IPhone Product Marketing Plan

Executive Summary

The purpose of report is to prepare a marketing plan of iPhone and it focuses on some specific issues like product description, pricing strategy, promotional activities, distribution channel, market position, external and internal factors of the products, action plan of the company, marketing control, organizational chart, and so on.

Company Profile

Apple Inc is the pioneer of computing, communicating and entertainment device design, develop, and marketing including their relevant software, accessories and networking way out to ensure highest customer satisfaction. Including a huge variety of own product line, the company third party value added services through Apple’s web based App stores through its strong ecommerce backbone. Rather than the global presence online, the Company has physical appearance with reportable working segments of the Europe, Japan and USA and even emerging Asian markets both for wholesale and retailing for computer system, communication, and entertainment devices where iPhone is the hottest globally later than the iPod and iTunes Store.

Apple is deeply concerned with the patents and copyrights of its products like iPhone, ipods and iTunes and applied for trademark registration in the US market including a number of overseas markets to protect them from any manipulation. Starting for California in 1977, Apple Inc is a listed company of NASDAQ with a market capitalization of US$ 331,255 million with 23. 7% return on assets, 36.8% return on equity and Price/Earnings ratio is 20.0 in the current year and 49400 employees (The Morningstar 2).

Summary of the Plan

In order to sustain in this competitive market, it is essential for Apple to enhance its marketing strategies and come up with its own chipsets, rather than buying those from companies like Intel at high price, which increases the annual expenditures of the company. Allocating a good amount of budget in the R&D of Iphone and emphasizing on renovating the product into a mini computer so that it can get beyond the competitions with other Smartphones and compete with products like laptops and PCs will prove to be profitable for the company by increasing sales and lowering costs of buying chipsets from others.

Current Market situation and market description

Apple is well-organized company and re-engineering ability in upgrading iPhone product categories, which brings success in the international market as iPhone sales revenue increased by 266% in 2009 (Apple Inc 42). According the annual report 2009, it sales iPhone in more than 80 countries by its direct distribution channels, its cellular network carriers’, and some third-party retailers; so in 2009, its sales revenue from iPhone and related products were $6,754 million while this figure was only $1,844 in the fiscal year 2008 (Apple Inc 36). On the other hand, Diaz (1) pointed out that its net profit from iPhone was nearly $1.50 billion in 2010 due to increase sales revenue in Europe and Asia Pacific, which was 90% greater than previous year.

However, Apple’s main target market for its iPhone 5 is upscale and middle-earner customers who have enough financial capability to purchase this product at higher price. However, Apple should try to increase customer base by adding features with reduced price for all range of customers.

4 Ps of iPhone

The Product

I-Phone is a communication device innovated by Apple integrating GSM1 technology and Information Technology where the most popular i-pod functions are added and the users are facilitated to telecommunication and internet applications. Apple has bring this product in the market in 2008, with multi touch user boundary based on both Windows and Mac platform backed by private cellular operators and the uses enjoy most of the computing opportunities including mailing, browsing, download, iTunes online purchase high regulation camera and video opportunities. In the succeeding year of introduction, Apple has added more features in iPhone like Wi-Fi wireless operation and networking facilities including higher regulation screen, Bluetooth, iPhone 3.2 software and features of Genius technology impressed customers and created high market demand (Apple, 10).

Price

From the introduction, Apple has emphasized to maintain affordable and competitive price for its iPhone in relation to the existing mobile phones market though the raising demand of this product is considerably privileged than the supply all over the world. To maintain its pricing strategy, Apple used only its own Agents for distribution and it has demonstrated that the high market demand has forced the company to boost price and depending on the location, the price varies from US$ 725 to US$ 1153 for across-the-board. For instance, the US wholesalers get iPhone at US$ 760 while the European wholesalers trade it at US$951 but the Asian Agents are offering from US$ 1153 for different assortments of models (Quinn 1).

Place

For iPhone, the Apple has engaged to utilize both digital and real-time distribution channels globally while the target consumers are primarily in SME sector, students, enterprises, governmental officials and the vendors of creative markets. Apple distributes its iPhone through Apple’s web based App stores including the real-time distribution channels of wholesalers, a large number of resellers, along with national and local retailers while none of the individual distributors has contributed more than 10% of the sales during the first three years of iPhone introduction due to digital distribution. Apple keeps its effort to reach the customers directly through its online sales force at online stores together with its products and resells certain third-party products in most of its major markets other products directly to end users through its own sales force at online stores including other manufacturers products by ensuring high quality after sales service (Apple AR, 10).

Promotion

Taking into account of market trend the marketing campaign for iPhone has aimed to be sophisticated complying with its marketing strategy that ultimately eager to achieving the goals of the product promotion systematically while marketing plan has taken into account of elevated traffic of content management, keywords research and accomplishment, and search engine optimization for the target audiences. The promotional campaign of iPhone would be an ongoing process starting through a press conference for greater than before media coverage to the product while Apple has its own gateway to advertise in huge technology based websites. Such campaign would draw the attention of users that ultimately result as an elevated sale for iPhone.

Competitive Review

Apple is one of the strong competitors in the mobile phone industry as its iPhone has captured significant shares in the global market. However, Apple has to face high competition as multinational companies like Microsoft Corporation sells window phone, and Nokia sells Nokia N97, which has serve similar services to the customers. According to the annual report 2009 of Apple,

Nokia

Chen (9) pointed out that the physical and multimedia features of Nokia’s N97 are similar to the features of Apple’s iPhone. However, the following figure shows these similarities –

RIM

RIM’s lightweight Blackberry is one of most popular product as it has captured the second position than 27.4% share of the US smart phone market;

Motorola

Though Motorola Droid Smart phones and Droid X is two well-known product of market giant Motorola but it lost its market share in the US market to RIM and Apple due to introduction of some new features;

Samsung

Chen (1) addressed the positive side of Samsung’s F700. In addition, its product named “Omnia” is also similar to the iPhone.

Porter Five Forces Analysis:

Porter 5 force analysis
Figure 2: Porter 5 force analysis. Source: Self generated from Kotler and Armstrong (65)

Competitive Rivalry

There are many competitors in the global market those offer similar products, for instance -Packard, IBM, Nokia, Gateway, Acer, Sony, Motorola, Fujitsu-Slemens, Legend, Sun-Micro-systems, Nortel etc. but the relationship is not always rivalry.

Threat of Substitute

threat of substitute for Apple’s iPhone product is very high because many firms in the industry try to introduce new upgrade substitute products like Nokia introduced Nokia N97.

Threat of New Entrants

 Threat of new entreat is comparatively low for Apple’s iPhone, as new entrants must need advance technological support, knowledge, and huge investment to sustain this competitive market, which is difficult for the new company. However, the risk of new entrants would be high, if any large mobile phone company intend to introduce this iPhone with more innovative features;

Bargaining Power of Suppliers

 Bargaining power of suppliers is high because Apple has to contract with suppliers because it needs to collect raw materials like certain liquid crystal displays, microprocessors, dynamic random access memory, flash memory, and so on from single or limited suppliers;

Bargaining Power of Buyers

The bargaining power of customer is moderate as competitors provide similar iPhone with advance technology at lower price, so, loyal customer of Apple may become IBM’s customer if IBM offer same high quality product at lower price.

SWOT Analysis of Apple Inc

SWOT Analysis of Apple Inc
Figure 3: SWOT Analysis of Apple Inc. Source: Self generated

Strength

  • Innovative combination of widescreen iPod with touch controls, mobile phone, and an Internet communications device is the main strongest point of this product;
  • In addition, strongest market stability and brand awareness of Apple Inc also have positive impact on sales as Apple is famous for iPods and the original Macintosh;
  • Apple distributes iPhone in more than 80 countries and the company would like to distribute rest of the world;
  • Chen, et al (10) pointed out that the quality of the Apple’s iPhone is outstanding in terms of brightness, scratch resistant screens, well metallic finish, and resistance system to computer viruses.
  • It has expert, experienced, brilliant, and dynamic employees to develop new version of this product with some other special features;
  • Administrative control is another important factor for success of the company, so, Apple maintains the standards of the PCAOB2 to process their audit reports;
  • However, Apple has about 34,300 full-time permanent workers and more than 2500 full-time temporary workers, who are working hard for the development of the company as well as its product iPhone.

Weakness

  • The economic position of resellers is not always good enough to carry on business with high confidence;
  • The confidence level of the purchaser has reduced because of global financial crisis. As a result, Apple’s export market share has reduced;
  • Many companies in the US market like Hewlett Packard, Dell, IBM, and Compaq have strong customer base;
  • As price is one of the most important factors to customers, so, target market range is not too wide for this product due to high price;
  • The success rate in Asian market is not good enough;
  • However, touch screen system may create gorilla arm disease.

Opportunities

  • As the market demand of iPhone is too high in global market, the marketer of Apple collaborate with powerful multinational mobile companies as Joint venture, merger, and acquisitions with renowned companies give the opportunity to enlarge its business quickly. As a result, Apple and IBM formed a joint venture, named Taligent, with the goal of creating a revolutionary new operating system;
  • Apple has opportunity to include more feature in single devise by using the advance technology and research outcomes;
  • In addition, Apple creates a new dimension in the communication industry, which gives the opportunity to the company to spread out its business operation all over the world.

Threats

  • Intense competition in the global market is the main threat for Apple because competitors can change the scenario of market environment, for instance, its competitive position changed dramatically in 1981 while IBM entered in the PC market with innovative products at lower price;
  • Many large and small companies produced similar products without patents and ask lower price of iPhone, which really great threat for the company to increase sales of its iPhone. As a result, Apple has to reduce the price of its iPhone to hold market leading position;
  • The profitability of iPhone may hamper if its operating system depends on the performance of distributors, staffs and other retailers;
  • On the other hand, some positive initiatives of the competitors may affect on the operation of Apple like joint venture, merger and acquisition between competitors may create hindrance.

Objectives and Issues

Short term Objectives

  • For iPhone-5 people are eager to welcome this product due to the marking campaign and the short term objectives of this marketing plan is to earn an annual rate of return on investment at 30% over the next three years;
  • To strengthening the core business of iPhone with an investment of US$ 300 million for research and development within the next three years;
  • Apple In has targeted a growth of net financial return for increase annual turnover 26% by next three years;
  • One of the most important objectives of the Apple Inc is to start its operation in the Asian emerging market by 2011 and achieve the market leader position in this market by capturing 25% market share within next three years while it has also targeted a more10% growth in the US and European market;

Long-Term Objectives

  • Apple Inc has targeted to boost its annual profit from global operation of iPhone of 20 % of the corporate within next five years;
  • It has aimed to spread out customer awareness about the product and services of Apple Inc brand from 25% to 30% within next five years;
  • Tippling the budget for R&D in order to conduct huge research works to get competitive advantage over the competitors within next five years;
  • Boost up the budget for promotional works by 80% with 2016 to amplify the brand awareness of Apple Inc for global operation.

Marketing strategy

Positioning

According to the report of Android Tapp (1), Apple iPhone OS holds the market leading position by capturing 27.90 percent shares, RIM holds the second position and Android OS occupies third position. However, the following figure demonstrates the market position of Smartphone in the US market more elaborately and shows the customers awareness of the relative brand versus competing products on important buying decision.

Market position of Smartphone
Figure 4: Market position of Smartphone. Source: Android Tapp (1)

However, the market position of Apple iPhone is not same in the international market because there are many companies those have no patents but manufacture similar products and sell these items at very lower price. As a result, this marketing plan would suggest differentiating its functions and appearance by including most of the features of personal computer in the iPhone and add versatile, convenient, value-added device to attract young generation particularly to the students. Moreover, it must provide touch screen facilities with less buttons, and give full Internet access and visual voicemail, which must help the company to increase customer as all sorts of customer would like to take the opportunity of visual voicemail.

Product Strategy

Apple plans to make further multifaceted versions of iPhone for professionals with additional features like larger, removable disk storage capacity, support for USB memory sticks, digital camera memory cards, external hard drives, lower weight and thinness (should fit into a wallet, like a mini-computer or become the wallet), and significantly longer battery life (should play movies for twice as long). Moreover the company will be undertaking strategies to spend more on R&D and come up with its own CPU chipsets, together with even faster, more incredible speeds than ever offered, more precise information on location; capacity to link with software to add even more functionality; peer to peer wireless exchange, improved camera for more high quality video conferencing, etc.

Price

Apple should set the prices of the iPhone products by keeping in mind about the quality, brand image, service range, and production costs of the iPhone 5. In addition, it should consider the income levels of its targeted market, and it should offer highly reasonable, affordable, and fair price for the customers of poor countries.

Place

As the aim of this marketing plan is to meet its target sales within next two years, it has to develop strong distribution channel in order to marketing its products. In addition, most of the people of developing countries have no opportunity to order online, so, Apple should open retail outlets in these countries in order to reach customer directly.

Promotion

 In order to be a market leader in Smartphone industry, Apple should provide more discounts and after sale services to the customers because average purchasing power of the people has decreased because global financial crisis. For instance, various promotional efforts will involve discounts, bonus packs, direct price reductions, advertising specialists, sampling, free the customers protect screen, free giveaways, and free internet service for 3 months.

Furthermore, Apple should develop innovative advertisement campaigns reflecting its positioning strategy by highlighting extra facilities and relative economies of each package offered and select different media for advertisement.

Marketing Research

The objective of this marketing research for iPhone is to understanding how and why customers cooperate with the iPhone backbone, what attracts customers and why and to identifying the customers needs for further development of the product. This researcher uses a wide variety of customers as sample to collect data for further progress of the iPhone and to assess the concerned market respond from the new development of the product for which this marketing plan has organized. To do so this researcher interacted with the end users, gathered their options regarding the iPhone’s user friendliness, and features those customers argued for improvement while the feedback from target groups integrated survey outcomes along with brand awareness assessment to indemnifying how the customers views iPhone globally.

The outcomes of this marketing research have demonstrated that the target groups are very significant to expand the iPhone market to get in touch with businesses along with an extensive professional base while the target audiences are 18 to 25 years age group. This age group has an open view with middle-income level individuals who are School and College students who has communicated through email and web campaign at iTunes and interviews in the Apple stores and suggested to improve iPhone as a portable personal computer including its existing features. Most of the end users would like to see iPhone as a next generation computing, communication and entertainment devise with full functionality of personal computer with both Mac and Windows platform and such customer’s views would contribute Apple with a new vision to improvement of iPhone.

Marketing Organization

The organizational structure of Apple Inc. is very complicated to understand and different from single product based companies because it has different business units for business operations in global market. According to the view of Anderson & André (276), the organizational chart is one of the most crucial factors to execute the Multi-product Strategies of the company as it would be different from one to another in terms of product range. Moreover, Anderson & André (276) further addressed that the Multi-product organization using the Multidivisional (M-form) Structure which has also 3 variations and these are the Cooperative M-Form, the SBU M-Form, and the Competitive M-Form in order to control all the business units.

However, it can confidently argued that Apple Inc is a Multi-product firm considering the product line of this company, because it has multiple different strategic business units and Affiliates, so its organizational structure will be Multidivisional (M-form) Structure though the following figure demonstrates that its organizational chart is more complicated than (M-form) structure. However, figure one presents entire organizational chart of Apple –

Organizational Structure of Apple Inc
Figure 5: Organizational Structure of Apple Inc. Source: The Official Board (1)

According to the annual report 2009 of Apple Inc, Chief Executive Officer of this company is Steve Jobs who takes all major decision by considering the board meeting and the CFO Peter Oppenheimer is responsible to control the company. In addition, it has al least six directors like Andrea Jung, Ronald Sugar, and William Campbell et al. who are highly educated and experienced to carry on the business with integrity, reliability, and consistency.

Budget

Apple Inc would focus on budget in order to measure the prospect of the business and estimate the target profit from next generation iPhone segment. However, the total production cost per unit would have to be reasonable though this company invest a large amount for promotional activities, research and development, new advertising campaign, and so on.

Projected Marketing Budget of new iPhone Campaign

Marketing Budget for 2011
Variables US$
Promotional activities $333000
Advertising television, $660000
Radio $140000
Print media (Magazine, and other Journal) $267000
News paper $200000
Direct mails, outdoor advertising, and others $160000
Video Commercial $70000
Flyer $10000
Mascot $15000
Web marketing (including costs of Search Engine Optimization (SEO), advertisement through social networking sites, website development, blogs, e-mail, online advertising in different areas) $400000
Market research $200000
Distribution stalls $100000
Bill boards including poster $850000
General and administration $200000
Others $260000
Total Marketing Budget US$3000000 or US$3.0 million

Table 1: Marketing Budget for Apple’s iPhone. Source: Self generated

Action plan

This marketing plan has designed an action plan for last three quarters of the fiscal year 2011 to marketing its iPhone 5, for instance –

  • April to June: Apple Inc has already marketed its iPhone products from the beginning of this year and the customers are appreciated its services. The marketer will carry on its promotional activities and advertising functions to hold the market leading position from April to June of 2011, and it will select media like popular newspapers of local and international markets, TV Channels, WebPages, social networking sites, Maskot, and many other way;
  • July to September: A number of mega competitors are running on diversified way to achieve public attention while Apple’s iPhone 5 is utilizing only a small portion of Asian market. Therefore, the management will concentrate on sales revenue from this sector by conducting market research and review the pricing strategy considering the current position;
  • October to December: Belch and Michael (57) stated that the fundamental principle of Customer Relationship Management is to achieving and retaining the loyal customers rather than struggling for maximum market profitability. As a result, the marketer will develop or adopt more efficient data base system to collect and retrieve data about the customers, and give virtual and dynamic to respond to the demand and enquiry of the customers. They also develop interpersonal skills to communicate with the customers and give free repairing guarantee in case of technical fault of the company but they must scrutinize all objections from the customers. However, the response of Apple to the customers should make quick to solve their problems; so the company needs to develop efficient operation and training program, which will bring ultimate success of the company.

Marketing Control

  • According to the report of Boykin, Ashley & Lance (5), joint venture with competitors helped to increase its sales revenue, so it should follow this strategy in future in case of marketing iPhone products;
  • Many companies has faced huge lose because of global financial downturn and lack of corporate governance, so it should more focus on its internal control system to avoid such situation;
  • The CFO should emphasized on the linking of all the monetary functions for having greater visibility and control on financial functions;
  • It should increase its budget for R&D and promotion activities by 25% because customers’ preferences change rapidly, so it is important to measure the attitude of the customers;
  • In addition, the management review the strategies and market survey reports to develop the features of iPhone as competitors always try to introduce innovative products;
  • The marketer of iPhone 5 should survey the market frequently then fix plan for different region;
  • The management can identify the uncertainty of the market in terms of return on investment capital; as a result, they must perfectly measure the long and short-term risk factors, liabilities, trade credit, accrued liabilities, and so on.

Operating Control

  • Operation managers would provide the progress report by e- mail, via telephone, voice mail or using other communication system and they must inform about the operational dilemmas and their contribution in solve the problems;
  • The HR manager, guides and other regular staffs and hired personnel will act as a team while HR manager will control operation departments and recruit sufficient number of employees, arrange training program for employees and expatriates in order to operate the company with highest skills;
  • Directors must concentrate on the production cost of the iPhone and take initiatives in order to reduce costs as it should not be higher than competitors production costs;
  • Managers must attain quarterly meeting with the board of directors to inform about gradual improvement, sales position, growth status of global market, and current status of the project.

Works Cited

Anderson, Simon, and André de Palma. “Multiproduct firms: A nested logit approach.” Journal of Industrial Economics, 40 (1992): 276. Print.

Android Tapp. Total U.S. Market & Smartphone Market. 2010. Web.

Apple Inc. Annual report 2009 of Apple Inc: Form 10-K. 2008. Web.

Belch, George. and Michael Belch. Advertising and Promotion: An Integrated Marketing Communications. London: McGraw-Hill, 2003. Print.

Boykin, Ryan. Ashley Fiorini. & Lance Tanaka. Apple Inc. Case Study# 1: iPhone. 2008. Web.

Chen, Hsiao-Chen. et al. Marketing Analysis- Apple iPhone 3GS. 2010. Web.

Diaz, Sam. Apple Earnings: iPhone Growth Magnifies Global Smartphone Potential. 2010. Web.

Kotler, Philip, and Armstrong Gary. Principles of Marketing. New Delhi: Prentice-Hall, 2006. Print

Quinn, Dan. iPhone 4 Global Price Variations. 2010. Web.

The Morningstar. Apple, Inc. AAPL 2011. 2011. Web.

The Official Board. Organizational Chart of Apple. 2011. Web.

Footnotes

  1. Global System for Mobile.
  2. Public Company Accounting Oversight Board (United States).