Apple's iPhone Launch Marketing Strategy Analysis

EI MDMK09 Borislav Kiprin iPhone Marketing Strategy Analysis Fundamentals of Marketing Management Course Work Course Leader: Maria Lopez Escorial Plovdiv, Bulgaria Phone: +359 89993700 E-Mail: bkiprin.mdmk2010@alumno.ie.edu Web: www.borislavkiprin.com

2 iPhone Marketing Strategy Analysis Table of Contents PRODUCT DESCRIPTION ................................................................................................................................ 3 MARKET AND COMPETITORS ANALYSIS ....................................................................................................... 4 TARGET, POSITIONING AND MAIN DIFFERENTIAL ATTRIBUTES .................................................................... 5 PRICE STRATEGY ............................................................................................................................................ 6 DISTRIBUTION STRATEGY ............................................................................................................................... 7 UNIQUE SELLING PROPOSITION .................................................................................................................... 8 COMMUNICATION STRATEGY AND PLAN (INCL. DIGITAL MARKETING) ................................................... 9 MAIN MEDIA PLAN ...................................................................................................................................... 10 MAIN RECOMMENDATIONS FOR SUCCESS WITH ITS SPECIFIC ACTIONS ................................................ 11 Disclaimer All information provided in this document is researched online. Relative resources are mentioned whenever found needed as a footnote. Opinions are stated on a subjective basis by the author and should not be taken as a pure truth. Should questions, comments and opinions be raised please contact me at bkiprin.mdmk2010@alumno.ie.edu. Due to space limitations, some of the findings are organized in table like formats. Those graphical contents are either based on research or represent my own perception of the events that occurred. Borislav Kiprin – IE MDMK09

3 iPhone Marketing Strategy Analysis PRODUCT DESCRIPTION For years Apple Inc. was considered as a computer manufacturer aiming at the “different, hip and imaginative” individual as a customer. With the return of Steve Jobs as a CEO of the company in21996, things changed tremendously and Apple Inc. brought matters to another level. First the company introduced a new line of successfully marketed computers and later a portable music player that made the world go mad - the iPod. And not so long after that came iPhone’s time to ravel yet another market - the mobile phone consumers’. The iPhone combines features like mobile phone, music player, small personal organizer and portable computing, all put in a small handheld with a widescreen display and multi-touch screen capability. The handheld device was introduced to the American consumer on January 9, 2007 and was made available on June 29 the same year through the AT&T mobile communications provider. Initially it was only available on signing 1 or 2 year contractual basis. The same approach is observed everywhere around the world, where Apple Inc. has decided to make the iPhone available. On the other hand "unlocked" iPhones were illegally available through cracking the software. Those are naturally not counted as official sales in the region they are sold via third/fourth parties, but rather as sales in the region they were originally purchased with a signed contract. The leader in this "illegally" sold quantity (over 2 Mn handhelds in 2007 alone) is China where a deal between Apple Inc. and China Mobile is to happen in the Q4 of year 2009. This will give Apple official access to the fastest growing and the biggest mobile handheld market in the world.1 The iPhone is fully compatible with both Apple computers and software (Mac OS & iTunes™), as well as the online application .Mac™ (now called Mobile Me). It is also "one-click-sync" ready for computers using Microsoft™ OS through the iTunes™ Windows version. iTunes' users are enjoying calendar, contacts, emails and documents synchronization, and also availability of all sorts of applications, music and video content. In that sense the iPhone is a multitasking communicational device with the ability to satisfy many individual needs in an all-in-one principle. Portable Mobile Digital Small Music iPhone Phone Camera Computer Player 1 Forecasted at 450 Mn subscribers in 2010 (Source: http://www.researchandmarkets.com/reportinfo.asp?report_id=542976 ) Borislav Kiprin – IE MDMK09

4 iPhone Marketing Strategy Analysis MARKET AND COMPETITORS ANALYSIS At the time Apple Computers recognized the need for a handheld mobile device the market players were a few and mainly business users. This explains the strong market share RIM had. Palm on its hand also was also somewhat popular but having limitations in terms of usability and software, deprived the brand from gaining significant position. Most of the devices present at the market in 2005-2007 were more featured towards personal organizing, emailing and computing, rather than web browsing or customized application usage. $600 iPhone $500 $499 $400 Blackberry Treo $300 $299 $299 BlackJack $200 $199 $100 $- Apple has clearly taken the marketing challenging strategy attacking the market leaders Blackberry and Palm. It has launched a full frontal attack right after the announcement of the iPhone in Steve Job's keynote speech in 2007's MacWorld. On the other hand Apple Inc. has always a customer-centered orientation spotting the growing market for smart phones, identifying an unrealized need for customization through phone applications and nonetheless usability. 2 IPHONE SWOT ANALYSIS STRENGTHS WEAKNESSES Style/Brand No 3G capability Rich UI High price/ High end User Base Limited distribution channels Blackberry Palm Samsung Hype Missing features •Strong •Business •New player on business acceptence the market First Mover Unsafe for corporate use? acceptence •Medium •Low premium • High Premium premium •Closed Migrate people to Apple Intense Competition • Closed •Closed software software software Port existing apps Highly developed market New social device Distribute iTunes content OPPORTUNITIES THREATS 2 http://www.appleinsider.com/articles/09/08/19/iphone_sales_predicted_to_top_80_million_by_2012.html Borislav Kiprin – IE MDMK09

5 iPhone Marketing Strategy Analysis TARGET, POSITIONING AND MAIN DIFFERENTIAL ATTRIBUTES "To create great things that change people's lives" - Apple's CEO Steve Jobs Up-and-Coming/Niche Leaders Main Differential Attributes: Apple RIM ENERGIZED BRAND STRENGTH  All-in-one Communicational Samsung Device Declining  Revolutionary Wide Touch Leaders Screen Palm  Large Storage Space New/Undeveloped Eroded/Commoditized  Customizable Software HTC Sony Ericson Availability Nokia DELL  Enhanced User Experience HP  Apple made  Browsing Speed BRAND ST ATU R E Here Apple Inc. has faced a clear category membership challenge. At the beginning of the century, the company was associated with its computers and portable music players and the delivery of a mobile handset was a new thing. To fast forward to 2009, Google Inc. is also facing the same problem when it introduced the Android OS for mobile devices. There few pillars that Apple identified as market segments to target. Please see the table below! Convenience Entertainmnent Staying Connected •Age 25-54 •Age 18-25 •Age 20-40 •Primarily Male •Mixed Gender •Primarily Female •Higher Salaries •Budgeting Skills •Secondary Ed. •Multitaskers •Trendsetters •Hold Family Dear •On-the-go •Educated •Tech Savvy •Goal Oriented •First to go home The interesting thing here is that Apple with its iPhone skipped the introductionary phase and went directly to growth stage with rapidly rising sales, growing number of competitors and building a strong awareness and interest in the mass market. This is mainly due to the satisfying unrealized needs, cool design, usability and compatibility with different computer OS. Borislav Kiprin – IE MDMK09

6 iPhone Marketing Strategy Analysis PRICE STRATEGY The iPhone was released in two different versions - 4GB and 8GB model. In the United States both required a two-year contract with Cingular (a unit of AT&T).3 As you can see below, the same approach with the difference between the 4Gb and the 8Gb models was kept in the other countries. Initially this action plan has raised numerous acts of discontent among the consumers who failed to see why the German user had to pay more that the American one, for example. In that sense Apple was going clearly for the geographical pricing module. iPhone Pricing Worldwide at Launch in 2007 4Gb 8Gb $800 $699 $695 $599 $618 $608 $559 $514 Price (USD) USA $499 $599 $600 $499 $400 Germany €399 €499 $200 UK £257 £309 $0 USA Germany UK Japan Japan ¥700004 ¥80000 5 As discussed in Market and Competition Analysis chapter the iPhone was set at a price much higher than the ones of the competitor's smartphones. Apple Inc. seems to have counted much on the new technology and the huge fan base that allowed them to adopt the maximum market skimming objective. The market research clearly showed that there is a huge potential specifically in the smartphone sector with an expected fourfold growth between year 2007 and year 2011. (See Figure1!) Another thing that the company did is create a survey and ask the customers how much they are willing to pay. At first the price was set at US $299(4GB) and $399(8GB) models.6 But Apple Inc. and AT&T decided to use a large premium in the markup pricing set up counting on the uniqueness of the product, Apple's brand perception and its loyal customer fan base. And this is fully consistent with the general Apple pricing policy observed with the computers and music players it offers on the market. There are basically two options selectable when purchasing an iPhone:  Contract based - signing up to an annual or two year contract with Apple's exclusive iPhone reseller (in US this is Cingular - an AT&T company). The contract involves monthly plan payments not only including the phone lease, but also the communication service in terms of data, texting and voice transfer rates.  Unlocked - in the event of having a plan with other than AT&T mobile provider, for example, the customer is given the option to purchase the iPhone with factory settings and use it further as he/she wishes. The price of this option naturally is set much higher. 3 Source: http://www.macworld.com/article/54769/2007/01/iphone.html 4 Source: http://www.mymapofjapan.com/blog/iphone-japan-launch-details/ 5 Currency calculations are based on 1 USD =115 JPY, 2 USD = 1 GBP, 1.40 USD= 1 EUR 6 Source: http://www.iphoneworld.ca/news/2007/02/17/iphone-299-399-pricing-research-rumors-are-true/ Borislav Kiprin – IE MDMK09

7 iPhone Marketing Strategy Analysis DISTRIBUTION STRATEGY Distribution of the iPhone is set only to exclusive mobile carriers in each country the iPhone was launched. In the United States the iPhone was launched first and then other countries followed unfortunately much later than expected. This was due mainly to the strategic decision made to partner with a mobile communication service provider. The technological time to set the parameters of the agreement was the main reason for the delay. For example the iPhone up to August 2009 is still not launched in the biggest market for mobile handhelds - China. Apple Inc. Customer •China based •Retail Distribution •Various suppliers •Regional •Logistic center warehousing •Service Plan •One assembling unit •Regional logistic and storage •Unlocked iPhone centers •Support Service Production Center Service Provider Setting Apple Inc. has chosen a hybrid distribution channel involving its online store, physical outlets and the retail points of the exclusive mobile service provider. Apple Store Apple Online Store Service Provider Outlet • Test driving the iPhone • Creating an apple account • Test driving the iPhone • Selecting the rate plan • Selecting a rate plan • Selecting the rate plan • Signing the contract • Purchasing the phone • Signing the contract • Picking up the iPhone right • Having it delivered to a • Picking up the iPhone right away preffered adress away Below you will find the main reason for Apple Inc. to choose Cingular over Sprint as an exclusive partner in the United States. Utilizing Cingular's Customer Base Uptake rate from Est. upt ake by Cingular Cingular Cingular iPod Cingular customers Cingular iPod subscribers with subscribers with customers in 1st - 58m customers in 1st iPod - 30% iPod - 17.4m year - year - 8.7m 50%(assumption) 7 7 Source: http://www.slideshare.net/rcastanon/iphone-for-latam Borislav Kiprin – IE MDMK09

8 iPhone Marketing Strategy Analysis UNIQUE SELLING PROPOSITION The unique selling point/proposition of Apple's iPhone was not in the message but rather in the different functions the handheld was offering. As usual Apple was relating the message that they offer something cool and different. Innovation Customization Personalization Connectivity Storage •Unconventional •Aps for •Sync with you •Wi-Fi •Enough to get buttons - just a everything Mac or PC •GSM you around for large touch •Infrared as long as the screen battery lasts •Bluetooth  Innovation - groundbreaking new device that allows a larger screen browsing and pop up of navigational icon set up as well as a full QWERTY keyboard when necessary.  Customization - iPhone application for virtually any desire the customer might have. this is the Long tail marketing point Apple introduced as a new concept into mobile phone industry. Customers are allowed and given the code to create apps that will allow them to execute, follow and stay in touch via third party software.8  Personalization - Simple and effortless synchronization with the address book, calendar and email client through iTunes and .Mac9 (now MobileMe) applications.  Connectivity - Stay in touch through almost all know ways10 for mobile handhelds.  Music, Photos & Video Storage - Full featured iPod like ability to store and play music up to 4Gb or 8Gb. As every Apple product, the main marketing message to the consumer is "something different, something cool, user friendly and simply Apple". There is probably no other company that contemplates such customer satisfaction and loyal brand fans. This is mainly due to the everyday maintenance of corporate and brand image as well as creating the means for self-support, should the latter be needed. Another pinpoint in their unique selling point is the utilization of iTunes to supply music, video and podcasting content as well as customization outlet for iPhone applications. So far none of the competitors has either created or offered a simple user friendly and all in one online store accessible to the consumer. 8 Visit http://www.apple.com/iphone/apps-for-iphone/ 9 A web based personal address book, calendar and email platform. 10 3G was not considered in the development stage of iPhone, since it was not a widely implemented data transfer protocol. Borislav Kiprin – IE MDMK09

9 iPhone Marketing Strategy Analysis COMMUNICATION STRATEGY AND PLAN (INCL. DIGITAL MARKETING) Apple Inc. used both the pull and the push strategy in its communication with the customer. One was the company advertising, promoting the product by itself employing the full spectrum of the marketing communication mix channels and the other is relying on the selected exclusive distributor region wise to advertise the iPhone. In that sense the customer was approached from two different sources creating differentiation from the competitors and delivering the product message with added value service or application. •PR •Blogs - Opinion Leaders & Specialized Pre Launch Strategy Sites •Sneak Peaks on R&D info •Buzz & Viral Marketing •Apple.com •Printed Media Launch Strategy •TV •Outdoor Media •Social Media •Carrier handeld advertisement •Apple.com Post Launch Strategy •Independent review Websites •Paind Online listings •Digital Campaigning Digital Marketing Strategy Break Up Social Media Email Marketing Display Ads Advertisement Blogs •A message sent to •Banner Ads •Facebook •Industry Blogs every Apple Customer •Interactive Ads •MySpace •Forums few weeks before •Discussion Boards launch Crowdsourcing & Search Engine Apple.com Opinion Leaders Online Communities Marketing •Extensive introduction •Word-of-Mouth, Apple •PPC •Handing free iPhone for to the advantages the fan club websites, Blogs •Affiliated Marketing review use of iPhone gives •Other paid listings •Supplying access to •Hosting iPhone Apps iTunes iPhone apps purchasing center section for free As you one can see Apple has employed almost all digital channels known in 2007 and making business sense to use for hosting its communicational message to the consumer and targeted audience. Borislav Kiprin – IE MDMK09

10 iPhone Marketing Strategy Analysis MAIN MEDIA PLAN It is difficult to determine which media was more important to Apple for advertising its iPhone, since the company has invested in almost every possible channel to bring the consumer to the P-O-P (Point of Purchase). The POP for iPhone was either Apple.com or the exclusive mobile carrier website or outlet store. That said signing a service contract through Apple.com is done the same way as if the consumer has done that through the carrier’s website. In 2007 Apples Advertising budget was $467 million11 and much of it was allocated specifically to market the iPhone. This ad budget was allocate through most of the available media channels enabling integrated and blended marketing campaign. The Main Media Plan looked like: Target Purchasing a mix of traditional (TV, Radio, Printed & Reaching the primary target as described on page 5 Outdoor) media and Digital Space Geographic Considerations Advertising in areas that have high concentrations of the Campaigning in the Top 25 US economic centers target consumers Reach and Frequency Reaching the target within the specified area with Targeting an often on-the-go target with media buys that everyday frequency reach consumers through modes of transportation Schedule Creating a campaign that reaches the target on a year Emphasizing on a pulsing schedule with Traditional and round basis Digital media channels Seasonality Purchasing media that heavy’s up during holiday seasons Enfassizing on media buy times during product launch to and other events drive traffic into Pointof Purchase Creative Constraints Picturing the iPhone as the number one choice among Useing innovative media buys that reach the target in smart phones their daily life Budget Data gathering, analysis and taking respective actions Using it in a way that most effectively reaches the target upon recognized CPO & CPA 11 Source: http://www.techcrunch.com/2008/11/21/yup-apples-advertising-budget-is-bigger-than-microsoft-vistas/ Borislav Kiprin – IE MDMK09

11 iPhone Marketing Strategy Analysis MAIN RECOMMENDATIONS FOR SUCCESS WITH ITS SPECIFIC ACTIONS •Simultaneous lauch of the iPhone in USA, UK, Germany, France, Italy, Spain, Russia & China Broadening the •Stock availability in the Apple's North America, European Distribution and Asian logistic centers •Better demand anticipation through research Channels •Fostering viral campaigning on diffirent video social networks (Youtubbe.com and alike) •Enabling "Share" button on Apple.com Heavier Employ of •Fostering User Generated Content advertisment & best Digital Marketing practices •Free MobileMe signup for 1 year with every iPhone purchased •Specialized workshops for corporate CTO's introducing the Promoting the iPhone as a corporate smartphone iPhone •Giving for free iPhones to Trend Setters (TV & Movie , Music and Sport stars) •Launching the iPhone at a 10% at least lower price for acquiring bigger share from competition & new comers to smart phones. Price Offering •Rebate for iTunes Store - "With the purchase of iPhone you will get 50 USD credit for your itunes account" •Introducing the same price regionally as a equivalent to the USD offer in the United States. •3G capability •Recording Video capability •Preinstall regional GPS map Improving Initial •PDF and Microsoft Officer suit faste compatibility Technological Offering •Built-in eBook reader Borislav Kiprin – IE MDMK09

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Apple's iPhone Launch Marketing Strategy Analysis

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Apple’s iPhone Launch Marketing Strategy Analysis — Document Transcript