its marketing. It has been ascertained that Apple is generally tagged as equivalent to innovation. The company undertakes very limited marketing for its products and Apple became popular more because of word of mouth marketing. The product development team has a great role in making the successful. Studies suggest that the products primarily created with a vision that it would be used by creators and not just buyers. The quality and performance of Apple products has helped in building brand loyalty. Additionally, the product features are very innovative yet simple to operate which has further contributed towards its brand equity (Keller, Parameswaran & Jacob, 2011; Apple, 2014). Customer relationship management CRM strategy Customer relationship management can be undertaken by Apple by developing cloud based software that will be accessible to sale personnel from any location. The sales force needs to upload their client database in the cloud from where preferred customers can be rewarded through loyalty points and customer queries and services can be handled easily. In addition, the salespersons will be able to have frequent interaction with the consumers regarding the products, due services and feedback using the cloud database (Payne & Frow, 2005). Functions of retailing for Apple From perspective of a consumer, retailer is responsible for delivering the product at a particular place and time in exchange of payment. In retailing, retailers are responsible for holding stock of products so that transportation cost of the product can be minimised and consumers are provided with greater options in terms of colour, memory and product variety. The retailers are also responsible for conveying product knowledge to consumers and product recommendation for enhancing brand loyalty (Davies, 2012). Challenges in dealership network Apple is a globalised brand and has heterogeneous demand level at different location. Heterogeneity in demand has caused major problem for dealers and distributors as stock management has become difficult. In certain location, dealers faced problem with product selling and high cost of stock accumulation. Contrastingly, in many locations dealers were out of stock due to heavy sales. One of the solutions to deal with this problem is integrated supply chain that is fast and flexible. Moreover, Apple can sell its products online so that distribution issues can be minimised (Davies, 2012). Critical analysis of concepts of CRM and its benefits to Apple The prime aspects of CRM are credibility, satisfaction, value addition and commitment. When imbibed, these factors will enhance a consumer’s brand loyalty towards Apple’s products. By having an appropriate CRM system, the company can measure consumer loyalty and reward preferred consumers. Additionally, having a well defined database will help the company to provide better service to consumers. Integrated CRM enables continuous interaction among salespersons and buyers, thereby enhances credibility and commitment level of the brand (Reinartz, Krafft & Hoyer, 2004). Strategy to minimise price sensitivity In Apple, for enhancing profit margin overall cost reduction is very important. Apple not only invests in its core products but also in augmented services that are provided with the product. Since manufacturing cost reduction implies quality compromise, Apple should reduce its indirect cost such as distribution and packaging costs. Generally, recyclable materials are less costly, which can be used for packaging. Additionally, the company can reduce number of middlemen in the distribution process which will further reduce operational cost. To convince the price sensitive consumers, the company have to demonstrate them the superiority of its products to that of competitors. It also has to convince consumers logically that they deserve to be a part of brand such as apple that speaks quality and innovation (Rossiter & Bellman, 2005; Payne & Frow, 2005). 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