Description
Describes about targeting, positioning, promotional strategies, SWOT, Porter five forces model for apple iPhone.
Apple iPhone
TABLE OF CONTENTS
INTRODUCTION................................................................................................................................... COMPANY BACKGROUND................................................................................................................ THE MARKET....................................................................................................................................... TARGET CUSTOMER.......................................................................................................................... CUSTOMER EXPECTATIONS AND FEEDBACK............................................................................ POSITIONING AND MARKETING STRATEGIES............................................................................ a. b. c. d. Product............................................................................................................................. Pricing.............................................................................................................................. Positioning....................................................................................................................... Promotion........................................................................................................................
COMPETITION ANALYSIS........................................................................................................ STRATEGIES TO FIGHT COMPETITION.......................................................................................... a. SWOT analysis.......................................................................................................................... b. Product Differentiation............................................................................................................. c. Value addition to Customers................................................................................................... CONCLUSION...................................................................................................................................... REFERENCES...................................................................................................................................... APPENDIX Questionnaire................................................................................................................................. Customer Response..........................................................................................................................
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INTRODUCTION
The iPhone is an internet-connected multimedia smart-phone designed and marketed by Apple Inc. with a flush multi-touch screen and a minimal hardware interface. The device combines an iPod, a tablet PC, a digital camera and a cellular phone with a virtual keyboard rendered on the touch screen. It offers a multitude of functions like those of a camera phone and portable media player (equivalent to the iPod), text messaging, visual voicemail and Internet services like e-mail, web browsing, and local Wi-Fi connectivity.
The birth of the iPhone began when Apple CEO, Steve Jobs directed his engineers to investigate touch screens which were already used in Apple‘s Mac Notebook. Apple created iPhone during its collaboration with AT&T Mobility at an estimated development cost of US$150 million. The touch user interface and the sleek and beautiful design by Jonathan Ive and his team made it a true masterpiece of technology and design and brought about a complete change in the paradigm in the mobile phone market. With its launch in USA on June 29, 2007, iPhone was named as the ?Invention of the year 2007’ by Time magazine. On the day of its launch, Apple sold 2, 70,000 iPhones in the first 30 hours itself. It was subsequently made available in five other countries namely, Republic of Ireland, UK, France, Germany, and Austria. On July 11, 2008, Apple released the iPhone 3G in twenty-two countries, including the original six. On October 21, 2008 Apple announced whopping sales of 6.89 million iPhone in the fourth quarter of 2008, totalling 13 million iPhones to date. They also noted that they became the third largest mobile phone manufacturer in terms of revenue after Nokia and Samsung.
COMPANY BACKGROUND:
Apple Inc., formerly Apple Computer, Inc., is an American multinational corporation with a focus on innovating, designing and manufacturing consumer electronics and software products. Established in Cupertino, California on April 1, 1976 and incorporated January 3,
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1977, the company was called "Apple Computer, Inc." for its first 30 years, but dropped the word "Computer" on January 9, 2007 to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple has about 28,000 employees worldwide and had worldwide annual sales of US$24 billion in its fiscal year ending September 29, 2007. The company's best-known hardware products include the Macintosh line of personal computers, the iPod line of portable media players, and the iPhone. Apple's software products include the Mac OS X operating system, iTunes media browser, the iLife suite of multimedia and creativity software, and Final Cut Studio, a suite of professional audio- and film-industry software products. The company operates more than 200 retail stores in eight countries and an online store where hardware and software products are sold. Due to several reasons like philosophy of comprehensive aesthetic design to distinctive advertising campaigns, Apple has been able to establish a unique reputation in the consumer electronics industry with a customer base that is devoted to the company and its brand, particularly in the United States. It was named as ?the most admired company‘ in the United States by Fortune magazine in 2007.
THE MARKET:
The mobile handset market is a highly volatile and constantly changing market with several players entering the market each year. The companies fight it out not only with their promotional campaigns, schemes and other marketing strategies but also through creating value for the consumers in the form of product innovation and differentiation. With mobiles becoming a vital aspect of our lives today, the companies in the market constantly endeavour to bring in products that are not only meant for making/accepting calls but which also provide a host of modern technological services like Bluetooth, music players, touch screen etc.
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The major players in the market which pose a threat to iPhone are Nokia N95, Blackberry‘s ?Curve‘, Samsung‘s ?Upstage‘ and other smaller players like HTC ?Touch‘ and Helio‘s ?Ocean‘. Currently, the market for high-end phones like the Apple iPhone is small. Few people want Internet, video, and PDA features in one device because of the high price. The smart phone market is still relatively small compared with general phone market. The market will rapidly increase in coming years due to lower prices and greater power. COMPARISON WITH COMPETITORS:
Feature Cost Apple iPhone
$500 (4GB) or $600 (8GB) with a two-year contract AT&T
HTC Touch
$600 for an unlocked phone from Dynamism
Helio Ocean
$295 from Helio
Nokia N95
$750 for an unlocked phone from Nokia
Blackberry Curve
$300 with a two-year contract; $200 after mail-in rebate AT&T
Samsung Upstage
$80 with a two-year contract
Service provider Display
Unlocked
3.5 inches, 320 by 480 pixels; landscape or portrait layout
2.8 inches, 240 by 320 pixels; portrait or landscape layout
Helio (Sprint network) 2.4 inches, 240 by 320 pixels; landscape or portrait layout
Unlocked
Sprint
2.6 inches, 240 by 320 pixels; portrait or landscape layout
2.5 inches, 240 by 320 pixels
Dimensions (inches) Controls
4.5 by 2.4 by 0.46 Touch screen, software keyboard
3.9 by 2.3 by 0.55 Touch screen, software keyboard
4.33 by 2.2 by 0.86 Navigation pad, slideout keyboard, slide-out phone keypad 200MB 5.1 hours
Built-in memory Battery life (manufactur er's talk-time rating) Music formats
4GB or 8GB 8 hours
64MB 5 hours
3.9 by 2.1 by 0.83 Navigation pad, slideout phone keypad, slide-out multimedia controls; no keyboard 160MB 4 hours
4.2 by 2.4 by 0.6 Keyboard, navigation pad, trackball
Phone display: 1.4 inches, 176 by 65 pixels Media display: 2.1 inches, 176 by 220 pixels 4.1 by 1.7 by 0.4 Phone side: phone keypad Media side: navigationa l pad; no keyboard 70MB 2.5 hours (6.3 with extended battery) AAC, MP3
64MB 4 hours
MP3, AAC, Audible, Apple Lossless, .wav
AAC, AAC+, eAAC+, MP3, WMA, .wav
MP3, AAC, WMA
MP3, AAC, AAC+, eAAC+, WMA
AAC, AAC+, WMA, MP3
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Operating system
OS X
Windows Mobile
Custom
Symbian
BlackBerry OS
Custom
TARGET CUSTOMER:
Apple targets the niche customer who values innovation and seeks to buy something ?Unique‘. Cost is not an issue with these consumers. What matters to them is how tech-savvy the product is, what facilities and software are provided and the ?experience‘ in general. These are the people who love to express their individuality and uniqueness which is accurately symbolized by the ?i‘ of the iPhone.
Apples target segments consist of professionals, students, corporate users, entrepreneurs, and health care workers between the age group of 20-40 having a wealthy background. About 75% of
them are existing Apple customers.
In order to target the mainstream users beyond the youthful technophiles, iPhone has announced support for Microsoft Exchange so as to get more of the business users on board. Majority of its users are the ones who use the applications like web browsers, e-mailing, net meetings etc on a frequent basis. VALUE PROPOSITION
Intended for style-conscious cell phone consumers who would like to browse the Internet and enjoy entertainment to-go, the iPhone is a smart phone that combines a web browser, email, iPod and personal computer into a single, fashionable, easy-to-use device.
CUSTOMER EXPECTATIONS AND FEEDBACK:
After collecting the data from the customers, we conclude that even though the pricing for cell phones is decreasing however, it has not altered the demand for iPhone since the primary reason the consumer‘s are shopping for the iPhone is driven not by cost but by style, internet accessibility, cool features and entertainment.
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The expectations of the customers and their feedback obtained through our survey can be better understood with the help of Maslow’s ‘Hierarchy of Needs’ Model as follows: (a) Physiological needs: It forms the basic reason since everyone needs a mobile to keep in touch and communicate effectively.
(b) Safety needs- Plays important role especially for parents of youngsters. These parents are happy to introduce this gadget in the family so as to ensure keeping track about their children‘s whereabouts and safety. (c) Love and belongingness needs- applicable for the grown up teens or adults to share videos, ringtones, music, text messages to share all the new happenings and latest activities and gossips in their friend circles
(d) Self esteem- since Apple plans to sell only 1% or 10 million by end of 2008, there is brand value and identity created in using this iPhone and a greater self-esteem and individuality within those who possess the device. (e) Self actualization needs – There is a high personal growth attained in using this gadget like increased information and knowledge for those who are not motivated reading newspapers or books, latest entertainment happenings in the neighbourhood etc. Those who are investors would like to run their business interactively and access anywhere without accessing the home-base (PCs) etc (Please refer to Appendix on ?Customer Response‘ for an in-depth study of customer‘s response to iPhone and its services)
POSITIONING AND MARKETING STRATEGIES:
1.
THE PRODUCT
Apple Inc has the legacy of having a Product Innovation model and has created a new segment in mobiles in order to distinguish itself from the competitors. The iPhone gadget is marvelous in terms of design and usage and has created a totally new experience that the users had never experienced.
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The iPhone merges three gadgets into one: an iPod with touch controls, internet communication device, and of course a mobile phone. It is a revolutionary new mobile phone that allows making a call by simply tapping a name or number in the address book or a call log. It allows selecting and listening to voicemail messages in any order – just like email.
iPhone has the most revolutionary interface and allows controlling everything using only fingers. Its soft keyboard allows sending SMS in multiple sessions. iPhone uses OS X operating system and allows multi-tasking. The accelerometer sensors automatically change the contents of the display; the proximity and ambient light sensors make the iPhone a power saving device. Also iPhone has a 2 Mega Pixel camera, advance photo management, a 3.5 inches wide screen display that allows scroll through, 5 hours of battery life for talk or video, with a full 16 hours in music mode, etc.
Unique Features:
Visual Voice Mail- Perhaps the most talked about feature, visual voice mail easily lets you play your messages out of order with more detail about who called and when. Eg: Features like voice-to-text, or voicemail-to-email using Callwave and Gotvoice. Browser- One of its key features which lets you surf the ?real? internet through a zoom and scan interface. Eg: OperaMini 4 Beta Email- A rich HTML email interface including attachment support. Maps- iPhone is featuring a version of Google Maps that takes advantage of the touch-screen interface. Music - Apple is claiming the iPhone is the best iPod to date.
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Widgets- To get information like weather and stock quotes through widgets.
2. PRICING Apple‘s pricing intentions lie in its desire to maintain the high level of perceived value iPods currently enjoy in consumer minds. By setting a high price point, Apple is adopting a skimming strategy, whereby it initially targets a narrow segment of the market with a high willingness-to-pay, as opposed to the mass market.
While the initial cost to buy iPhone is high, the high profit margin of about 30% on the device leaves lot of room for opportunities to innovate with its pricing. Recently, the company announced a price cut. This seems to be a long-planned strategic move to pick up a second wave of customers following those early adopters for whom price was no concern. Model 4gb model 8gb model Price 499 599
3. POSITIONING:
Apple is ideally positioned, in terms of technology, design, brand, component sourcing, media deals and software, to be a significant player in mobile handset industry. Through various campaigns, Apple has been able to position itself as: ? ? ? ? A smart phone that combines a web browser, email, iPod and personal computer apart from the basic utility of making phone calls. Fashionable and easy-to-use device
“Internet-on-the-go value proposition?
Innovative and Unique
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4. PROMOTION: The excitement raised by the hype in January in the Apple Expo, is still maintained. Steve Jobs was able to create a “wow effect” among the customers. Apple has the marketing strategy of coming up with a unique slogan for each of its products so as to occupy the consumers‘ mind space. In fact, just the prefix ?i? evokes brand awareness since it is associated with Apple products. So naming the product iPhone is clearly the right move for establishing early product interest.
Steve Jobs first introduced the iPhone as a publicity campaign in Mac world. The launch created a huge buzz in the market.
Apple used the entire arsenal in its buzz generating kitty. These include: ? ? ? ? ? Make an innovative product Stress on design Create impressive ads Offer surprises (none knew what it would be like) Put it on show (drive people to stores to test the product)
Advertisements:
iPhone is a pioneer brand, the first brand to enter in the market. The blast of commercials the 30-seconds spots – offering snippets of the iPhone‘s cool touch-screen, Web browser, GPS functions, and music player in action, are more easily retrieved from the consumer‘s memory than the competitors‘ brands. The three main advertisements are: 1. „Never been an iPod? The advertisement portrays that the ?iPhone is the best iPod ever, and by the way, it‘s a phone too!‘
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2. „How To? The second advertisement places less emphasis on its iPod heritage, instead focuses on the device‘s Internet capabilities. Apple is keen to demonstrate that the iPhone can provide access to full web experience. Here also, the fact that it‘s also a phone is teasingly left right till the end.
3. „Calamari? The third advertisement highlights two features in addition to the device‘s cell phonefunctionality: playing hollywood content and Google Maps integration. The ad begins by playing a scene from Pirates of the Caribbean, cutting to a shot of a ship being attacked by a
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giant octopus. Then in a play on imagery, the user searches for a sea food restaurant using the iPhone‘s rich Google Maps client app.
The campaign focuses on the iPhone‘s iPod, Internet and multimedia functionality — an area where Apple clearly feels the device triumphs over its competitors — with a constant theme being that the iPhone happens to make calls too. PACKAGING: Apple used iPhone packaging as a styling weapon and gives great importance to details making it a niche product.
COMPETITION ANALYSIS:
The mobile market is a highly competitive market. The competition faced by iPhone can be understood using ?Porter’s five forces’ theory as under:
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Porter’s Five Forces
New entrants
Bargaining power of suppliers
Competition within industry
Bargaining Power of customers
Threat of substitutes
Threat of New Entrants Ultimately the iPhone is going to face the most competition from imitators who can sell a similar or comparable device at a lower price. Most of these threats are going to come from established players in the cell phone industry (such as Nokia, Blackberry and Samsung) rather than companies trying to enter the cell phone market anew. Software companies such as Google and Microsoft may pose a credible threat at entering the cell phone market and trying to carve a niche out for themselves. It has been rumoured that Google has a team actively investigating such a move and Microsoft currently has a lot of experience creating software specifically for mobile devices.
Bargaining Power of Suppliers Fortunately for Apple the iPhone is more than the sum of its parts. The parts themselves are not that interesting as they are readily available from a number of sources and alternatives exist for most of the parts. What gives the iPhone its appeal is really the software that
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brings all these parts together and allows the user to interact with the phone in a compelling way. And Apple, of course, developed and owns the software. Further, Apple has been successful in creating a strong barrier to entry by : 1. Securing a patent for iPhone that will give them short-term monopoly rights on some of its technology. 2. Apple has invested heavily in knowledge and experience which will take time for competitors to be able to emulate. 3. In order to effectively compete with the iPhone, competitors like Nokia, Samsung etc will need to invest significantly in software development. 4. Since Apple also has a lot of experience making hardware, it gives them a head start on some other potential entrants into the cell phone market whose experience lies largely in the software realm (eg. Google, Microsoft)
Therefore Apple is not dependent on the powerful suppliers and calls the shots for both the integrating software and Operating System.
Bargaining Power of Customers The buyers of the iPhone are somewhat more powerful. The consumers tend to be susceptible to price sensitivity and alternative choices. Given the relatively high price of the iPhone it remains to be seen whether consumers will pay a premium for Apple cachet and technological convergence when their needs may be equally met by cheaper alternatives.
Substitutes The iPhone mainly distinguishes itself from competitors over its user interface which is driven by a multi-touch screen. However, it is likely that other players in the market will soon be able to deliver similar products. Nokia, HTC, LG and Samsung etc have already disclosed details of coming up with products which feature touch-screen interfaces, as well. iPhone faces a realistic threat from the substitutes in the near future.
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STRATEGIES TO FIGHT COMPETITION:
In order to maintain its dominance, Apple Inc must do a complete SWOT analysis for iPhone and thence come up with appropriate strategies to fight competition.
SWOT ANALYSIS:
Strengths
Style/Brand Rich UI First mover Missing features Sensors User base
Weaknesses
High price / high end Limited distribution channels
Migrate people to Apple Similar devices Port existing apps New social device Distribute iTunes content Highly developed market
Opportunities
Threats
A. Strengths: The iPhone has several features that add to the strength of the product: ? ? ? ? Its unique look Feel accompanied by a mobile operating system. Phone sensors that work with the multi-touch screen Ease of Use
The fact that the company is first to deliver in this arena of computer phones is one of its greatest strengths B. Weaknesses ? ? It has a sub- par camera, at about 2 megapixels as well as its memory not being removable. The phone is high priced
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? ?
Apple‘s choice of distribution channel has also been construed as a weakness as they‘re limiting it to only Cingular and Apple retailers. The businessmen community still don‘t identify themselves with iPhone and Apple.
C. Opportunities ? ? ? Demand for a better mobile computing experience. The iPhone tries to combine both powerful computing as well as entertainment into one system. People have also noted that the Mac OS applications for desktop can be seamlessly adapted for the iPhone. iPhone is the first step towards an Internet Protocol-based network.
D. Threats ? ? ? ? Competitors- Nokia, Sony, and Google. Smart phones are one popular example that stands to compete against the iPhone. The fact that these phones run on the 3G network also puts iPhone behind in the speed race. The release of the iPhone is still in a time where people are cautious of spending money.
STRATEGY FOR COMBATING COMPETITION:
1.
Through Product Differentiation:
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iPhone differentiation
10
Score (10 = highest)
8 6 4 2 0
ffo rd ab le Fa sh io na bl e ai l y cr ee n si ng C ar rie ra W eb E M fu nc t io na lit y of us e la ye r br ow va ila bi lit E m P as y ed ia A S
iPhone Blackberry Pearl Motorola RAZR
Factors of Competition
Overall this trait sides favourably for Apple (right now) because the iPhone is significantly different than its nearest competitors. Apple also has a certain amount of protection through the strength of its brand identity.
2.
Through Value Addition to Customers:
Consumers value what they pay for. They don't value things they perceive as free. What Apple has done is inverted the value proposition. It has created a phone that consumers see as desirable, so desirable in fact that they will actually pay $400 to $600 for one. And because the device is desirable, Apple can demand exclusive deals with carriers, which creates valuable differentiation for those carriers that have iPhones and disadvantages for those that don't.
CONCLUSION:
Through its product innovation, a strong brand imagery and focus on customer value, iPhone has been able to create a lasting impact on the mobile industry and change the dynamics.
P
C
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Apple‘s creation of iPhone has put pressure on other mobile companies to deliver more PClike phones with better browsers which will push forward greater adoption of mobile web and hence facilitate ease of use through technological prowess. Apple has chosen the price points based on consumer demand and interest. A constant set of features will move down the price scale to more value-oriented price points, but Apple will introduce new and even more desirable products at the old price points. And so as long as it can keep that engine going, it will make money hand over fist. Thus, through iPhone, Apple has waged a marketing war to reshape the value chain for the mobile phone industry. Through a clear understanding and analysis of its market, the customers and their values, the competition‘s strengths and weakness etc, iPhone has been able to differentiate itself and create a blue ocean amongst the existing mobile market especially in USA.
REFERENCES:
1. www.apple.com/iPhone 2. Marketing management : Prof Rajan Saxena 3. http://www.readwriteweb.com/archives/todays_iphone_users_are_young_rich_and_te chnically_savvy.php 4. www.wikipedia.com 5. http://www.msnbc.msn.com/id/16566968/site/newsweek
APPENDIX:
1. Questionnaire
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Dear Sir/Madam, MBA is a qualification in business administration open to degree holders of any discipline. This course aims to equip managers with sufficient knowledge and skills in main function areas of business like finance, marketing, human resource, Operations, Systems etc.
This survey is a part of our marketing academic project on „iPhone?
All information provided by you will be kept confidential and be used only for academic purpose. It will take around 10 minutes to complete the questionnaire. We would greatly appreciate your time and help in this project.
Kindly mail the complete questionnaire and send your responses to the following email id: Rituma: [email protected]
Demographics: Name: Present Age: Earning/Student/House maker Annual Income: Highest Qualification: Rs.
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For Customers: 1. Where did you first hear about the iPhone? a) Ads b) Apple c) O2/AT&T d) Press e) Internet f) Word of mouth g) Others please specify: ……………………….
2. Are you aware of the major features of the iPhone? a) Not at all b) To some extent c) Yes
3. Do you consider the iPhone a successful product? a) Yes b) No
4. Please explain why you think it is a successful/unsuccessful product. Ans: …………………………………………………………………………
5. Do you own a) 1st generation iPhone (launched 2007) b) 3G iPhone (launched 11 July, 2008)
6. If not, please specify the reason ; Ans: …………………………………………………………………… 7. If you own the 1st gen iPhone, would you consider upgrading to the 3G version? a) Yes b) Not yet
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c) No, I am happy with the current one
8. Does the iPhone meet your needs better than other phones in the market? a) Yes b) No c) Others please specify: …………………………..
9. Do you think iPhone is a unique, innovative and better quality product? a) Yes b) No
10. What is your primary use of the iPhone? a) Phone calls b) Internet browsing c) Music d) Emails e) Camera f) Others please specify: ………………………….
11. What feature is the most important for you? a) Touch screen/large screen size b) Ability to make calls c) Internet browsing d) Emailing e) IPod facility f) Storage space g) Others please specify: ……………………………
12. What were the factors affecting you when you bought iPhone? a) Price b) Apple brand c) Features d) Design
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e) Others please specify: ……………………………
13. How satisfied are you with the product overall? a) Very satisfied b) Satisfied c) Indifferent d) Unsatisfied e) Very unsatisfied
For Retailers:
1) Where did you first hear about the iPhone? a) Ads b) Apple c) O2/AT&T d) Press e) Internet f) Word of mouth g) Others please specify: ……………………….
2) Are you aware of the major features of the iPhone? d) Not at all e) To some extent f) Yes
3) Do you consider the iPhone a successful product? c) Yes d) No
4) Please explain why you think it is a successful/unsuccessful product. Ans: …………………………………………………………………
5) Do you own
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c) 1st generation iPhone (launched 2007) d) 3G iPhone (launched 11 July, 2008)
6) If not, please specify the reason ; Ans: ………………………………………………………………………
7) Who according to you is the target customer for iPhone? a) Youngsters b) Professionals c) Others please specify: ……………………
8) What do you think about the pricing of iPhone a) Under priced b) Perfect c) Little overpriced d) Very expensive
9) How successful is iPhone for you, please specify; Ans: ………………………………………………………………
10) What feature is the most important for you? h) Touch screen/large screen size i) Ability to make calls j) Internet browsing k) Emailing l) IPod facility m) Storage space n) Others please specify: ……………………………
11) What were the factors you stress upon while selling iPhone? f) Price g) Apple brand h) Features
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i) Design j) Others please specify: ……………………………
12) How satisfied are you with the product overall? f) Very satisfied g) Satisfied h) Indifferent i) Unsatisfied j) Very unsatisfied
2. Customer Response:
Factors affecting buying decision
2%
30% 38%
Features Design Apple Brand Price Others
15% 15%
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Product satisfaction
5% 0% 2%
35%
Very Satisfied Satisifed Indifferent Unsatisfied Very Unsatisfied
58%
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Most Important Feature
8% 12% 5% 20% 15%
Ability to make Calls Internet Browsing Emailing iPod Others Storage Space 5%
35%
Screen Size
Is iPhone Unique,Innovative and Better than others?
12%
Yes No
88%
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doc_864906099.docx
Describes about targeting, positioning, promotional strategies, SWOT, Porter five forces model for apple iPhone.
Apple iPhone
TABLE OF CONTENTS
INTRODUCTION................................................................................................................................... COMPANY BACKGROUND................................................................................................................ THE MARKET....................................................................................................................................... TARGET CUSTOMER.......................................................................................................................... CUSTOMER EXPECTATIONS AND FEEDBACK............................................................................ POSITIONING AND MARKETING STRATEGIES............................................................................ a. b. c. d. Product............................................................................................................................. Pricing.............................................................................................................................. Positioning....................................................................................................................... Promotion........................................................................................................................
COMPETITION ANALYSIS........................................................................................................ STRATEGIES TO FIGHT COMPETITION.......................................................................................... a. SWOT analysis.......................................................................................................................... b. Product Differentiation............................................................................................................. c. Value addition to Customers................................................................................................... CONCLUSION...................................................................................................................................... REFERENCES...................................................................................................................................... APPENDIX Questionnaire................................................................................................................................. Customer Response..........................................................................................................................
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INTRODUCTION
The iPhone is an internet-connected multimedia smart-phone designed and marketed by Apple Inc. with a flush multi-touch screen and a minimal hardware interface. The device combines an iPod, a tablet PC, a digital camera and a cellular phone with a virtual keyboard rendered on the touch screen. It offers a multitude of functions like those of a camera phone and portable media player (equivalent to the iPod), text messaging, visual voicemail and Internet services like e-mail, web browsing, and local Wi-Fi connectivity.
The birth of the iPhone began when Apple CEO, Steve Jobs directed his engineers to investigate touch screens which were already used in Apple‘s Mac Notebook. Apple created iPhone during its collaboration with AT&T Mobility at an estimated development cost of US$150 million. The touch user interface and the sleek and beautiful design by Jonathan Ive and his team made it a true masterpiece of technology and design and brought about a complete change in the paradigm in the mobile phone market. With its launch in USA on June 29, 2007, iPhone was named as the ?Invention of the year 2007’ by Time magazine. On the day of its launch, Apple sold 2, 70,000 iPhones in the first 30 hours itself. It was subsequently made available in five other countries namely, Republic of Ireland, UK, France, Germany, and Austria. On July 11, 2008, Apple released the iPhone 3G in twenty-two countries, including the original six. On October 21, 2008 Apple announced whopping sales of 6.89 million iPhone in the fourth quarter of 2008, totalling 13 million iPhones to date. They also noted that they became the third largest mobile phone manufacturer in terms of revenue after Nokia and Samsung.
COMPANY BACKGROUND:
Apple Inc., formerly Apple Computer, Inc., is an American multinational corporation with a focus on innovating, designing and manufacturing consumer electronics and software products. Established in Cupertino, California on April 1, 1976 and incorporated January 3,
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1977, the company was called "Apple Computer, Inc." for its first 30 years, but dropped the word "Computer" on January 9, 2007 to reflect the company's ongoing expansion into the consumer electronics market in addition to its traditional focus on personal computers. Apple has about 28,000 employees worldwide and had worldwide annual sales of US$24 billion in its fiscal year ending September 29, 2007. The company's best-known hardware products include the Macintosh line of personal computers, the iPod line of portable media players, and the iPhone. Apple's software products include the Mac OS X operating system, iTunes media browser, the iLife suite of multimedia and creativity software, and Final Cut Studio, a suite of professional audio- and film-industry software products. The company operates more than 200 retail stores in eight countries and an online store where hardware and software products are sold. Due to several reasons like philosophy of comprehensive aesthetic design to distinctive advertising campaigns, Apple has been able to establish a unique reputation in the consumer electronics industry with a customer base that is devoted to the company and its brand, particularly in the United States. It was named as ?the most admired company‘ in the United States by Fortune magazine in 2007.
THE MARKET:
The mobile handset market is a highly volatile and constantly changing market with several players entering the market each year. The companies fight it out not only with their promotional campaigns, schemes and other marketing strategies but also through creating value for the consumers in the form of product innovation and differentiation. With mobiles becoming a vital aspect of our lives today, the companies in the market constantly endeavour to bring in products that are not only meant for making/accepting calls but which also provide a host of modern technological services like Bluetooth, music players, touch screen etc.
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The major players in the market which pose a threat to iPhone are Nokia N95, Blackberry‘s ?Curve‘, Samsung‘s ?Upstage‘ and other smaller players like HTC ?Touch‘ and Helio‘s ?Ocean‘. Currently, the market for high-end phones like the Apple iPhone is small. Few people want Internet, video, and PDA features in one device because of the high price. The smart phone market is still relatively small compared with general phone market. The market will rapidly increase in coming years due to lower prices and greater power. COMPARISON WITH COMPETITORS:
Feature Cost Apple iPhone
$500 (4GB) or $600 (8GB) with a two-year contract AT&T
HTC Touch
$600 for an unlocked phone from Dynamism
Helio Ocean
$295 from Helio
Nokia N95
$750 for an unlocked phone from Nokia
Blackberry Curve
$300 with a two-year contract; $200 after mail-in rebate AT&T
Samsung Upstage
$80 with a two-year contract
Service provider Display
Unlocked
3.5 inches, 320 by 480 pixels; landscape or portrait layout
2.8 inches, 240 by 320 pixels; portrait or landscape layout
Helio (Sprint network) 2.4 inches, 240 by 320 pixels; landscape or portrait layout
Unlocked
Sprint
2.6 inches, 240 by 320 pixels; portrait or landscape layout
2.5 inches, 240 by 320 pixels
Dimensions (inches) Controls
4.5 by 2.4 by 0.46 Touch screen, software keyboard
3.9 by 2.3 by 0.55 Touch screen, software keyboard
4.33 by 2.2 by 0.86 Navigation pad, slideout keyboard, slide-out phone keypad 200MB 5.1 hours
Built-in memory Battery life (manufactur er's talk-time rating) Music formats
4GB or 8GB 8 hours
64MB 5 hours
3.9 by 2.1 by 0.83 Navigation pad, slideout phone keypad, slide-out multimedia controls; no keyboard 160MB 4 hours
4.2 by 2.4 by 0.6 Keyboard, navigation pad, trackball
Phone display: 1.4 inches, 176 by 65 pixels Media display: 2.1 inches, 176 by 220 pixels 4.1 by 1.7 by 0.4 Phone side: phone keypad Media side: navigationa l pad; no keyboard 70MB 2.5 hours (6.3 with extended battery) AAC, MP3
64MB 4 hours
MP3, AAC, Audible, Apple Lossless, .wav
AAC, AAC+, eAAC+, MP3, WMA, .wav
MP3, AAC, WMA
MP3, AAC, AAC+, eAAC+, WMA
AAC, AAC+, WMA, MP3
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Operating system
OS X
Windows Mobile
Custom
Symbian
BlackBerry OS
Custom
TARGET CUSTOMER:
Apple targets the niche customer who values innovation and seeks to buy something ?Unique‘. Cost is not an issue with these consumers. What matters to them is how tech-savvy the product is, what facilities and software are provided and the ?experience‘ in general. These are the people who love to express their individuality and uniqueness which is accurately symbolized by the ?i‘ of the iPhone.
Apples target segments consist of professionals, students, corporate users, entrepreneurs, and health care workers between the age group of 20-40 having a wealthy background. About 75% of
them are existing Apple customers.
In order to target the mainstream users beyond the youthful technophiles, iPhone has announced support for Microsoft Exchange so as to get more of the business users on board. Majority of its users are the ones who use the applications like web browsers, e-mailing, net meetings etc on a frequent basis. VALUE PROPOSITION
Intended for style-conscious cell phone consumers who would like to browse the Internet and enjoy entertainment to-go, the iPhone is a smart phone that combines a web browser, email, iPod and personal computer into a single, fashionable, easy-to-use device.
CUSTOMER EXPECTATIONS AND FEEDBACK:
After collecting the data from the customers, we conclude that even though the pricing for cell phones is decreasing however, it has not altered the demand for iPhone since the primary reason the consumer‘s are shopping for the iPhone is driven not by cost but by style, internet accessibility, cool features and entertainment.
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The expectations of the customers and their feedback obtained through our survey can be better understood with the help of Maslow’s ‘Hierarchy of Needs’ Model as follows: (a) Physiological needs: It forms the basic reason since everyone needs a mobile to keep in touch and communicate effectively.
(b) Safety needs- Plays important role especially for parents of youngsters. These parents are happy to introduce this gadget in the family so as to ensure keeping track about their children‘s whereabouts and safety. (c) Love and belongingness needs- applicable for the grown up teens or adults to share videos, ringtones, music, text messages to share all the new happenings and latest activities and gossips in their friend circles
(d) Self esteem- since Apple plans to sell only 1% or 10 million by end of 2008, there is brand value and identity created in using this iPhone and a greater self-esteem and individuality within those who possess the device. (e) Self actualization needs – There is a high personal growth attained in using this gadget like increased information and knowledge for those who are not motivated reading newspapers or books, latest entertainment happenings in the neighbourhood etc. Those who are investors would like to run their business interactively and access anywhere without accessing the home-base (PCs) etc (Please refer to Appendix on ?Customer Response‘ for an in-depth study of customer‘s response to iPhone and its services)
POSITIONING AND MARKETING STRATEGIES:
1.
THE PRODUCT
Apple Inc has the legacy of having a Product Innovation model and has created a new segment in mobiles in order to distinguish itself from the competitors. The iPhone gadget is marvelous in terms of design and usage and has created a totally new experience that the users had never experienced.
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The iPhone merges three gadgets into one: an iPod with touch controls, internet communication device, and of course a mobile phone. It is a revolutionary new mobile phone that allows making a call by simply tapping a name or number in the address book or a call log. It allows selecting and listening to voicemail messages in any order – just like email.
iPhone has the most revolutionary interface and allows controlling everything using only fingers. Its soft keyboard allows sending SMS in multiple sessions. iPhone uses OS X operating system and allows multi-tasking. The accelerometer sensors automatically change the contents of the display; the proximity and ambient light sensors make the iPhone a power saving device. Also iPhone has a 2 Mega Pixel camera, advance photo management, a 3.5 inches wide screen display that allows scroll through, 5 hours of battery life for talk or video, with a full 16 hours in music mode, etc.
Unique Features:
Visual Voice Mail- Perhaps the most talked about feature, visual voice mail easily lets you play your messages out of order with more detail about who called and when. Eg: Features like voice-to-text, or voicemail-to-email using Callwave and Gotvoice. Browser- One of its key features which lets you surf the ?real? internet through a zoom and scan interface. Eg: OperaMini 4 Beta Email- A rich HTML email interface including attachment support. Maps- iPhone is featuring a version of Google Maps that takes advantage of the touch-screen interface. Music - Apple is claiming the iPhone is the best iPod to date.
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Widgets- To get information like weather and stock quotes through widgets.
2. PRICING Apple‘s pricing intentions lie in its desire to maintain the high level of perceived value iPods currently enjoy in consumer minds. By setting a high price point, Apple is adopting a skimming strategy, whereby it initially targets a narrow segment of the market with a high willingness-to-pay, as opposed to the mass market.
While the initial cost to buy iPhone is high, the high profit margin of about 30% on the device leaves lot of room for opportunities to innovate with its pricing. Recently, the company announced a price cut. This seems to be a long-planned strategic move to pick up a second wave of customers following those early adopters for whom price was no concern. Model 4gb model 8gb model Price 499 599
3. POSITIONING:
Apple is ideally positioned, in terms of technology, design, brand, component sourcing, media deals and software, to be a significant player in mobile handset industry. Through various campaigns, Apple has been able to position itself as: ? ? ? ? A smart phone that combines a web browser, email, iPod and personal computer apart from the basic utility of making phone calls. Fashionable and easy-to-use device
“Internet-on-the-go value proposition?
Innovative and Unique
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4. PROMOTION: The excitement raised by the hype in January in the Apple Expo, is still maintained. Steve Jobs was able to create a “wow effect” among the customers. Apple has the marketing strategy of coming up with a unique slogan for each of its products so as to occupy the consumers‘ mind space. In fact, just the prefix ?i? evokes brand awareness since it is associated with Apple products. So naming the product iPhone is clearly the right move for establishing early product interest.
Steve Jobs first introduced the iPhone as a publicity campaign in Mac world. The launch created a huge buzz in the market.
Apple used the entire arsenal in its buzz generating kitty. These include: ? ? ? ? ? Make an innovative product Stress on design Create impressive ads Offer surprises (none knew what it would be like) Put it on show (drive people to stores to test the product)
Advertisements:
iPhone is a pioneer brand, the first brand to enter in the market. The blast of commercials the 30-seconds spots – offering snippets of the iPhone‘s cool touch-screen, Web browser, GPS functions, and music player in action, are more easily retrieved from the consumer‘s memory than the competitors‘ brands. The three main advertisements are: 1. „Never been an iPod? The advertisement portrays that the ?iPhone is the best iPod ever, and by the way, it‘s a phone too!‘
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2. „How To? The second advertisement places less emphasis on its iPod heritage, instead focuses on the device‘s Internet capabilities. Apple is keen to demonstrate that the iPhone can provide access to full web experience. Here also, the fact that it‘s also a phone is teasingly left right till the end.
3. „Calamari? The third advertisement highlights two features in addition to the device‘s cell phonefunctionality: playing hollywood content and Google Maps integration. The ad begins by playing a scene from Pirates of the Caribbean, cutting to a shot of a ship being attacked by a
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giant octopus. Then in a play on imagery, the user searches for a sea food restaurant using the iPhone‘s rich Google Maps client app.
The campaign focuses on the iPhone‘s iPod, Internet and multimedia functionality — an area where Apple clearly feels the device triumphs over its competitors — with a constant theme being that the iPhone happens to make calls too. PACKAGING: Apple used iPhone packaging as a styling weapon and gives great importance to details making it a niche product.
COMPETITION ANALYSIS:
The mobile market is a highly competitive market. The competition faced by iPhone can be understood using ?Porter’s five forces’ theory as under:
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Porter’s Five Forces
New entrants
Bargaining power of suppliers
Competition within industry
Bargaining Power of customers
Threat of substitutes
Threat of New Entrants Ultimately the iPhone is going to face the most competition from imitators who can sell a similar or comparable device at a lower price. Most of these threats are going to come from established players in the cell phone industry (such as Nokia, Blackberry and Samsung) rather than companies trying to enter the cell phone market anew. Software companies such as Google and Microsoft may pose a credible threat at entering the cell phone market and trying to carve a niche out for themselves. It has been rumoured that Google has a team actively investigating such a move and Microsoft currently has a lot of experience creating software specifically for mobile devices.
Bargaining Power of Suppliers Fortunately for Apple the iPhone is more than the sum of its parts. The parts themselves are not that interesting as they are readily available from a number of sources and alternatives exist for most of the parts. What gives the iPhone its appeal is really the software that
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brings all these parts together and allows the user to interact with the phone in a compelling way. And Apple, of course, developed and owns the software. Further, Apple has been successful in creating a strong barrier to entry by : 1. Securing a patent for iPhone that will give them short-term monopoly rights on some of its technology. 2. Apple has invested heavily in knowledge and experience which will take time for competitors to be able to emulate. 3. In order to effectively compete with the iPhone, competitors like Nokia, Samsung etc will need to invest significantly in software development. 4. Since Apple also has a lot of experience making hardware, it gives them a head start on some other potential entrants into the cell phone market whose experience lies largely in the software realm (eg. Google, Microsoft)
Therefore Apple is not dependent on the powerful suppliers and calls the shots for both the integrating software and Operating System.
Bargaining Power of Customers The buyers of the iPhone are somewhat more powerful. The consumers tend to be susceptible to price sensitivity and alternative choices. Given the relatively high price of the iPhone it remains to be seen whether consumers will pay a premium for Apple cachet and technological convergence when their needs may be equally met by cheaper alternatives.
Substitutes The iPhone mainly distinguishes itself from competitors over its user interface which is driven by a multi-touch screen. However, it is likely that other players in the market will soon be able to deliver similar products. Nokia, HTC, LG and Samsung etc have already disclosed details of coming up with products which feature touch-screen interfaces, as well. iPhone faces a realistic threat from the substitutes in the near future.
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STRATEGIES TO FIGHT COMPETITION:
In order to maintain its dominance, Apple Inc must do a complete SWOT analysis for iPhone and thence come up with appropriate strategies to fight competition.
SWOT ANALYSIS:
Strengths
Style/Brand Rich UI First mover Missing features Sensors User base
Weaknesses
High price / high end Limited distribution channels
Migrate people to Apple Similar devices Port existing apps New social device Distribute iTunes content Highly developed market
Opportunities
Threats
A. Strengths: The iPhone has several features that add to the strength of the product: ? ? ? ? Its unique look Feel accompanied by a mobile operating system. Phone sensors that work with the multi-touch screen Ease of Use
The fact that the company is first to deliver in this arena of computer phones is one of its greatest strengths B. Weaknesses ? ? It has a sub- par camera, at about 2 megapixels as well as its memory not being removable. The phone is high priced
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? ?
Apple‘s choice of distribution channel has also been construed as a weakness as they‘re limiting it to only Cingular and Apple retailers. The businessmen community still don‘t identify themselves with iPhone and Apple.
C. Opportunities ? ? ? Demand for a better mobile computing experience. The iPhone tries to combine both powerful computing as well as entertainment into one system. People have also noted that the Mac OS applications for desktop can be seamlessly adapted for the iPhone. iPhone is the first step towards an Internet Protocol-based network.
D. Threats ? ? ? ? Competitors- Nokia, Sony, and Google. Smart phones are one popular example that stands to compete against the iPhone. The fact that these phones run on the 3G network also puts iPhone behind in the speed race. The release of the iPhone is still in a time where people are cautious of spending money.
STRATEGY FOR COMBATING COMPETITION:
1.
Through Product Differentiation:
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iPhone differentiation
10
Score (10 = highest)
8 6 4 2 0
ffo rd ab le Fa sh io na bl e ai l y cr ee n si ng C ar rie ra W eb E M fu nc t io na lit y of us e la ye r br ow va ila bi lit E m P as y ed ia A S
iPhone Blackberry Pearl Motorola RAZR
Factors of Competition
Overall this trait sides favourably for Apple (right now) because the iPhone is significantly different than its nearest competitors. Apple also has a certain amount of protection through the strength of its brand identity.
2.
Through Value Addition to Customers:
Consumers value what they pay for. They don't value things they perceive as free. What Apple has done is inverted the value proposition. It has created a phone that consumers see as desirable, so desirable in fact that they will actually pay $400 to $600 for one. And because the device is desirable, Apple can demand exclusive deals with carriers, which creates valuable differentiation for those carriers that have iPhones and disadvantages for those that don't.
CONCLUSION:
Through its product innovation, a strong brand imagery and focus on customer value, iPhone has been able to create a lasting impact on the mobile industry and change the dynamics.
P
C
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Apple‘s creation of iPhone has put pressure on other mobile companies to deliver more PClike phones with better browsers which will push forward greater adoption of mobile web and hence facilitate ease of use through technological prowess. Apple has chosen the price points based on consumer demand and interest. A constant set of features will move down the price scale to more value-oriented price points, but Apple will introduce new and even more desirable products at the old price points. And so as long as it can keep that engine going, it will make money hand over fist. Thus, through iPhone, Apple has waged a marketing war to reshape the value chain for the mobile phone industry. Through a clear understanding and analysis of its market, the customers and their values, the competition‘s strengths and weakness etc, iPhone has been able to differentiate itself and create a blue ocean amongst the existing mobile market especially in USA.
REFERENCES:
1. www.apple.com/iPhone 2. Marketing management : Prof Rajan Saxena 3. http://www.readwriteweb.com/archives/todays_iphone_users_are_young_rich_and_te chnically_savvy.php 4. www.wikipedia.com 5. http://www.msnbc.msn.com/id/16566968/site/newsweek
APPENDIX:
1. Questionnaire
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Dear Sir/Madam, MBA is a qualification in business administration open to degree holders of any discipline. This course aims to equip managers with sufficient knowledge and skills in main function areas of business like finance, marketing, human resource, Operations, Systems etc.
This survey is a part of our marketing academic project on „iPhone?
All information provided by you will be kept confidential and be used only for academic purpose. It will take around 10 minutes to complete the questionnaire. We would greatly appreciate your time and help in this project.
Kindly mail the complete questionnaire and send your responses to the following email id: Rituma: [email protected]
Demographics: Name: Present Age: Earning/Student/House maker Annual Income: Highest Qualification: Rs.
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For Customers: 1. Where did you first hear about the iPhone? a) Ads b) Apple c) O2/AT&T d) Press e) Internet f) Word of mouth g) Others please specify: ……………………….
2. Are you aware of the major features of the iPhone? a) Not at all b) To some extent c) Yes
3. Do you consider the iPhone a successful product? a) Yes b) No
4. Please explain why you think it is a successful/unsuccessful product. Ans: …………………………………………………………………………
5. Do you own a) 1st generation iPhone (launched 2007) b) 3G iPhone (launched 11 July, 2008)
6. If not, please specify the reason ; Ans: …………………………………………………………………… 7. If you own the 1st gen iPhone, would you consider upgrading to the 3G version? a) Yes b) Not yet
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c) No, I am happy with the current one
8. Does the iPhone meet your needs better than other phones in the market? a) Yes b) No c) Others please specify: …………………………..
9. Do you think iPhone is a unique, innovative and better quality product? a) Yes b) No
10. What is your primary use of the iPhone? a) Phone calls b) Internet browsing c) Music d) Emails e) Camera f) Others please specify: ………………………….
11. What feature is the most important for you? a) Touch screen/large screen size b) Ability to make calls c) Internet browsing d) Emailing e) IPod facility f) Storage space g) Others please specify: ……………………………
12. What were the factors affecting you when you bought iPhone? a) Price b) Apple brand c) Features d) Design
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e) Others please specify: ……………………………
13. How satisfied are you with the product overall? a) Very satisfied b) Satisfied c) Indifferent d) Unsatisfied e) Very unsatisfied
For Retailers:
1) Where did you first hear about the iPhone? a) Ads b) Apple c) O2/AT&T d) Press e) Internet f) Word of mouth g) Others please specify: ……………………….
2) Are you aware of the major features of the iPhone? d) Not at all e) To some extent f) Yes
3) Do you consider the iPhone a successful product? c) Yes d) No
4) Please explain why you think it is a successful/unsuccessful product. Ans: …………………………………………………………………
5) Do you own
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c) 1st generation iPhone (launched 2007) d) 3G iPhone (launched 11 July, 2008)
6) If not, please specify the reason ; Ans: ………………………………………………………………………
7) Who according to you is the target customer for iPhone? a) Youngsters b) Professionals c) Others please specify: ……………………
8) What do you think about the pricing of iPhone a) Under priced b) Perfect c) Little overpriced d) Very expensive
9) How successful is iPhone for you, please specify; Ans: ………………………………………………………………
10) What feature is the most important for you? h) Touch screen/large screen size i) Ability to make calls j) Internet browsing k) Emailing l) IPod facility m) Storage space n) Others please specify: ……………………………
11) What were the factors you stress upon while selling iPhone? f) Price g) Apple brand h) Features
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i) Design j) Others please specify: ……………………………
12) How satisfied are you with the product overall? f) Very satisfied g) Satisfied h) Indifferent i) Unsatisfied j) Very unsatisfied
2. Customer Response:
Factors affecting buying decision
2%
30% 38%
Features Design Apple Brand Price Others
15% 15%
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Product satisfaction
5% 0% 2%
35%
Very Satisfied Satisifed Indifferent Unsatisfied Very Unsatisfied
58%
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Most Important Feature
8% 12% 5% 20% 15%
Ability to make Calls Internet Browsing Emailing iPod Others Storage Space 5%
35%
Screen Size
Is iPhone Unique,Innovative and Better than others?
12%
Yes No
88%
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doc_864906099.docx