Apple Marketing - Case Study Example

Apple Marketing Name Institution Date Table of Contents Running Head: APPLE MARKETING 1 Apple Marketing 1 Table of Contents 1 APPLE MARKETING 19 2 Apple Marketing 2 Introduction 2 Developing Marketing Strategies and Plans 3 Creating Long-Term Loyalty Relationships 5 Analyzing consumer markets 7 Identifying market segments 8 Crafting the brand position 9 Developing Pricing Strategies and Programs 12 Designing and Managing Integrated Marketing Channel 14 Conclusion 15 Reference 16 Apple Marketing Introduction Organizational marketing is becoming essential for organizations to realize sales. Consumer satisfaction and corporate social responsibility are marketing strategies by default. Effective marketing requires that plans and strategies are put in place. According to Pophal (2009), information within an organization is used in developing a marketing plan. This includes information from all markets that the organization is targeting and expected sales in the given markets, including the external factors that affect the organization such as demographic changes. Organization operations target consumers in order to realize profits. Developing Marketing Strategies and Plans Apple Company observes the SWOT marketing strategy through its BCG matrix. SWOT analysis helps the organization to acquire information that enables it to determine its strengths and weaknesses, the opportunities that are open for it to venture, and tactics of venturing in to viable opportunities (Ranchhod & Gurau, 2007). The BCG matrix comprises of Question marks, Star, Cash cows and Dogs. Apple’s BCG matrix strategic business units (SBU) comprises of: iPod iTunes iPod iTunes iPhone iPad iPhone iPad Mac Mac Apple have Mac software and Mac Os X in the question mark category which shows the potential of the company to either achieve market share or deteriorate to the dog category. The question mark category indicates that the product is growing rapidly and therefore consuming a lot of cash. However, they do not generate a lot of cash since the market share is low. If it gains market share, it becomes a star and finally a cash cow, if not, it deteriorates to a dog. Current statistics of the Mac product indicate that rate of growth is high, but relative market share is low. The rate of growth for Mac software product is 32% and 0.01 market share. Mac Os X has a growth rate of 31.7% and 0.09 market share. Because of the low market share, the products consume more cash than they create. This low market share is as a result of the supremacy of Microsoft in the Operations System market. Continued low market share levels might require that Apple divert from computer business and concentrate on Star products. This is however unreasonable since diverting from Mac OS X and Mac software might affect the Star and Cash Cow products because of the products work together and the results can not be obtained without the computer business. The Star category of the BCG matrix constitutes of the IPad SBU and iPhones. The iPad was Apple’s digital extension invention January 2010. The product offers internet connectivity through Wi-Fi and on the move 3G potential. It is a touch screen with no keyboard, resembling iPhones but of a bigger size. The products need more investment since opportunities for the products are many and viable in the market which encourages growth. Their market share is high and the industry is growing. Growth rate for iPads is currently at 28% and 485 for iPhones. The market share of star products is above their competitor products, making them the market leaders. iPad’s market share is more than its closest rival Scandisk by 60%. Although Apple’s iPhones are not market leaders, it is slightly below its closest competitor by 13%. iPhones have 28% market share, while its closest competitor Blackberry RIM manufacturer has 41%. Apple therefore is a threat to its competitor as it posses challenge with its relative market share proportion that is significant. Both products are vital for the long-term success of the company. The dog category of the BCG matrix carries the Apple’s Macs since the company is not a market leader in this market segment. The product has an irrelevant percentage of the available market shares. Chances of capturing more market shares are also limited in case the company intends to make further investments in the market segment to develop the product. The product break-evens when its costs and benefits are compared. The iTunes digital downloading software fall under the Cash Cow category in the matrix. The company is the market leader in this market segment. iTunes have a market share of 82%, exceeding the market share of its closest rival by 79%. Napster, which is the closest rival, has 3% relative market share. The significant difference in the market share indicates that Apple is outstanding in the market segment. iTunes is a stable product, which is also mature and does not require the company to strongly invest in it to develop. iTunes cash flow is necessary for Apple company to provide for question mark products. Creating Long-Term Loyalty Relationships Apple Company aims at creating long-term loyalty and relationships with customers. It has a value proposition that focuses more on its greatness as a company rather than its bigness. The company focuses on the changing needs of the customers and strategizes to meet these needs. Apple aims at delivering its customer’s satisfaction. They have the ability of delivering high quality to its consumers. Ashcroft, in the 2000-2010 Apple Inc Case Study registers that the company is devoted to delivering the best communicating exposure to its consumers through individual computing, movable music and mobile gadgets. He further states that the company has the ability to produce new and unique products to its customers which are easy to use. Steve jobs, founder of Apple Inc believed in greatness and simplicity. This reflects on the products he founded. Apple continually invests on research and development which is a vital strategy for the development and improving innovative products and embracing o new technologies. The company focuses on maintaining customer loyalty as one of the company’s strategies. Apple Company invests in research; this is to determine the needs of its customers and to seek to understand them. The company understands that its customers need more personal computers devices. In the 200-2009 report, Ashcroft states that expanding distribution networks is among the company’s strategies to closely reach its potential consumers and provide them high quality services, both during and after sale. According to Ranchhod & Gurau (2007), existing customers serve as great referrals to new potential customers. Through word of mouth form the existing clients, the company’s reputation spreads. If customers are treated right and provided with excellent products, a positive reputation is spread to attract more clients. The after sale services and high quality products maintains Apple consumers’ loyalty to the company. Customer loyalty means that the customers will stick with the producer through competition, by purchasing their product, however, these consumers require the producer to be also committed (Bhote, 2010). Analyzing consumer markets Apple Company is interested in analyzing its performance in the consumer market. Ashcroft states that the company sells to consumers, businesses, education, enterprise, government and creative customers. An organization can only determine the target consumers of its products if it conducts market analysis. The company identified consumer market segments that it sells in as high-end consumers, education, business, and creative professionals. An analysis of the market in 2000 indicated that the sales of the company hit the rock. Sales dropped by 33%, from 2000 sale of $ 8billion to $ 5.7 billion and the company recorded a $344m operating loss, an equivalent of 6% sales. Power Mac Sales dropped by 35% and 76% of the sales were made to industrial and commercial sectors. Students seamed to have the most of consumer exposure, contributing 15% of revenues. The AB premium and advanced consumer market also constituted the bracket of consumer exposure. The analysis enabled the company to understand the product features that consumers need most in their products. They settled on music and shifted from video and digital cameras. The music sector was advancing with time and consumers shifted their interests from older music storage systems. By 2002, the consumer market based their choices on design of product, its battery life, capacity and download facility. iPod increased the company’s market share to 33% and to 64% in 2003. 2004 marked 82% of the company’s hard drive market and in 2008; it took over the U.S market by 75%. Most consumers of the advanced products are consumed more by the middle age clients. Vascellero (2012) reported that in May 2011, a research for Apple product was done for consumers in a number of countries concerning their reasons for buying iPhones. In the United States and China, 54% of the respondents replied by saying that they trust Apple brand. 67% of China respondents stated that they bought iPhones because of their physical appearance and make. The countries with most respondents included U.K, Southern Korea, Japan and Germany. Most respondents, 47% in South Korea stated that the device has greater availability in terms of transferring music to other devices. 48% respondents stated that the product was comfortable to hold in the hand. Identifying market segments Apple Company in the recent years has developed interests in segmentation of its markets and has done well in it. They purpose to make each product the best in the market. In the 2000-2009 Apple Inc. case study, Ashcroft explained that the company identified major consumer-based market segments that it wanted to venture in since 2000. It targeted Businesses, advanced consumer markets, creative professionals and the education sector. The market is big and a company my fail to meet its consumers’ needs without segmentation. Identifying specific consumers within the market and focusing to satisfy them makes it easier for the company. The strengths of the company’s products were on Desktop publishing, computer aided design and DTP and CAD. Most selling products in the publishing area were apple and Quark Express for newspapers and magazines. The company’s 75% sales for 2000 were in the business and professional market segments and by the year 2010, the company’s sales of 70% were in the consumer markets. The company identifies the customers’ demographic characters, usage patterns and lifestyles then draw analysis from that (Capon & Hulbert, 2007). Apple products are expensive and therefore, they provide the hardware and their software counterparts. This enables them to standout, other than using prices as a strategy for the same. The hardware software strategy gives the company in a better position in the market. Because of the expensive nature of their products, Apple targets the advanced market consumers, with high disposable income who they provide for their high-end products. Services like MobileMe are expensive and some people consider it unnecessary. An article from embracing chaos notes that, customers for high-end Apple products are extremely willing to buy the expensive unnecessary and just for fun products. Crafting the brand position Apple has experienced growth over the years in its products and the general company returns. Branding development and product extension has enabled the company maintain the leading positions in markets and its high profile in the business sector. Ashcroft in the 2000-2009 report said that the company has always depended on improving each of its products that it offers in the market. iPod is one of apple’s products that has undergone branding and effected the sales of the company. The size, simplicity, added features and costs are the major branding icons differentiating the new form initial products. Apple’s then CEO, the late Steve Jobs introduced the first iPod in 2001October, iPod classic, having a hard drive of 5 GB which held about 1000 songs (Smalling 2012 ). By 2004, iPod classic was in the third generation when the first iPod mini was introduced. The first generation mini had a 4GB capacity with USB and FireWire connectivity. 2005 marked the emergence of iPod classic fifth and sixth generation, iPod Mini second generation and emergence of two new iPod models, the iPod Nano first generation and iPod Shuffle first generation. An advanced generation of iPod Nano appeared in 2006 September with 2, 4 and 8 GB available. In the same year, second generation of iPod Nano was introduced with 1 and 2GB available. iPod Touch of 2007 was flood the market with its capacity and price segmentation. Sixth generation of iPod classic appeared the same time together with iPod Nano third generation. By 2010, iPod Nano was in its sixth generation, iPod shuffle in the fourth generation and the iPod Touch model introduced its fourth generation device. In September this year, the newest versions iPod Touch and iPod Nano models were introduced. The recent iPod Nano has 16 GB while iPod Touch has 16, 32 and 64 GB memories available. iPod Classic iPod Mini iPod Nano iPod Shuffle iPod Touch Setting Product strategy Apple Company has had to set product strategies for its products in order to meet market demand and maintain its market share. Setting a product strategy requires product innovation; differentiation and making the product stand out among its competitors in the market (McGrath, 2000). Apple’s first product strategy is selling quality products and innovativeness to improve each and every product that the company offers. The company has developed reputations and different impressions among its customers and third parties in the market. The Research and Markets body has developed reports aiming at Apple’s product strategies and its effect on the company’s products and the general development of the industry. Apple has set product strategies for its iPhone product and improved it over time to fit the market demands. The version of the product, iPhone 4 has long battery life, an extended talk time and 5 megapixels camera. So far, since the launch of the recent iPhone, the company has made 100million sales. iPhone 4 is faster than the earlier iPhone 2G and 3G. 2G allowed only WiFi, Bluetooth and GSM and was slow, while the 3G supported the same but was faster. iPhone 4 is even better and makes surfing easier, and watching YouTube videos and internet-phone downloading of information is made much easier. iPhone 4 offers a more quality product from the physical appearance and the usage for consumers. Sales for iPhones in 2007 had increased to $123million. The 2008 revenue of $1.8 billion increased by 2010 to $25billion and had taken over the United States smart phone market by 25%. This posed competition and threat to the RIM blackberry and suppressed Nokia, which was forced into a process of product development. 2010 marked high sales of iPad, iPhone iPod and other Apple’s music devices by $ 45 billion, being more than 70% of the annual sales. Success in the sales of iPhones and other apple music-oriented products is attributed to its reliability, innovativeness, company’s reputation and product features. Developing Pricing Strategies and Programs Apple is changing its pricing strategies while moving towards more complex products. Other than product designs, standards and the late Steve Jobs’ adherence principle, the company is performing very good in setting prices. Before the introduction of its iPad, apple used to stabilize its products within the intended market segment before it could set the actual high price. It introduced products and provided premium price tags for them, then develops its capacity, stabilize the supply of the product and ensure that it has infiltrated the market segment before it could increase prices. Apple’s iPad pricing strategy aimed at increasing the sales of the products by a very large margin. The company targeted at selling it to the maximum level in the market having Sony e-reader and Amazon Kindle as the major competitors. Initial sales amounted to 25million for a period of one year. Revenue from the sales amounted to $ 16 billion. This was a pricing strategy to take over the market against it competitors, and it succeeded in the strategy since it took over the market by 95% total market share, leaving its competitors with only 5% to share. Apple mantra of steady improvement of the products once again was employed to outplay the initial performance techniques in the introduction of iPad 2.0. The product had a longer battery life with bigger capacity than the initial one, it was thin in size and operated faster that the first version. Apple Company in the recent years is overdoing its rivals in setting low prices. Wingfield (2011) reported that, the company which for a long period has been known for setting very high prices and leading in the technology industry is now setting lower prices than its competitors. Many people were buying Apple’s smartphones and iPhone 4s and willing to commit to the conditions stated. They had strict conditions but cheaper prices and people preferred the cheaper Apple product than more expensive ones from Apple competitors. The company is changing its pricing strategy, from the previously known as overpricing tech-company which laid behind in competing with its competitors’ Window PCs to a price-competitive company. Markets’ analysts consider the pricing factor of Apple Company as insignificant compared to the company’s ability to attract customers apart from its loyal clients. Although the products can not be considered as being cheap, the prices are also not very high either. Apple’s competitor, Taiwanese introduced Asus in October 2011, a device that uses windows and was valued at $ 999, same as the Apple product. However, this did not beat Apple’s device. Apple’s original MacBook Air was introduced in 2008 and priced at $1,799, which attracted less buyers. In 2010, the company modified the product, by changing its size and reduced its price to $999 and for 11-inch and 13-inch screen Macbooks, they priced them at $ 1,299. Analysists relate the aggressiveness of the company in pricing to its ability in utilizing opportunities. They assume that the company is taking advantage of the benefits of high manufacturing levels to adjust the prices of its commodities which are the crucial part of the devices. This they consider as a strategy to maintain their ability of existence in the market. The company employs the strategy of early acquisition of manufacturing materials, leaving out competitors to struggle for the remaining percentatge. As a result of competing for the remainders of manufacturing materials, Apple competitors are forced to raise their prices to cater for the high costs of production. Apple prices therefore end up to be higher than its rivals’. Although market analysts consider apple pricing as strategy for more sales, others consider it as a threat to the company’s profits and likelihood to survive. Krause (2012) points out that China is currently the biggest market for smartphone. He says that there is need for Apple Company to consider pricing older iPhones at competitive levels in order for them to cope in the market. Mac Sue, in the October 2012 article emphasized that the company should look more into the lower-end and middle markets to realize higher sales. The analyst considers Apple pricing to be based on product cycle. With china smartphones as the closest competitor, sue advices that Apple considers its iPhone 3Gs in China and base on it to maximize its sales in China, while still competing on the lower end. Designing and Managing Integrated Marketing Channel Apple Company is cautious on the distribution channels that its products go through in order to reach the final consumers. The company sells its products all over the world through its own stores, which are online, through direct sales force, retail stores, third party resellers, wholesalers and value-added resellers. Apple has been focusing on developing its distribution channels. In 2001, the company introduced its first store for distribution and had developed a total of 25stores by year end. As the manufacturer, the company had big and reliable retailers such as Compuserve and Sears since it was founded. However, the late Jobs cut off retailers who were not serving well in the late years of the 90s decade. It was hectic for the company to produce and sell at the same point, and controlling its own products. Storage was a challenge, and stock of the company, also the dealers’ professionalism. The company thought of vertical incorporation of retail. It thought of establishing online stores and stores for iTunes. This called for the company’s own retailing channels to solve the distribution problem. An agreement to this effect was made with CompUSA to set aside 15% of the store as the Apple shop. However, it was not successful as the sales failed to meet the target. The shop location was poor and sales were not realized to this effect, and the unsecured retailer mind also contributed. The company through its then CEO ventured into creation of own stores near its place of operation. This marked a success of the own chain venture initiative. Trainings and workshop programs contributed to the success. There were 211 Apple stores in USA by 2009. Retails sales raised to 20% of the company’s revenue by 2011. Conclusion Marketing plans are important for a company’s increased sales. Customers’ loyalty ensures a company of returns even through high competition sessions. Companies should therefore ensure that they target their consumers’ needs. Analyzing the markets that the company serves enables it to identify any needs, satisfaction and opportunities for the company. Companies need to identify market segments that best suits them to know the targets. Crafting brand position ensures the company’s survival in the market. Strategies places companies in better positions to mark their achievements and channels ensure that the producer products reaches its target consumers. Reference Apple (2011). Apple BCG Matrix. Studymode.com. Retrieved on 7th November, 2012 from < http://www.studymode.com/essays/Apple-Bcg-Matrix-741789.html> Bhote, K.R. (2010). The Customer Loyalty Audit. 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