SLP 1: Consumer Behavior: Segmentation, Target
Marketing Plan for Apple iPhone6
Product Statement
Background
Apple Inc. (Apple), formerly known as Apple Computer, Inc., is an American multinational company founded in 1976 that designs, manufactures and sells a range of consumer electronic products ranging from mobile communication and media devices to personal computers to portable digital music players and computer related software (Boone & Kurtz, 2012). The corporation, headquartered in Cupertino, California, also offers a range of services, networking solutions, peripherals, as well as third-party digital content and related applications.
Apple’s product and services catalog include iPhone Smartphone, iPad tablet computer, iPod, Apple TV, Mac, iOS and Mac OS X operating systems, consumer & professional software applications, iCloud, together with a variety of accessory, service and support offerings. In addition, the company sells and delivers a range of digital content and applications via the iTunes Store, iBookstore, App Store, and Mac App Store (Gibbs, 2009). The word “Computer” was dropped from the corporations name in 2007 to reflect shift in focus towards consumer electronics following the introduction of the iPhone. At the moment, Apple and its subsidiaries is estimated to have over 75,000 employees worldwide (Boone & Kurtz, 2012).
The iPhone 6
In the Summer of 2014, Apple anticipates to release iPhone 6 that will include revolutionary features currently lacking in the iPhone 5. The iPhone 6 will be available in up to eight different color options, a super HD camera, and Near-Field Communication (NFC). The super HD camera will be supported by a dual-LED, dual color flash that will enhance white balancing of photos. Apple believes that providing its customers with more screen sizes and color options with the same superior quality capability of the iPhone would significantly contribute to expanding the market share in the increasingly competitive Smartphone world.
Figure 2: The Apple iPhone 6 Prototype in different colours
The iPhone 6 will be an “iPhone mini” meaning that it will be low-priced with relatively smaller screen size. It is believed that this strategy would enable the company to further penetrate markets China besides opening up opportunities in India. The iPhone six will come with a twist in the sense that it will be the first time that Apple would offer multiple screens for a single Smartphone model. In this regard, the iPhone 6 will also come with a larger screen size than the 4-inch iPhone 5. This is a strategic move considering that there is an increasing number of large sized Smartphones in the market and the larger phone market is expected to dominate Smartphone shipment growth by 2015.
The iPhone 6 would come in three different screen size Retina Display and installed with iOS 7 (the latest iPhone Operating System). The iPhone 6 will also revive the slide out keyboard concept. This is in response with the consumer feedback that revealed widespread frustrations with the on-screen touch screens because of inaccuracies. The Smartphone will therefore incorporate the manual buttons for typing and a new A7 quad-core processor as desired by many iPhone consumers.
Figure 1: Prototype of iPhone 6 with slide-out keyboard concept
The iPhone 6 will also have wireless battery charging (mini-fuel-cell battery technology and biometric security in the form of fingerprint sensor lodged directly in the “home” button. This will replace the need for passwords and usernames thus faster and more secure authentication. It is also believed that the new technology would prove difficult to replicate by competing Windows and Android phone devices thus enabling Apple to maintain its “minimalist design” (Boone & Kurtz, 2012). The Windows and Android Phone devices, which carry several button below the home button display, would encounter major challenges in trying to integrate the revolutionary fingerprint technology because their buttons respond to the slightest touches unlike Apple’s which require some mechanical push. The former devices would be less intuitive and result in frustrations on the part of the user.
Figure 3: The iPhone 6 fingerprint sensor advantage
Finally, the iPhone 6 will have greater internal storage of 128GB. Upon release, iPhone 6 is expected to compete well with other anticipated brands like Galaxy S4.
Situational Analysis
External Environment Analysis
1. Industry Analysis
The Smartphone is a highly competitive market, previously dominated by Nokia, Samsung and Motorola. These companies have long claimed a collective large market share because of their extensive product line (Gibbs, 2009). However, Apple’s introduction of the iPhone in 2007 made the company a major competitor in the industry as the iPhone offered a variety of features in a single device. Table 1 below shows sales statistics indicating Samsung and Apple’s strong dominance of the Smartphone market in 2012.
Table 1: Global Handset Sales by Manufacturer 2012
In the fourth quarter of 2012, Samsung’s Smartphone sales were 64.5 million handsets (up 85.3% of 2011), while Apple’s sales totaled 43.5 million (22.6% increase). In the same period, Android gained market share to 69.7%, while the overall iOS market share dropped from 23.6% at the end of 2011 to 20.9% in Q4 2012 as evidenced by Table 2 below.
Table 2: Global Handset Sales in 2012 by Operating System
Generally, the figure translate that Apple’s continued success is more as a result of the halo effect of the brand as opposed to the strength of its iOS platform itself.
2. Political Analysis
The varying taxation regulations by different government requires that Apple conducts a country by country analysis to reach individual pricing strategy and anticipate profitability. Importing laws across the world are in favor of high-end smartphone trade following GATT regulations (Gibbs, 2009). Also, there is widespread concern regarding on Global Warming and related pollution effects resulting from the packaging material and radiation of cellphones. The Apple products are therefore exposed to thorough screening (regulatory) before getting international environmental approvals.
3. Socio-cultural Situation
The number of persons needing Smartphones is increasing with the growing world population. There is educational growth across the world and an increasing number of people are depending on mobile communication. Also, the cultural perception of technological devices such as Smartphones is becoming increasingly positive. However, literacy and illiteracy level has significant effects on high technological Smartphones besides the apparent resistance of imported products in some countries in which there is trusted local provider. Different social views are bound to affect the product, for instance, the anti-American products sentiments across the Islamic world.
4. Technological Situation
There is tremendous technological advancement in most countries that Apple does business. The Internet level of awareness as well as usage is increasing for both individuals and industries. The cell phone is increasingly being used to link governments, agencies, learning institutions, medical institutions. There is also high and trendy use of e-technology using Smartphones in online billing, blogging, and customer service (Kahl et al, 2012).
5. Competitor Analysis
Apple’s iPhone faces stiff competition from other manufacturers who have first learned how to deliver similar Smartphone using Android and Windows operating systems. Samsung’s Galax S3 is currently the major rival for Apple’s iPhone 5 while Samsung’s anticipated release, Galaxy S4 is poised to give Apple’s iPhone 6 a run for its money. Apple’s operating system faces fierce challenge from Android which is able to partner with other global manufacturers like Samsung, Nokia, Sony, RIM, and HTC (Kahl et al, 2012). As such, Apple is currently faced with the challenge of mitigating its market share loss in a business climate where many consumers have access to competitor products and brands offered at varied prices. However, Apple’s competitive advantage is pegged on its philosophy that intersects technology and consumer values. The company has always strived to create substantial value for the customer through innovative and differentiation of products, with focus on quality, design elegance together with superior customer service.
6. Economic Situation
The world economy was reported to have weakened considerably in 2012 and the economic woes are projected to carry on to 2013 (Kahl et al, 2012). Apple’s new product may face low sales considering that the worldwide total mobile handset sales in 2012 fell by 1.7% to 1.75 billion. The state of economy has and is likely to make consumer delay upgrading to iPhone 6. While it is evident that iPhone’s hyper growth is no more, Apple’s market shall is likely to peak in 2013 at 22% and increase considerably with the release of iPhone 6.
Customer Environment Analysis
With the new iPhone 6, Apple is targeting a range of consumer segments such as professionals, corporate users, students, entrepreneurs as well as health care workers. These are customers who need a device with Internet, video, music, and PDA features in one device. This segment thus requires effective communication, entertainment on the fly, and large storage for their personal material. The market for such high-end phones is growing steadily.
Company Analysis
Apple has a rich history in consumer electronics industry. It started by introducing the Apple II in 1977, which was an 8-bit computer developed by Steve Wozniak and became one of the maiden successful personal computers. This was followed by the 1984 release of the Apple IIc, which demonstrated the company appreciation of smaller, light-weight design – the computer had similar power of the of the initial Apple II but weight a mere 7.5 pounds. In 1990, Apple launched its first Apple Macintosh, the Macintosh Classic, featuring 8 Mhz processor, 4 megabytes memory and 9-inch screen. The Macintosh classic retailed under $1,000. The company released iMac G3 in 1998, a design by Jonathan Ive. The multi-colored all-encompassing iMac G3 series took relatively small space on the desk because it encompassed both the computer and the monitor in a single unit. The iBook was introduced in 1999 and came to be fondly referred to as the “clamshell”. The laptop was widely marketed to educators and consumers.
In 2001, Apple released its higher end laptop, the PowerBook, featuring superior capabilities and more expensive than the iBook. In the same year, the iPod Classic was launched revolutionizing how music was listened to and carried around. It became the predecessor of other subsequent iPods and the Mini, Nano, Shuffle, as well as Touch. The company released iMac G5 in 2005. The slim computer sported between 1.6 to 2.1 GHz processing. In the same year, Apple introduced iPod Nano to replace the iPod Mini, offering more storage besides having a slimmer design. MacBook Pro, characterized by an aluminum shell, was introduced in 2006 to replace the PowerBook G4. 2007 was marked with the release of iPod Touch which had superior capability than previous iPods. It had an all-screen design and integrated portable media player, game console, Wi-Fi mobile platform and digital assistant functionalities (Isson & Harriot, 2012).
Similarly in early 2007, the Apple CEO, Steve Jobs, introduced the iPhone, a revolutionary combination of the iPod and an Internet-enabled Smartphone. The iPhone, which had characteristic sleek operating system, touch-screen features, intelligent voice calling, an app store, web browsers, music and video playback etc soon became the most sought after Smartphone in the world. Apple followed this with the introduction of MacBook Air, themed as the “World’s Thinnest Laptop”, in 2008. It weighed just 3 pounds. In 2010, Apple bridged the gap between a Smartphone and laptop by launching Apple’s iPad. It supplied portability of a Smartphone and had a large multi-touch display. October 2012 saw the unveiling of iPad Mini, which is the downsized 7.9” product in the iPad product line. In summer 2014, it is expected that Apple will release another cutting-edge Smartphone to be called the iPhone 6.
Since 2007, with the exception of 2011, Apple has made it a tradition of releasing a new iPhone annually that has the latest version of iOS (Isson & Harriot, 2012). The newer product is always an upgrade of the previous Smartphone. The iPhone product line accounts for over 50 percent of Apple’s revenue as well as about two-thirds of the company’s profits.
Apple’s market share for both smartphones and non-smart units has been growing inexorably over the years to reach over 10% by volume at the end of 2012. Table 5 shows 2007-2012 mobile handset percentage sales for Apple.
Table 5: Apple’s Global Market Share of Mobile Handset Units
The growth of Apple’s unit share in Smartphones has been significantly hindered by the rapid growth of Android. However, in terms of overall revenue, Apple has claimed 40% of the revenue in the entire global mobile phone business. Table 6 shows Apple’s iPhone revenues in percentage over the years.
Table 6: Apple’s global iPhone revenue percentage
SWOT Analysis
Strengths
• Innovative – Apple is a highly innovative consumer electronics manufacturer, a pioneer in innovative high-tech quality products. iPhone 6 will have several innovative features such as fingerprint sensor besides incorporating many functionalities of other mobile products in a single device. It will also have great ease of use.
• Globally known brand name and products – Apple boosts of a widely-known and highly-held brand name in the world. The iPhone product is also widely acclaimed and associated with Apple Inc (Sutherland, 2012). in addition, Apple’s iPhone are known to be highly resistant to computer viruses.
• The “Apple Culture” – Apple has a large consumer base who are loyal and supportive. They are more likely than not to welcome another iPhone release from the company.
• Apple has invested heavily in Research and Development in order to produce products that meet the needs and desires of the customers. The company is also strongly invested in education.
• Apple has a strong history of charismatic and visionary leadership from Steve Jobs to the current leadership.
• Product compatibility – Apple’s iPhones are always compatible with other many applications such as iTunes and other competitor products and softwares. iPhone 6 will therefore have limitless potential for upgradeability.
Weaknesses
• Image – Apple does not a track record of releasing Smartphones targeting people in the corporate world rather individuals (Hill & Jones, 2009).
• Pricing – Apple is not associated with low-priced products rather those for high-end segments. This misses out on cost conscious consumers.
• User interface – The touch screen interfaces for Smartphones are prone to the ‘gorilla arm” problem, where extensive use of the flat, solid surface becomes uncomfortable for users.
• Decision to limit iPhone to one operator is unpopular in a number markets around the world.
Opportunities
• Good rapport with other global mobile phone companies through joint ventures and partnerships to expand their iPhone market share while undergoing reduced marketing costs
• Constant growth of the global mobile phone industry presenting opportunity to increase revenues
• More international expansion opportunities to Asian markets where Smartphones adoption is tremendously high (Sutherland, 2012)
• Growing demand of such online applications as cloud-based services
• Increasing demand for green and energy efficient products
Threats
• Increasing competition from Samsung and HTC. Furthermore, more companies are drifting towards manufacturing smartphones and there is also risk of Apple contractors maneuvering around patent to produce similar or better devices
• Premium pricing pressure – Apple markets its iPhones to high-end segments but faces pressure to make low-priced Smartphones like its main competitors
• The Asian market problem – Apple faces great challenge selling its Smartphone in Asian countries because of lack of interest among consumers who already have such products from competitors like HTC and Samsung (Hill & Jones, 2009).
• There is high product substitution effect in the rather highly innovative and competitive technology industry.
References:
Gibbs, R. (2009). Strategic Alliances and Marketing Partnerships: Gaining Competitive Advantage Through Collaboration and Partnering. London: Kogan Page Publishers.
Boone, E. L., & Kurtz, L., M. (2012). Contemporary Marketing 2013. Connecticut: Cengage Learning.
Hill, C., & Jones, R. G. (2009). Strategic Management Theory: An Integrated Approach. Connecticut: Cengage Learning.
Sutherland, A. (2012). The Story of Apple. New York: The Rosen Publishing Group.
Isson, J.P., & Harriot, J. (2012). Win with Advanced Business Analytics: Creating Business Value from Your Data. New Jersey: John Wiley & Sons.
Kahl, J. S., Silverman, S, B., & Cusumano, A., M. (2012). History and Strategy. Binglwy: Emerald Group Publishing.
