Successful Marketing Story: Apple iPad - Case Study Example

Successful Marketing Story: Apple iPad [Name] [Course] [Name of Professor] [Date] Table of Contents Introduction …................................................................................................. 3 Description of the product: iPad …................................................................. 3 Marketing Strategies …........................................................................... 4 Comparative Analysis …............................................................................ 7 Implications of General Forces …................................................................ 11 Considerations in Establishing One's Own Business …................................ 12 References …................................................................................................ 14 Successful Marketing Story: Apple iPad Introduction Apple Inc. is considered today as one of the most admired global brands whose most popular products in the most recent past include the iPod music player, iMac desktop, iPhone, and the iPad tablet. For these recent crops of innovative products, it is said that Apple is currently enjoying its most profitable quarter with record sales and profits figures. Its unprecedented growth is attributed to numerous factors, including sound and innovative marketing strategies and its former and now deceased CEO, Steven P. Jobs. This paper then is concerned with the successful marketing story of one of Apple's key innovations – the iPad. Thus, to analyze the innovative tablet product, this paper begins by describing that led to its success. Its marketing strategy will be studied in light of an industry where there is an ever-changing trends and where consumers have shifting wants. This paper ends with a recommendation for this researcher in developing one's own business idea based on the experience of Apple in marketing its iPad product. Description of the Product: iPad After a string of successes in marketing its iPod music player to iPhone, Apple Inc. introduced its entry to the tablet computer category called the iPad in January 2010. Although tablet computers have been tried before by other companies, Apple was the first company to have successfully established tablet as a major industry with vast opportunities for growth. Just within 90 days after shipping the first iPad in April of 2010, the company was already selling its three millionth unit. As a platform geared for users' consumption of audio and visual media (e.g., books, movies, games, and web content, among others), the magazine-sized iPad is the “most advanced technology in a magical and revolutionary device,” according to Apple. The iPad's size and weight are not far with those of the latest smartphones and netbooks at around 700 grams (25 ounces) only. There are Wi-Fi and 3G mobile data connection models of the iPad and its most unique features are its multitouch display or fingerprint-resistant LCD touchscreen display with a 1024x768 pixel resolution. Storage capacity of the iPad ranges from 16GB to 64GB and up to ten hours of battery life. As for its operating system, the iPad works on the same platform used by Apple for its iPod Touch and iPhone products. Through the iOS, iPad can run its own applications, even programs developed for the iPhone that are distributed via its online App Store. The iPad tablet is managed and synced by Apple's iTunes on a personal computer via USB cable. Since the iPad is only half an inch thick (0.34 inch) and 1.5 pounds, this device can be comfortably inserted in carry-on bag. It is also hassle-free to bring an iPad when passing through the TSA security checkpoint unlike notebook computers where one have to remove the device from the case and placed in their bin for more detailed security inspection. Since the iPad is not deemed as a notebook, it can be passed through these checkpoints untouched. For its uses, the iPad tablet is versatile as it offers both business productivity and consumer entertainment. The first twelve months after launching the iPad, Apple sold up to 25 million units and chalked up to $16 billion in revenues, on top seizing 95% of the market share of its product category (Canalys 2011). Recent observations made by research firm Canalys (2011) suggest that the tablet platform introduced by Apple has inadvertently surpassed notebook and netbook shipments during the first quarter of 2011. The popularity of the iPad tablet has been strongly competiting for a share of consumer IT spending (Canalys 2011). In figures, Apple shipped 6.4 million units of iPad worldwide during the first quarter of the year or from January to March. It projected, however, that while iPad will dominate the tablet market, there will be significant changes in the market as other branded tablet will emerge coming from Acer, Asus, LG and Research in Motion (RIM). Marketing Strategies From the way Apple markets its products, it cannot be denied that its goal is to convince consumers to take a bite of its often fresh inventions or innovations one after another. This can be accounted on ensuring that Apple products are the best in its class design, integration, and ease of use. Its business strategy – witnessed since the launch of iPod, iTunes, iPhone, and now the iPad – leverages Apple's ability to consider highly design and the development of its own operating system and hardware. Its commitment has always been that of the development of software that can be deeply integrated with the hardware (Ashcroft 2010; Sarno 2011; Bradley 2010)). It earned its reputation as a leader in developing innovative and groundbreaking products through years of constantly producing products that consciously consider customer satisfaction, a quality that sets Apple apart from its rivals. Another significant development in Apple's marketing strategy is the so-called price skimming. This strategy allows a company to initially give a higher price tag to its product during the early stage of the Product Life Cycle or PLC (Kotler 2009; Sliwinska, Ranasinghe, & Kardava 2008). The intention is to cover on the costs expended during the research and development of the innovation, thus, allowing Apple to maximize profits. This tendency is likely to be observed when introducing an innovation like the iPad because factors like research and development costs of iPad, which is considered an innovation, are likely to be high (Sliwinska, Ranasinghe, & Kardava 2008). Additionally, the costs of introducing a product to the market through promotion and advertising would necessitate price skimming to allow for some return on the setup costs. Another benefit of price skimming is that Apple can continue building high-quality image for its product (Sliwinska, Ranasinghe, & Kardava 2008). As competition gets stiff, Apple can then slowly decrase prices when needed in lieu of sales reduction. According to Kotler (2004), among the strategies for price setting of new innovative products consists “in setting high initial prices to “skim” revenues layer-by-layer from the market.” This strategy was proven to be effective when Apple launched the iPad, where a big segment of its loyal customers are willing to spend even at a price premium for a product they love to have. On the contrary, by setting a lower initial price for its products, Apple would find it difficult to increase the cost of its products without risking the loss of sales volume. In a conference paper prepared by Hernandez and GuoHua (2011), they explained that innovators and early product adopter customers prefer the influence factors of value over price, as these consumers tended to affiliate price to brand empathy, status, fashion, position, and more. With Apple products' expected position, it was observed that iPad tablet's buyers are more prestige conscious than price conscious where premium price is relative to owning a luxury item (Hernandez and GuoHua 2011; Sliwinska, Ranasinghe, & Kardava 2008). In connection to this price skimming strategy, Apple is also seen interested in bringing to the masses its products, where more people can actually purchase and own tablet “right from the very start” (Ashcroft 2010). This was a departure from former practice at Apple where it would introduce a new product with a premium price tag, and then developing volume, supply and segment penetration. The more that people are using its products, not only its early adopters and brand loyalists, Apple can evolve new consumer groups into brand loyalists. This is helpful in saving on costs on publicity and promotions through of word-of-mouth marketing. Some experts contend that it may be because Apple is experimenting in marketing or to adopt a strategic eye on the competition offered by Sony and Amazon tablets (Ashcroft 2010). To make their products appeal to the masses, not only through its new pricing model, Apple is eyeing to gather business customer and entertainment both in one market (Sarno 2011; Bradley 2010). Apple has also perfected mixing the different factors of coming up with exceptional products, great style and design, sound strategy, innovative marketing, and enticing communication. The marketing mix combined with its competitive strategy spell for Apple excellent customer relationsihp and brand loyalty (Hernandez and GuoHua 2011). Some experts also consider Apple's approach of providing consistency of experience beneficial to its consumers, starting with young consumers. Apple ensures that even kids can operate an iPod Touch, which is essential in preparing them to need a mobile phone or an iPad that provides the same interface and experience they are already used to when they grew up (Hernandez and GuoHua 2011). To provide the best user experience but also to maintain its proprietary nature and domineering business model, Apple makes sure that it controls every aspect of its products, namely hardware, software, distribution and even third-party apps (Hernandez and GuoHua 2011). Through its marketing strategy, Apple has always generated high interest for its products even before a new product will be launched. Its being secretive during the development stage is also helpful in generating free publicity for the company, which also contributes in the company's marketing efforts. From these important factors as part of its strategy – Apple's technology and marketing – it is evident how Apple's strategy is working in its favor. Not to be discounted is how Apple is also able to provide attention to ensuring unparalleled customer experience and value added services. While Apple gives intense focus to its marketing mix, it also is mindful of its core competency (citation needed). By piecing together all the important factors of its marketing strategies for iPad, Apple is eminently focusing its resources on the best opportunities that if find or envision would allow it to improve on sales and achieve a sustainable competitive advantage. In sum, the marketing strategy zeroed in on the business concept that customer satisfaction can be used as a main goal. Comparative Analysis: Other Tablet Product's Marketing Strategies Although the tablet electronic device is relatively new on the market, it has some competitors contending for market share and leadership. Among these competitors are HP, Samsung, Research in Motion, Dell, Barnes & Nobles, and Amazon. Given Apple's competitive advantage and marketing strategies, it is said that iPad can beat out the competition against other tablet manufacturers through its approach in taking a popular consumer device and adding business functionality rather than taking a business device and trying to add entertainment (Sarno 2011). Although fundamentally not a surefire replacement of notebook computers, the iPad is still its own unique device. This means that even business professionals while owning an iPad can still keep their desktop or notebook – on account that an iPad is capable of performing up to 90 percent of the same functions as the notebook, but with even greater mobility and convenience. In terms of specifications, the iPad's decision to make to 10” its screen size, as against other tablet platform's 7” screens, is fundamentally a sound and logical design and functional decision to allow consumers to shift entertainment to productivity works using the iPad. It can be added also that evidence exists that the time consumers spend watching video on different devices is directly proportional to screen size, in which a higher or bigger screen can provide the better user experience than its peers (Sarno 2011; Bradley 2010). One of the biggest rival to date for the iPad is Amazon's Kindle Fire, which launched in November 2011. Contrary to the Apple business model in marketing the iPad, Kindle Fire has the lowest starting price for any tablet in the market with US$199 as against the iPad's US$499 (Sarno, 2011). But these two rivals are similar in that they are both connected to large, best-branded online entertainment giants (Sarno 2011). Apple prides its iTunes for music and movies and iBookstore for books. Amazon's music store, on the other hand, and thousands of TV shows and movies are its content drivers. The competitors of these two rivals like Motorola's Xoom, Samsung's Galaxy Tab, and the T-Mobile SpringBoard, meanwhile, are not connected to the big, popular stores that Apple and Amazon have. Items Issue Analysis Impact Threat of new entrant Economies of Scale: Need a substantial number of assets (Head Office, Factories, Retail Outlets) However, the internet has no scale therefore room is available and businesses wont need head offices, factories and retail outlets to coordinate Brand Identity: Vary with products and offer a range under each category. E.g. Apple Computers Make products compatible with online services and the latest trends Capital Requirement: Need millions of dollars to make new products HR and staffing costs Adapting to change Marketing costs to get the product in consumers heads Absolute Cost Advantages: Existing companies like Apple and Samsung have had the production experience and opportunities to polish practices and procedures, which may be hard for new entrants to mimic. Access To Distribution: There is no reason why new entrants cant distribute their product to the market. Expected Retaliation: Capital they posses, well known businesses such as Apple can cut prices to drive off others Would reproduce limited editions or a different version of an already known product Overall: Low – Medium Low High High High Low Medium Bargaining power of suppliers Differentiation of Inputs: Parts (microchips, screens, chemistry to remove toxic carbons) Labour (engineers) Presence of Substitute Inputs: The use of specific parts that suppliers make is crucial to the overall performance. The final product must be reliable and durable. Supplier Concentration (compared to industry): The number of suppliers are limited so they have some power Threat of Forward Integration: A supplier will need huge amounts of capital for this to happen along with economies of scale, probably make enough money outsourcing for multi-media technology solutions retail companies Overall – Medium Medium Medium Medium Low Bargaining power of buyers Differentiation of Outputs: Customer service Price Products Convenience Switching Costs of Buyers: - Not really applicable to majority of buyers. Involves business customers as they choose to implement a particular computer through the entire industry. Business owners would only sign into an agreement if there are discounted price or something that will contribute to companies' interest. Locking customers into telephone contracts exists between the phone company and the individual. Apple would have a contractual relationship with phone companies to sell their products but switching costs wouldn’t apply. Presence of Substitute Outputs: Computers (Dell, HP, Acer, Apple) Music Players (Zune, X series, SanDisk, iRiver) Mobile Phones (Nokia, Sony Ericsson, Samsung, Apple) Buyer Concentration (relative to industry): There isn’t a small number of buyers, buyers have no power Cost Relative to Total Buyers Purchases: Purchases by buyers play a part in this industry; buyer has the power because they can determine how much their willing to pay for a specific small technology appliances, providing there is a substitute. Buyer Information about the industry output: Most buyers will know what they’re buying, what the product can do and would have researched on a competitor’s similar product. Threat of Backward Integration: When a buyer becomes a manufacturer of products that the multi-media technology solutions Industry sells. Overall – Medium High Low High Medium Medium High Low Intensity of Industry rivalry Product Difference: Small multi-media technology solutions industry companies have various products including mobile phones, laptops and mp3 players. Apart from the mp3 category, other small technology areas have competitors in their fields. Rivalry is fierce. Brand Identity: Is very significant in the multi-media technology solutions industry as most consumers will trust the brands they have previously bought of that have been recommended. Switching Costs: Very easy for buyers to switch companies. Rivalry high. Concentration & Balance: There are many organisations in the small multi-media technology solutions industry including Apple, Dell, Nokia and Samsung therefore the rivalry is high. Informational Complexity: - Buyers know the products that the industry sells so informational complexity doesn’t exist. Overall: High High Medium High High High Implications of General Forces Threats. As with its competitors, the external environment poses some threats to the way Apple does its business, even with its launch of the iPad. These include increasing government and public pressure about accusations that the company is employing unfair business practice, such as discouraging music labels from participating in a competitors' promotional strategies. Economically, the rising interest rates and fluctuating dollar may also impact Apple's capacity to maintain a positive credit risk standing. In turn, any economic downturn and reaction from the Feds may affect long-term growth of Apple and impact its ability to pay long-term debts and obligations . Opportunities. Apple remains regionally-based, particularly on the basis of where it derives its revenues – that are, US-based. For a company competing in a strong industry and with a strategy to be the best provider of innovative products internationally, Apple must persistently penetrate other bigger nations of the world with great population level. For its part, Apple must break the culture barriers of these countries. With a unique brand recognition, Apple is well-positioned to take advantage from higher market share. In addition, with Apple's strategy to make its products cheaper, access to Internet is becoming more easier. Since newer products of Apple are packaged to be more Internet-based, the company can take advantage of these and make its products more useful to all, such as iPad tablets, iPod touch, iPhone, and more. Weaknesses. Apple products are viewed as elitist or only for the rich and affluent, and this can be considered one of the weaknesses of Apple. Another is the issue of ease of use. Though it may seem like strength, but in this case, the notion about ease of use have created an image problem for Apple with some perceiving its products as only toys and not utilities. The price of Apple product is also one of its weaknesses for some. Based from these pieces of analysis, it can be said that Apple has made a name for itself through its innovative products and services which helped it capture sizeable market share in various sectors of personal computer, mobile phone, tablet computers, and personal music player. This can be considered an opportunity that will allow it to pursue more product developments. Considerations in Establishing One's Own Business There are good lessons that can be used or adopted from our subject case, the marketing of Apple's iPad, when formulating a business strategy. First, coming up with a sound and competitive marketing strategy must be sustainainable that would ensure not a one-hit wonder but long-term growth and profitability. However, profitability must also not immediately be a priority concern among business owners but to first allow the product to grow its brand until trust and loyalty from its customers are established. When customers are loyal and that they perceive the product or the company with credibility and reputation, profits will eventually grow. Second, marketing strategies must be accompanied by bold investments in product innovation and technology through research and development. Investments in research and development seems not a high priority at Apple because of the very small percentage of its capital investment in research and development. By constantly innovating and producing innovative or products that users will love and soon adopt, marketing the products will become secondary priority. Through these efforts, customer wants and needs are studied more thoroughly, including research on products that will be useful in other territories or countries outside the country of origin of the products to be introuced. Third, one very best aspect that Apple is good at is on how it has consistently been breaking new ground or category, even though it was only rehashing or remaking a former product. Apple has a miraculous way of changing the game and for anyone hoping to emulate this aspect, this is an interesting lesson to learn. Amazon has also been following or breaking its own ground similar with Apple with its launch of the Kindle e-readers. Hence, it is not impossible that other emergent businesses can follow suit Fourth, as a marketing strategy, price skimming is also a good example of sound marketing strategy that can be applied and can be very useful for anyone planning to break a new category. References Ashcroft, J., 2010. Apple in the digital age from the iPod to the iPad: Apple Inc Case Study (2000-2010). [Online] Available at [Accessed 23 November 2011]. Bradley, T., 2010. iPad Marketing 101 All Business Professionals are Consumers, PCWorld.com. [online] (Last updated 9 April 2010) Available at [Accessed on 25 November 2011] ] Canalys Research, 2011. Worldwide PC market up 7% as pads fuel growth, Canalys Research. [Online] (Last updated 3 April 2011) Available at [Accessed on 23 November 2011]. Hernandez, J.A., GuoHua, Y., 2011. Is it just technology or other else behind Apple? Study of marketing strategy for iPad Launching as its new Innovative Product, 2nd International Conference on Business and Economic (2nd ICBER 2011) Proceeding. [online] (Last updated 2011) Available at [Accessed on 23 November 2011]. Kotler, P 2009, Kotler on Marketing: How to Create, Win, and Dominate Markets, New York: Free Press. Mittan, S. R., 2010. Apple: A Case Study Analysis, Western Michigan University. [Online] (Last updated 28 January 2010) Available at [Accessed on 23 November 2011]. Sarno, D., 2011. How do other tablets compare against iPad, Kindle, and Nook?, Los Angeles Times. [online] (Last updated 27 November 2011) Available at [Accessed on 25 November 2011]. Sliwinska, D, Ranasinghe, J, and Kardava, I., 2008. Apple's Pricing Strategy. Paris-X Nanterre: Affaires Internationales Et Negociation Interculturelle, Affaires Internationales Et Negociation Interculturelle. [online] (Last updated 2008) Available on [Accessed on 23 November 2011]. Read More