APPLE CASE STUDY- MARKETING
STRATEGY
Before delving straight into product and pricing strategy, we must first understand strategy as a basic principle and what it is about.
Strategy definitively is a plan or method that is outlined and executed with the goal of achieving something and is usually over a long period of time. When used in a business environment strategy is revolves around the how to ‘s of a business; how to outcompete rivals (Thompson, slide 3), how to respond to economic and market conditions and growth opportunities, how to manage the business and how to improve financial and market performance. When outlining a business strategy we must first define where we are and then we should define where we want to be in a given span of time. The strategy is the action plan of how to get there.
Chapter 12: Setting Product Strategy
A product is something that can satisfy a need or a want within a given market when offered to that market. When outlining a product strategy there are some questions that we ought to consider; such as how can a company differentiate its products, what are the characteristics of products and how markets classify products, and what is the importance of product design and factors affecting a good design.
When looking at the attractiveness of the market offerings, we consider three key areas;
-Product features and quality
-service mix and quality
-Value-based price
For the purpose of this assignment we shall consider one of the prominent Apple products from the case study to illustrated one of the three key components (i.e product features and quality.)
Case Study
There are a number of apple products that we can look at for the case study including the iPad, iPhone, Macbooks, iPod e.tc We shall focus on the iPhone for the case study.
The iPhone is a product line of smartphones that are designed and marketed by Apple Inc. The product items in this series run on Apples’ mobile operating system called the iOS. Its premier product in this series begun with the iPhone2G which was released on June, 2007. It was then shortly followed consecutively by the iPhone,3,3s,4,4s and the most recent in the product line being the iPhone5 which was most recently released on September 2012.The iPhone series consist of six models each of which were accompanied by one of the six major releases of the iOS software.
Product Features
The Original iPhone was a GSM phone and it established the precedent design of all the other models, such as the screen size, button placement which has been consistent with all the other models. The original model supported Wi-Fi, GSM, and Bluetooth. The launch of the iPhone 3G added to the original model the third generation speed which meant better surfing experience allowing one to download videos, watch YouTube, and downloading data from the internet.
The iPhone can shoot videos (available in the 3Gs, 4, 4s, and 5), take photos, play music, send and receive emails, browse, send texts and receive visual voicemail. Other functions include games, referencing and social networking which is made possible by downloading apps from its App stores. An added feature to each the models includes a faster processor and high-resolution camera. The iPhone 4 introduced the added feature of a high-resolution display ‘retina display’, a rear and front camera for video calling. The iPhone 4s then introduced an 8 megapixel camera with ability to video record and a dual-core processor and a natural language voice control called Siri .The most recent model has the latest processor (A6), it boasts of a 4-inch retina display, with ultra-slim aluminum casing that makes it very light weight.
Apple has successfully achieved one of the key components of product strategy by efficiently address the issue of product differentiation. Several factors can be considered by a company so as to differentiate its product; these include product form, features, customization, performance, style, repairability, reliability and durability (Kolter, slide 11). The features seen in Apples’ iPhone have successful differentiated its self from other products in the market.
Apple has demonstrated time and time again that it has been committed to its business strategy which emphasizes on continual investment in research and development as a key factor to come up with innovative products and technologies. Apple product strategy consists of constant improvement on product offer so as satisfy consumers. Realization of their success factors such as smaller, simpler devices, more features and less expensive has been the focus of product development plan. This is consistent with their Apple Kaizen mantra “Constant improvement- one infinite loop” (Apple study, p.15)
Chapter 14 Developing Pricing Strategies And Programs
There are a number of factors that can be considered when developing an efficient pricing strategy. First and foremost the main goal of a pricing strategy is the how to obtain the best price that;
-Generates sufficient revenues to cover operational cost and produce a tidy sum of profits
-A price that offers customers good value for their.
The following business element models can be incorporated when developing a pricing strategy;
A) Customer Value Proposition- this is where customer wants and needs are satisfied at a price that can be considered as a good value by customer. ‘The greater the value provided (V) and the lower the price (P); the more attractive the value proposition is to customers’ (Chapt_01, slide 19).
B) Profit Formula- this helps to create a cost structure that allows for acceptable profits when the pricing is tied to customer value proposition. The lower the cost for a customer value proposition (V-P) the greater the ability of a model to make profit.
When we look at product pricing we can consider a number of techniques that can be included in a company’s’ pricing strategy. These including; Product-line pricing, Optional-feature pricing, Captive-product pricing, Two-part pricing, By-product pricing, Product-bundling pricing (Chapt_12, slide 11). Other factor that can be used include product differentiation and reference pricing.
Case Study: Apple Pricing Strategy
Low Prices- In the past Apple had been consider as a high-quality, high-price technology company whose products were main for the high-end consumer base. However in recent years Apple has decided to change the script by offering really competitive prices as compared to the prices of rival competitors with almost equivalent features.
Product Differentiation-Another thing that can be viewed as distinct feature in Apples’ pricing strategy is the ability of the company to retain a huge fan base because of the distinct quality it offers. Its ability to efficiently differentiate its products within the market has enable the company to put itself in a unique position that allows them to be able to justify its prices regardless of how high or how low it is. It is the reason one would opt to buy an 8GB iPod at a price higher than a Sony E Series 16GB at a low price; because it is distinctly unique.
Apple has applied the concept of making gains early then reducing the price shortly after. This can be seen in the launch of the previous models of the iPhone where the entry price was high and it then dropped significantly after two months. With the highly publicized launch and anticipation created by the advertisements, Apple was able to rack in significant revenue within the first two months which would then allow them to reduce them prices significantly without affecting their core benefits. Thus they are able to lockout rivals with the aggressively low prices.
Reducing internal Cost (Profit formulae) – Apples’ foresightedness has played a major role in their final game plan. They locked up supplies of parts for years forcing their competitors to scramble for the remaining few thus raising their cost level. For example in 2005 Apple struck a five-year deal manufacturers to secure flash memory chips for its devices thus reducing it operating cost while driving that of the competitors upwards. Reducing operating cost increases the chances of making higher profits according to the profit formulae.
Apples’ adopts in its strategy the concept of reference pricing whereby consumers are given the choice of comparing the prices of products. By launch a series of products whose versions are placed at various price points, Apple has succeed into manipulating the market such that a consumer wouldn’t mind paying a little more for a higher version that has extra features.
Apples’ pricing strategy also includes another pricing technique called bundling. This is whereby the seller combines two or more products and/or services and sell it as one singular unit of a slightly reduced price. While this looks very attractive to the consumer since results in savings, it also and more significantly benefits the seller since it results in higher sales and eventually higher profits.
It also applies the two-part pricing concept whereby, it sells its product at seemingly attractive prices. This traps the customer since they have to pay later for the software that is compatible with their hardware.
Conclusion
Generally for any business strategy to succeed it must pass three crucial tests;
1. The Fit Test- the question to be asked here is whether it is practical and if it integrates well with both the external factors and internal factors of the company.
2. The Competitive Advantage Test- does the plan help the company build a sound and sustainable competitive advantage. Can it help the firm achieve a significant and sustainable competitive advantage? Competitive advantage is the ability of a company’s’ product to be the preferred choice among consumers.
3. The Performance Test- Can it produce good performance as measured by the firm’s profitability, financial and competitive strengths, and market standing? (Chapt_01, slide 27.)
References
1. Kolter & Keller (Copyright © 2011 )
MARKETING MANAGEMENT, Chapter 12 Setting Product Strategy.
Pearson Education, Inc Publishing as Prentice Hall.
Print (pdf.)
2. THOMPSON | PETERAF | GAMBLE | STRICKLAND (Copyright © 2012).
Crafting and Executing Strategy 18e, Chapter1: What is Strategy and Why is it Important?
McGrawHill Companies, Inc.
Print (pdf)
3. Apple in the digital age from the iPod to the iPad
Apple Inc. The Case study from 2000-2009
Applecasestudy. Pdf
Retrieved from http://www.pro-manchester.co.uk/assets/Applecasestudy.pdf
4. Dave Bul.
Little Known Secrets of Apple’s Pricing Strategy
Saleschase Blog RSS Feed.
Retrieved www.saleschase.com/blog/2012/04/03/little-known-secrets-of-apples-pricing-strategy/
2150 hrs 21st November.
5. iPhone
Apple.com
www.apple.com/ iphone/features/
2250hrs, 21st November.
