Marketing is one of the most crucial aspects of a business venture which greatly determines its success in the consumer realm. Philip Kotler describes marketing as “A set of human activities directed at facilitating and consummating exchanges” (Kumar & Sharma, 1998). American Marketing Association (AMA) defines marketing in more detail as, “An activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large” (Definition of Marketing, 2012). Marketing is not just limited to advertising the products and services to the end customers, it also entails the determination of complete channels through which a product/ service is going to be introduced in the niche market as well as its promotion throughout the potential customers in order to encourage them to buy the product/service.
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Since the purpose of marketing is to create an awareness of the product/service, an effective marketing strategy also focuses on developing a need of the product/service among other market sectors and expanding their horizon thereon. This is exactly what has been observed in the marketing strategy of Apple Inc. – a world renowned name of innovation and breakthrough in the consumer electronics and computer industry. Although Apple Inc. is not the sole producer/manufacturer and seller of MP3 players but however when an individual thinks about buying a PMP, the first name that comes to his/her mind is an “iPod”. This is attributable to the effective branding and promotion of the product coupled with iTunes music software (helping Apple Inc. creating a strong brand perception in existing and new arenas.)
Apple Inc. is positioned in the market as the innovators of high-tech products. Marketing for such products needs to be encompassing in order to create and redefine new markets in addition to competing in already existing markets. Apple Inc. has always taken steps to keep their marketing process free of new market challenges in their attempt to penetrate deeper into the industry.
This report constitutes an in-depth analysis of the marketing strategies adopted by Apple Inc. It will discuss about Apple’s approach towards the marketing mix and analyze the strategies utilized by the company in relation to market segmentation, product segmentation, pricing, distribution, promotion and social responsibility.
Apple Inc. History
Apple Inc. (an American MNC incorporated in 1977 by Steve Jobs) is a company successfully operating in the consumer electronics and personal computer sector. It was formerly known as Apple Computers Inc. but the word ‘computers’ from the name was removed in 2007, as the company entered into the business of designing, producing and selling consumer electronic products in addition to (the former business operations) developing personal computers and computer software. Apple Inc. remained a predominant manufacturer of personal computers for the early thirty years of its corporate life. Its early products included Apple I, Apple II and Apple III, with Apple III being the conservative machine for the computers of that era; however Apple I and Apple II generated quite huge revenues for the company.
By 1980, Apple Inc. went public and declared its Initial Public Offering. The investor’s confidence in the future prospects of the company was reflected through the fact that Apple generated highest capital financing through IPO in the history. In 1983, Apple introduced its first GUI operating system computer named Apple Lisa which somehow failed to penetrate into the business market due to being overpriced and underpowered, lacking the interoperability and software. For this reason Apple Lisa couldn’t break the IBM’s dominance in the corporate world and was considered as a marketing disaster.
The next breakthrough product for Apple was Macintosh which created hype in the market with a famous television commercial in 1984. The advertisement was aired in the right way and at the right time i.e. during the third quarter of Super Bowl. This ad served as a radical spot and was termed as ‘the best super bowl ad’ hence it caught the attention of many potential customers. The President of BCCI, Bob Circosta commented on the success of the ad, saying “The commercial, which aired only once, was the best on the basis of impact, sales and viewer memorability” (Apple’s ‘1984’ commercial named best Super Bowl ad ever, 2012)
In 1987, Apple registered itself under Apple.com domain name on the Internet. After introducing iMac, iBook and Mac OS, it revised its promotional strategy and came up with the idea of opening Apple retail stores throughout the US computer based markets, since selling through third party retail outlets was not translating the Apple’s brand image to the customers appropriately.
The following invention of iPod, iPhone and iPad along with the iTools and their growing desirability among the customers around the globe have raised Apple Inc’s revenues and share price considerably.
The Marketing Mix analysis of Apple Inc.
The term marketing mix was coined by Neil H. Bordon in his article titled as “The concept of the marketing mix” (The Marketing Mix, 2010). Marketing mix is a concept which is used by businesses in the marketing process. It is known as a set of controllable tools that can be utilized by the firms to generate the desired demand levels of their products in the market. Basically it constitutes 4 P’s of marketing but in some cases they do extend to 10 P’s of marketing. However, in this report, marketing mix analysis of Apple Inc. revolves around six most crucial P’s of marketing i.e. Product, People, Price, Placement, Promotion and Personality- each of which is briefly analyzed below:
Product/ Service
A product can be defined as an item produced and made available in response to a gap in the market. This gap is originated from the need or want of a tangible product or an intangible service by the potential customers. The key element here is to identify the need and address it by delivering the exact item. In response to the growing tech-savvy society, Apple responded by offering high-tech products including personal computers, Servers, iPod, iPhone, Wi-Fi based stations, Accessories, software developing service, iTunes and peripheral equipments etc. The full range of products offered along with their key features will be discussed later in the report.
People
People include the target market of the business. It is imperative for any organization to identify its potential target audience if it wishes to address its needs effectively. The target market of Apple includes the businesses and individuals who demand highly innovative yet user-friendly experience of computer and consumer electronic products. Apple targets those people who are willing to adopt the exquisite technological lifestyle.
Price
Price is one of the most sensitive and important P’s of the marketing mix which involves adjusting the cost to the market in order to reasonably cater the solution by adding value to both the customer relationship and the business. Companies need to ensure that the products are correctly priced i.e. not overpriced enough that no one buys it or underpriced enough that might raise quality concerns in the customer’s mind. The pricing strategy adopted by Apple differs considerably from its competitors in the market, since it is known as a premium brand and has witnessed an ever growing iLegacy over a period. Apple charges high prices, targeting middle to upper level income groups because it is not just selling a product rather it is selling a differential technological lifestyle to its customers which they are willing to trade in return for a handsome amount.
Placement
Placement means the distribution channels through which the product reaches the end-user from the point of production. Placement strategy must be well thought of because it greatly impacts the costs attributable to distribution of products and successive sales made to the customers. The customers are willing to buy products that are conveniently available to them. The best strategy is to provide the customers with the products at a location where they can easily access them along with the requisite support. Apple has a powerful retailing activity. In the late 1990s, Apple Inc. was relying on the big box retailers to deliver its products to the end users. Not much value was being added to the business and company-customer relationship. Apple decided to innovate its distribution channels while competitors tied themselves to big box retailers.
By early 2000s, Apple started a chain of independent stores where staff was focused more on customer needs rather than simply selling a product. These retail stores have gone global and are now seen in major cities of the countries where Apple is available including Asia/ Pacific, Middle East, Africa and Latin America. Through its independent retail stores, Apple has penetrated deeper into the target market creating awareness, need, promising a benefit and then effectively delivering that benefit through innovatory products. Apple’s retail outlets are contributing to its revenues increasingly. Peter Oppenheimer, CFO said that Apple’s 372 stores yielded collective revenue of about $4.2 billion which is a vast contribution to the company’s earnings (Paczkowski, 2012).
Promotion
Five important areas are covered under promotion namely, personal selling, direct marketing, sales promotions, advertising and publicity. A promotional plan serves three basic objectives i.e. to create awareness about the product in the market, to create or increase the demand of the product and to communicate the differentiating factor(s) of the product over the competitor’s. Other objectives may include increasing the sales of the company to a certain level or developing brand equity.
Apple has been quite actively participating in promotional endeavors. It has tailored the promotional strategies according to how potential customers desire to be benefitted from and informed about Apple’s products. For this, Apple pursues two primary promotional methods including advertising and personal selling. Apple believes in heavily investing in the televised, print and online advertising. The apple logo is now amongst the most recognizable logos around the globe and it reflects a stylish and modern lifestyle. It promotes its USP mostly through comparative advertising. It highlights the key benefits of the products in a way that hits the right perception spot of the viewer, convincing them that they will actually be delivered that benefit.
Apple’s promotional strategies are however, hype centric. The market is typically boosted with enthusiasm before the launch of a new product. Apple’s products are usually high priced as compared to the competitors however; they add value to them by offering a three year warranty.
Another promotional strategy extensively used by Apple is the personal selling. Within the independent stores, a customer driven approach is adopted by the sales representatives, who instead of paying attention to selling products, focus keenly on turning the visitor into a compulsive buyer. These representatives are well abreast of the newest technologies springing out in the market. Moreover they are trained to provide the customer care service in an excellent manner. Change is often perceived as intimidating and Apple is always on the go whether it concerns launching innovatory products or upgrading the existing ones. For this reason particularly, personal selling strategy is pursued in order to instill ease and convenience with the newer technologies in the customers’ minds.
Personality
Apple has maintained a minimalist personality of its brand. It is marketing its image largely through its retail outlets which reflects their minimalist philosophy. Its stores are clutter free and staff is trained to deal with customer needs in the most helpful and informative manner. Potential customers are allowed to learn about the Apple’s products, try them and obtain practical help about using the technology. Apple’s brand personality is about delivering power to the customers through technological, user friendly masterpieces which enhances the lifestyle.
Apple reinvigorated its brand personality by creating an iPod halo effect. Catering to the consumer want of great musical experience, iPod and iTunes were created which have earned Apple the most brand loyalty.
Customer Segmentation at Apple Inc.
Customer segmentation is best described by Kotler as, “Dividing a market into distinct groups of buyers who have distinct needs, characteristics or behavior and who might require separate products or marketing mixes” (Market segmentation according to Sir Philip Kotler, 2011) The target market is segmented considering various factors such as demographics which include age, race, gender, religion, occupation, education and income brackets. The customer segmentation could also be carried out geographically, behaviorally or psycho-graphically. Geographic segmentation is carried out by dividing the target market according to geographic area. A business that has created a niche in different cities or countries is said to be utilizing geographic method to segment its customers. When segmenting the market psycho-graphically, businesses base the process on factors like values and lifestyle of the potential customers. The behavioral segmentation is carried out in accordance with the behaviors that consumers display to the product and the patterns in which they spend their time and money.
Apple uses multiple successful customer segmentation strategies. It divides its global market into four geographic segments including America & Latin America, Asia/Pacific, UAE and Africa. Apple has retail stores operating in all of these regions that sell products catered specifically for those markets.
Moreover, what makes Apple’s segmentation process even more successful and profitable for the company as a whole, is its vertical product segmentation strategy. Apple, instead of focusing on manufacturing a single product with multiple features for all customers, it rather manufactures its products with specific use case, highlighting a key benefit that overweighs all other aspects of a competitor’s product. Targeting specific user’s experience and desirability, Apple manufactures a product around that accordingly. With the help of right segmentation, Apple (despite of not generating as much sales as competitor’s e.g. Nokia in case of smart phones) is the lead contributor to the industry profits. This is because it has vertically segmented its products for specific user experiences. For instance iPod for exquisite music experience and iPhone for myriad user-friendly applications and then sells these products at the right price (Apple’s a case study of segmentation strategy, 2007). Customers are willing to pay premium for products that address their needs and wants and this is how Apple is generating sizable revenues.
Instead of targeting a diverse market, Apple believes in targeting a specific consumer market, providing all they desire and thus taking over that segment with quality products and high-tech experience. Following this philosophy, it has segmented its market into Business, Creative Professionals, Education and Students or High-end users. With this 3D market profile, it has secured a high demand for Apple’s consumer digital devices.
Market Research at Apple Inc.
Apple Inc. is known as a premium brand that does not get engaged in extensive market research programs to determine their customer’s needs and wants rather they believe in dictating their customers about what they need and desire in the form of their new products. Steve Jobs, the CEO and co-founder of Apple Inc. commented about the market research at Apple, saying “We do no market research. We don’t hire consultants. The only consultants I’ve ever hired in my 10 years is one firm to analyze Gateway’s retail strategy so I would not make some of the same mistakes they made [when launching Apple’s retail stores]. But we never hire consultants, per se. We just want to make great products” (Heisler, 2012). Since Apple is largely associated with bringing about innovations, so according to their view it is pointless to learn about customer’s needs and wants especially when they have never seen anything remotely similar to what Apple can offer them.
However, Apple Inc. does not completely ignore market research and instead of engaging potential customers in surveys, they focus on the existing Apple users to draw information considered essential for the development of new Apple products. In this regard, Apple began a market research campaign, namely “Apple Customer Pulse” which targeted selective existing Apple customers to fill up periodic surveys. An online community for Apple Customer Pulse has been established on their official website to communicate issues and suggestions about Apple products.
Apple Inc. also conducts similar surveys with iPhone and iPad buyers to learn about the famous and most used features and level of satisfaction with the product from different demographics. These surveys are then used extensively by the company. However, it does not get engaged in market research in the product development stage since the Apple Inc. family figures out what they want and project it onto the market customers. For iTunes and iPod, Apple Inc. said that they wished to own the best portable jukebox and this desire could definitely be projected to potential customers as well.
Apple’s Products and key features
Apple’s products are well sought after around the globe. These products have distinctive features that make them stand out as compared to the competitors’ products. The products run on the Apple developed operating systems (iOS) which sets them apart from the competitors, for instance Dell computers usually run on Microsoft operating systems. Apple Inc. has segmented its products as follows:
Mac Products
MacBook Air
MacBook Pro
Mac mini
Mac mini server
iMac
Mac Pro
Apple laptops are known as MacBooks which come in varieties like MacBook Air and MacBook Pro. MacBooks are equipped with the capability to run different software types including the Microsoft Office to facilitate the media rich student and business customers. It frees the user from virus attack worries since the operating system has been designed keeping in view the security concerns. A very distinguishing benefit includes the parental control feature, thus allowing parents to filter the activities of their children. They include high quality built in camera and battery testing results are far better than competitors. They are typically light weighted. All these features have resulted in high end customer satisfaction.
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The Mac desktop computers lineup include Mac mini, iMac and Mac Pro. Mac mini’s smaller size and capability to be used for creating networks and for home theatre entertainment makes it popular among the targeted segment. The iMac is ultrathin and is designed to cater the minimalist philosophy spreading among the customers. The state of the art design and incorporation of highly innovative technologies like thunderbolt and groundbreaking storage options instantly created a niche among tech savvy consumers. Mac Pro workstation has an astonishing processing power of up to 12 cores and allows the installation of up to 512 GB state drive options. It is not only a technological innovation but an environmental innovation as well since it significantly reduces the energy consumption.
iPod and iTunes
iPod created a new market when launched in 2001 rather than displacing the existing market segment. It allowed the customers to carry 1000 songs in their pocket with initial memory of 5GB but later it was upgraded to 10GB. The iPod family was extended in 2005 to iPod nano and iPod shuffle. The iPod nano had a key feature named ‘shake’ where you could shuffle songs by merely shaking the iPod. It could also play videos. iPod shuffle allows you to play a music with single click, being sleek and small in size, it also allows you to set your listening order. Flip this little device to right and you can listen to randomly played sons, flip to middle if you wish to play the songs in order and flip to right to turn it off. The voiceover feature tells you the name of the artist, song and the playlist. Apple later launched iPod touch with bigger screen and lighter weight. The incorporation of 5 mega pixel camera made it a panorama featured product.
iTunes music store was launched in 2003, which made it much easier to access and download music and this resulted in phenomenal increase in the sale of iPods.
iPhone
iPhone is a line of smart phones manufactured and marketed by the Apple Inc. Six generations of iPhone have been sold until now, the latest being iPhone 5 which was launched on Sept 21st , 2012. Each generation provided extended benefits and enhanced features for the smart phone consumers. The phone runs on iPhone Operating System. The iPhone 4S has an advanced operating system named ‘Siri’, that could perform numerous functions on receiving voice commands, for example sending text messages and doing assortment tasks, thus making life easier with user friendly, simple yet innovative features. The iPhone 5 is 1cm bigger than the previous generation phone. The A6 processor is the iPhone 5’s main attraction.
iPad
iPad is a tablet PC that has no predecessors. It has all the features of a laptop including browsing the web, reading e books, sending emails, capturing photos, playing games, watching videos and creating documents etc. All features in one small tablet with high resolution responsive multi touch screen allowing the users to interact with the numerous applications physically. iPad is a revolutionary device , the launch of which has served as a breakthrough for Apple Inc. The applications in iPad work in both landscape and portrait. It is a new blend of ease and technology. It allows you to read ebooks on the LED screen by flipping through pages, without using a light bulb in dark. Importing photos from Mac is easier and automatically creates an album of the imported pages. iPad syncs with over 14000 applications in the Apps store.
Apple Inc’s goals for customer satisfaction
Apple has been declared as the top company among computer manufacturers for achieving customer satisfaction (Sande, 2012). Apple had immensely focused on its all activities i.e. from packaging to enhancing the operating systems and hit the perception spot of the customer where owning an Apple product not just made them a regular customer but rather included them as a member in the ‘Apple cult’.
Apple earns the satisfaction through quality of construction. It delivers what it promises. Even Mac mini, the low end computer of Apple is twice as expensive as to its competitors low end computers. It derives the customer satisfaction by providing seamless digital experience.
Apple has also achieved immense customer satisfaction by valuing them through their Apple outlets where customers are treated by well-informed and trained representatives who guide them and answer their any query related to the device and repair and replace faulty parts. In the customer care perspective, they gained a competitive edge by not only covering operating system and hardware but other Apple software as well.
Apple’s pricing strategies
Apple Inc. uses most effective pricing strategies that impact the customers’ buying behavior. It often sells its gadgets and devices in price series. For instance, Apple launched three different versions of the “iPod touch,” which were priced at $229 or $299 and $399, based on varying storage capacities. A customer will excitingly spend $229 for that minimalist iPod providing excellent music experience, while comparing it with its high priced version(s). Customers typically don’t realize at that point that they can get iPhone with far more features at lower price of $199. This is how Apple captures a profit margin in each of its product category.
The pricing series strategy cloud the customer’s judgment. The technologically sophisticated customers will want to spend $399 to get the best of all versions available thus leading Apple to generate even more profits (Apple’s Brilliant Pricing Strategy, 2011). Apple launched iPad with an initial price of $499. People perceived it as a high price which is not unusual for Apple’s products but when compared with an iPhone having lesser features, the high price was automatically justified in customer’s perception.
Apple adopts another pricing strategy, i.e. ‘Skimming’. It is where, the company sells product initially at a very high price and compromise sales for earning higher profits. This is probably done to cover the high costs invested in manufacturing and developing the product. Since a brand loyal customer is less price sensitive towards the products, so such strategy mainly targets them successfully.
Apple has applied a price cut strategy both in the case of iPod and iPhone. The iPod experienced a price cut four years later than its launch while iPhone’s price cut happened after two months of its launch. The reason behind it was to gain profits from price cut in the declining phase of iPod while to monopolize the smart phone market in the growing phase of iPhone (Pricing strategy of Apple, 2010).
Apple also offers discounts to its buyers from the education market segment.
Apple’s Distribution strategies
Before 2001, Apple was mainly dependent on famous retailers including Sears and CompuServe, although retailers who were not owning the sale of Apple’s products in real terms were culled by Steve Jobs. The only effective solution to this dilemma was a vertical integration into retail. Apple launched online store, an iTune store following the opening of retail stores across the USA initially.
These retail stores spread across the globe and were later opened in Latin America, Canada, UK, Africa, Asia/Pacific and Middle East and in other major countries like Australia, Switzerland etc. By 2012, Apple had 360 retail stores which greatly contributed to company’s total revenues. Apple chose high traffic locations and shopping malls to open up its retail outlets.
Apple had made a contract with Foxconn- a manufacturing partner, which manufactures products in China and ships them at low costs to retail stores in the US and elsewhere.
Apple’s promotional strategies
Apple use advertising as its main promotional strategy. Its effective advertising is based on comparative advantage received by their customers. Apple is known to create memorable advertising slogans. For iMac the slogan said, “3 steps to the Internet”. In this precise message, the most distinctive feature of the product was communicated to the masses. Slogan for Mac and iPod were “Computers for the rest of us”, and “1000 songs in your pocket” respectively.
Apple’s minimalist retail stores (with congenial environment for visiting customers) promote the brand and the products as a whole. Prospective customers are dealt with highly trained floor staff that provides thorough information about the specifications of the products. These stores give the visitor a feel of an Apple museum which entices/attracts them and promotes the brand as a whole.
Apple uploads various special offers and qualifying promotions on the website and online store to specific market segments like students. An example is a US gift card promotion where a student might win $100 or $50 of Apps upon buying a Mac or an iPad from online store.
Marketing Planning at Apple Inc
Apple has a separate marketing unit that is headed by a Marketing Chief. The marketing unit carries out all marketing planning in the most effective manner. The marketing method used by Apple is termed as ‘Golden Circle’, where instead of laying more focus on communicating to the audience about ‘what they do?’, they start spreading the message with the ‘why’ component i.e. ‘Why they do what they do? (As Apple believes in thinking differently)’. Their message begins with addressing the audience with ‘why question ‘, followed by ‘how they do it’ (By making user friendly and elegantly designed products) and ending the message with ‘what they do’ (Developing great computers).
The marketing planning process begins with research and planning where complete market analysis is carried out. It leads to the stage of developing market strategies where the marketing goals, ambitions, strategies and marketing mix are developed, leading to the actions and control step where marketing mix are managed and projects are delegated keeping in view the due time limit.
Social Responsibility at Apple Inc.
Apple lays focus on supplier social responsibility ensuring healthy and safe working conditions/environment, use of environmental friendly manufacturing processes and deliverance of human and labor rights to the workers. It conducts specialized environmental audit. According to the official website of Apple, “Each of these audits included onsite inspections of wastewater treatment facilities, air emissions handling, solid waste disposal and noise abatement systems – both at the facility and in the surrounding areas. The audits also included interviews with local residents. The auditing team reviewed all documentation regarding wastewater, air emissions, and noise monitoring as well as waste removal and disposal documentation from the past three years” (Environmental Impact, 2012).
Apple reflects the social responsibility in the marketing P’s of process and placement. It ensures that all manufacturing processes are carried out in nonhazardous conditions, workers are treated with dignity and no environmental damage is being made.
Conclusion
Apple’s in depth marketing analysis concludes that it engages itself in effective and attainable marketing strategies which results in high customer satisfaction level and greater profit margins for the company. Apple has been successful in creating a luxury and premium brand image by adopting just the right marketing mix strategies and policies.
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