The Apple iPhone was released on June 29, 2007 (Apple Inc.). Anticipation for the product started six months earlier, the moment Apple publically hinted of the launch; and was clearly seen by the crowds waiting in line outside retailers. The record-breaking consumer response to the release of the iPhone was due to the position Apple placed itself within the smart phone market. Strategic marketing ignited a buzz for the new product that has stayed lit for the past five years. Apple’s iPhone has remained on top of the smart phone market share since its release. However, in the past five years the release of multiple comparable products has given Apple a reason to expect a decrease in their market share. In order to avoid this decline we propose Apple penetrate a new market and once again be the innovative trend setter their brand has become known for.
As of today Apple has always targeted professionals, students and individuals between the ages of 18-35. This demographic is the main market for smart phones, but the truth is the demographic that has seen the most increase in smart phone purchases over the past five years are “tweeners” (children aged 8-12). Apple’s primary goal is to remain at the top of the market while gaining market share. We propose the following recommendations for Apple to uphold a positive business strategy: * Introduction of the iPhone Mini; an iPhone geared towards the “tween” market; offering beneficial features for children and parents. * Position the iPhone Mini in the market as the smartest, safest smart phone for “tweens”, young teens, and older teens. * Increase market share domestically and internationally
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad” (Apple Inc., 2013). Situation Analysis
Apple Inc. is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company’s best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad. Thanks to its philosophy of comprehensive aesthetic design and its distinctive advertising campaigns, Apple has established a unique reputation in the consumer electronics industry. This includes a customer base that is devoted to the company and its brand, particularly in the United States. Recently, the company has recognized the opportunity to develop the iPhone Mini, targeted to the little ones of the families, this due to the fact that children are attracted to technology and smart phones. Apple has acknowledged their opportunity to attract consumers in this market. Industry Environment
Political and Legal Forces. Governments provide the basic legal regulations and restrictions that influence the PC in producing and selling personal computers and smart phones. These refer to government policy such as the degree of intervention in the economy. Apple, being a Cupertino based company in California, is subject to American laws and regulations. These include taxation laws and product manufacturing regulations. Socio-Cultural Forces. Changes in social trends can impact the demand for a firm’s products and the availability and willingness of individuals to work. Apple is at the forefront of social trends, it not only follows trends, it starts them. It is very good at market research and finding out what it is exactly that people want. The omnipresent iPhone is a massive trend in itself. Technological Forces. New technologies create new products and new processes. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products.
Apple, being a consumer electronics company has a core competency in technology, more importantly it also has a competitive advantage regarding technology given some of the revolutionary products it has. For example, its Retina display is the first mass produced screen with over 300ppi (pixels per inch). Economic Forces. Economic environment implies all the factors both internal and external involved in operation of a business. These economic factors will include; income, employment inflation, interest rates and wealth that have an influence on buying behaviors of consumers and the firms. The company is focusing on recovery economy. The economy in the United States and Europe has improved thus there are hopes of full recovery looming although the outlook is not certain. The uncertainty in the markets will always leave the consumers weary of hike in price or big ticket purchase like mobile communication devices and computers.
As part of a very competitive industry, Apple faces the threat of many competitors regarding smart phones. The biggest competitor is Google’s Android OS with Samsung as a leader in 2012; the Android OS has claimed 42.7% of tablet sales. Android smartphone sales have increased from 57.5% of total smartphones worldwide in 2011, to 75% of smartphone sales in 2012. The Android OS seems to be growing really fast. A new threat that Apple has to look out for is BlackBerry, although this company was facing many innovative and technological glitches, it is now attempting to reestablish itself in the smartphone market with the BlackBerry 10 operating system and new smartphones, Z10 and Q10. With over one million new BlackBerry devices already sold, BlackBerry looks to be off to a good start for regaining its place in the smartphone market. Nevertheless, since Apple Inc. has a diverse product line, it faces competition from mobile industry, music and PC industry as well. Products| Competitors|
Macintosh and iMac| IBM, Dell, Lenovo, Acer, HP
iPod| Samsung, SanDisk, Amazon.com, internet radio, websites such as Pandora and Spotify.| iPhone| Samsung, RIM’s Blackberry, Nokia|
iPad| Amazon’s kindle, Samsung, HP
Operating System| Microsoft Windows, Google’s Android OS
The company is facing high competition in all areas of its production. The markets for digital devices are highly competitive because they are
characterized by high and rapid technological changes in software and hardware that have increased the potential and substantial use of computers, mobile communication gadgets, and digital electronics. This has led competitors to introduce new products with highly competitive and friendly pricing, features and performance behavior. Internal Environment
Since its birth, Apple has been a company run by engineers and programmers instead of managers. Apple began using the matrix structure of management when the company became larger. Top management hands out strategic decisions to project managers and different departments to be carried out. The project managers then devise an operational plan and then coordinate their units to successfully carry it out. The department managers are then consulted to provide budgeting, scheduling, and market analysis. The official departments that make up the matrix structure for Apple are Finance, Sales, Hardware Engineering, and Software Engineering. This structure is clearly understood by everyone in the whole company. Additionally, the current structure is consistent with current corporate objectives and strategies because Apple’s current focus has been on increasing sales through software and hardware engineering.
This is similar to many other computer companies in the business such as IBM and Compaq. Moreover, Apple’s internal environment is known to have the following characteristics: good management, a flat organization, positive social contribution, individual reward systems, individual performance opportunities, and a positive team spirit. Corporate Culture. Apple prides itself on its innovative culture – freethinking and open-mindedness is encouraged. This goes along perfectly with their new “think different” advertising campaign, which has resulted in an increased popularity of Apple in the minds of consumers. Their corporate culture is consistent with their current strategy of differentiation because it portrays a typical Mac user as a free thinker that will not assimilate to popular beliefs of the time.
SWOT analysis shows on one hand the internal factors that are consider as strengths and weaknesses within the company, and on the other hand the external environment for opportunities and threats that are related to Apple Inc. Strengths. Apple has many strengths; some of their strengths are having strong customer loyalty, being the leading innovator of mobile device technology, having strong financial performance, a good brand reputation, strong marketing and advertising teams, and a unique fashion identity. One of its most important strengths is its strong loyal customer base, which provides a strong competitive advantage. The company has been chosen as the most innovative company in the world for the 3rd time in 2012. Apple’s essential competency of producing innovative products is the strength the company builds upon and is able to bring the most innovative products to the market.
Moreover, Apple’s financial performance is one of the best among many companies. By the end of 2012 the company held about $10,000,000,000 in cash, which can be used for acquisitions, buying back company shares and other matters. It also has higher gross profit margin than its main competitors, which is equal to 43.9%. Apple also has a reputation of highly innovative, well designed, and well-functioning products and sound company performance. The brand is valued at $76.5 billion and was the second most valuable brand in the world in 2012 Marketing is one of the strongest functional areas Apple has. It can sell pricier products, build superior stores (they are more or less built to achieve marketing goals) and advertise their products in a compelling manner. Weaknesses. Some weaknesses of Apple Inc. include their high prices, product incompatibility due to their distinct operating systems, recent changes in management, and their lack of corporate users.
Many critics argue that the price is not justified. When there’s such a fierce competition, Apple’s pricing has become a weakness because consumers can easily opt for similar quality but lower price products. Another weakness is that Apple uses iOS and OS X. The iOS and OS X are quite different from other OS and uses software that is unlike the software used in Microsoft OS. Due to such differences, both in software and hardware, users often choose to stay with their accustomed software and hardware (Microsoft OS and Intel hardware). This can also cause less appeal to corporate users because most corporations use Windows systems. Recently, Apple has lost Steve Jobs, a known figure that has been trusted by many. Steve Jobs has been called the mastermind of the iPhone, iPad, and Mac products. As of late August 2011, Tim Cook became the new CEO. Along with Jobs departure, Scott Forstall and John Browett (Chief of Retail) left the company as well, causing an impact of Apple’s management. Many have said that the recent decline in sales and control has been a direct effect of recent management changes in Apple. Opportunities. Although there are many weaknesses, Apple has many opportunities.
With the sharp rise in consumer demand, growth in the mobile market, and new target markets, there are many opportunities for Apple. Apple’s iAd advertising platform, which allows advertising on Apple iPhone, iPad and iPod touch has created growth in the market. In a technological era where there is an increasing demand for technology, this creates a wider target market. The growth of mobile advertising market is an opportunity, which could be further seized upon. Apple could also expand its range of iCloud services and software as the demand for cloud-based services is expanding. Finally, there is a chance to increase sales from targeting families offering the option of having an extra iPhone for their children at a lower price. This idea goes according the fact that children at early age have started using smart phones and appeal with music and games offered by iTunes and AppStore. Threats. Apple Inc., like any other corporation, faces a plethora of threats. Some threats include the rapid technological changes, price pressure from competitors, new competitors, an online growing market, and similar substitute products.
One of the most severe threats Apple and the other technology companies are facing is the rapid technological change. Companies are under the pressure to release new products faster and faster. Those companies that cannot keep up with the competitions often fail. This is especially hard when a company wants to introduce something new, innovative and successful. Apple has been able to bring very innovative products to the market so far but for the moment, even Apple hasn’t unveiled any plans for the new products (except iTV) and may lack new introductions to keep up with competition.
Price pressure from competitors over key components is another threat. Samsung, for example, has already asked Apple to pay higher price for its application processors. Due to intense competition and no viable substitutes, Apple may be asked to pay even more.
Apple also faces threat from online music stores, such as Amazon, Wal-Mart and online music subscription companies, such as Spotify, where people can find music and apps cheaper or even free.
Our first objective is to increase market share an estimated 50% as a result of using the iPhone Mini as a product extension. Specifically, using the low-cost features of the iPhone Mini, we hope to increase market share in Asia. It is currently 23% in China. Market share should be greater than 30%, especially since Android has a market share of 70%. In India we currently have a 5% market share, which we hope to increase anywhere between 10% to 15%. In the United States we hope to increase market share by 10%. Our second objective is to increase awareness of the iPhone Mini by increasing share of heart and share of mind by advertising throughout the three-tier advertising strategy. Target Markets
Essentially, we will be targeting two distinct groups of people with some level of overlap. Initially we will be targeting a market of children between the ages of 8 and 18. This group of individuals is separated into tweens (ages 8-12), young teens (11-14) and older teens (14-18). Currently, there are 20 million tweens in the U.S and it is projected to reach 23 million by 2020 (U.S Census Bureau, 2012). It is suggested that when children enter the ‘tween’ age, they begin to grow distinctive social needs and desires, and subsequently reveal different hopes, dreams, and prospects for the future. Tweens begin to develop their own self-identity and seek out information from parents, media, and peers that will all help shape that child’s future. Therefore, we wish to instill positive ideas of the Apple brand at this young age in hopes of them becoming a lifetime customer, as with all Apple products, they provide for an elegant mix of sophistication with simplicity. We have found that the age of 10-11 appears to be traditional age for pre-teens to be given a cell phone. Six out of 10 pre-teens were either 10 or 11 years old when they were given their first phone.
Further, 20% of 8-9 year olds and 15% of 12 year olds were given a cell phone (Rodrigo, 2012). It is evident with such numbers that this age group appears to be a potential “sweet spot” for our iPhone Mini. Specifically we include older teens as part of our target market because in this day and age parents are buying cell phones at historically young ages, meaning children with parents in the ‘late-majority’ and ‘laggards’ stages will traditionally receive their phones later in their lives. With generations becoming more and more technologically savvy, it is imperative for us to grab hold of this market. The increased technological skills that pre-teens have will make our advertising schedule paramount. We must endeavor to have Apple at the top of these children’s mind. A recent survey found that the top three reasons parents buy cell phones for tweens are: safety (84%), tracking child’s after-school activities (73%), and child asked for one (16%) (Rodrigo, 2012). Invariably, this demonstrates that the biggest reasons for buying a cell phone for a child are parent’s safety issues with their children at school.
This shows that we must consider parents as a distinct part of our target market, as they undoubtedly have more power in the eventual buying decision. Additionally, it has been estimated that it is more expensive for a firm to invest in attracting new customers rather than building on existing customers. This is why we also are going to rely on our present customers, who are embodied by the parents in a family home that already have the genuine love for the brand and the expertise needed for Apple products to continue pushing this tradition with their offspring. Essentially, the parents and potentially grandparents will be acting as an informational reference group for our target of pre-teens all the way through the oldest teens.
As a final measure of our target markets we need to assess their measurability, how substantial they are, accessibility, how differentiable they are, and if they are actionable. It is clear that it is a measurable market, as it is dictated as children between the ages of 8 and 12, and they alone amount to 20 million in the U.S. Furthermore, in this day and age we can say that it is definitely a substantial market as a study found that 60% of tweens possesses a cell phone, and they have grown up being exposed to constantly evolving forms of technology, which will leave them more prepared for a smart phone that any tweens in history.
This specific target market we are analyzing is also readily accessible, as the openness of the Internet along with the buzz of social media has made accessing potential youth segments a lot easier. Additionally, by targeting the parents of these children who are already iPhone users we can make their children’s transition into Apple products completely seamless. There is also no doubt that we can easily differentiate the varied segments, as we are explicitly targeting younger children and not simply wasting targeted communications on a more ambiguous target. Finally, one can also state that the segment we chose is actionable because it is an ever-growing market, and as the prior survey revealed, it is becoming a form of safety mechanisms for parents who wish to maintain constant contact with their kids during school or during any other forms of activities. Strategies
Our initial strategy is to promote awareness of the existence of the iPhone Mini. We must make it an imminent choice for potential customers to want to have the newest iPhone product with respect to similarly priced models. We must implement a continuous advertising strategy that uses T.V commercials, social media, online advertisements, and advertisements used by our varied carriers. The message that we will be encoding will seek to communicate the totality of the iPhone Mini’s features, which will be similar to the regular iPhone, but will also add a touch of improvisation when taking into account the different colors that can be employed. The mediums that will be used for the T.V commercials will primarily family-based networks such as ABC Family, Disney Channel, and main networks such as NBC in order to tailor to our target market.
Within the communications that we will be sending to our respective target markets, we will be looking to elicit an emotional connection with our consumers. This connection will be based on Apple’s brand personality, which represents adjectives such as chic, refined, and elegance. These sentiments that are aroused in our customers can definitely not be used to compare our competition, whether it be Samsung, LG, or any new company attempting to break in the smartphone market. Customers must feel slightly ‘superior’ when holding an iPhone Mini instead of any similarly priced phone, and for that we must make sure that a lot of the most important features of the iPhone (memory, iTunes, Find my iPhone, Apple store, GPS) be present within the mini version as well.
It is obvious that our main strategy will be that of growth. This growth we are seeking will take shape in the form of a market-penetration campaign, as we are presenting a new product (iPhone Mini) in an industry that we are already apart of. This strategy was chosen because of how Samsung has recently increased their market share significantly, and we feel that we are not filling a ‘perceived need’ in customers by not providing a more low-cost smartphone to offset the relatively high prices of our main products (iPhone, Macbook). ‘Tweens’ who are not able to purchase the regular iPhone feel outdated and out of their local social ambiance.
The Apple brand holds a very high regard in the professional environment as well as young adults as being dependable, sophisticated, and socially popular. Moreover, by offering an iPhone Mini at a lower price with color customization, we will be filling this ‘apparent’ need of “coolness” combined with “seriousness” at an affordable price. We will also be implementing the option of family bundles with homes that have several iPhones. We are confident that parents with Apple products will like their children to use the same brand and will subsequently streamline any training that must be done. Furthermore we want our brand personality reputation with the older segments to act as a “pull” strategy with their children as they can instill a preference for the Apple brand. By making this love for our brand uniform we will undoubtedly increase sales of our iPhone Mini. We will also focus on the safety and education of children.
Eventually we will release the iPhone mini in the Asia market, in which we are currently being considerably beat out by Samsung. Hopefully when consumers see that we are tailoring a product for their region of the world they will see the Apple brand even more favorably. Since Asia is the fastest growing market in the world due to their population demographics we must make sure that we make our market share more substantial as it will continue to provide room for growth. This growth technique that we will employ is referred to as a market-development strategy as we will present a product, which already exists (iPhone Mini) in a market that we are not fully immersed in (Asia). This international expansion of our newly created product will ideally undercut the market share of our competitors and, in time, lead us to become the number one smartphone in every available price range; cementing our reputation as the most valuable brand in the world. Positioning
Apple will position itself as the premier smartphone company in the U.S. Despite decreasing market share in recent years, as Apple’s brand still resonates as the most elite brand for the majority of cell phone users. It is clear that this market share has been dwindling due to the fact that other companies, such as Samsung, have introduced more economical versions of smartphones. Being that we are a very sophisticated brand, we have always priced our products at a relatively high level. Our price-skimming technique has led to Apple becoming recognized by many as the world’s most valuable brand. For instance, in the Millward Brown Optimor’s Annual BrandZ Study they again ranked Apple as the world’s most valuable brand followed by Google and then IBM (Millward Brown, 2013).
Moreover, we need to capitalize on this view of our brand by adding the iPhone Mini as a clever innovation instead of being viewed as a senseless pursuit of market share. It is evident that we would be mirroring BMW’s low-end entry-level technique, which would attract customers to our brand franchise. This method would essentially be using the iPhone Mini as “traffic builders” because they are able to “trade up” customers to a higher-priced model, being that they already appreciate all the features that an iPhone contains. It is also imperative to position the iPhone mini to parents as a safeguard for their children’s safety and academic success. We must show that we genuinely care for the health and personal success of American children, and this can evidenced with the varied features within the phone that will enable parents to know what websites their children are using, where they are going before or after school, how much social media they employ, and who they are deciding to text with.
We will be continuously conducting focus groups with our target markets in order to gauge the reception of the iPhone Mini in both younger individuals and adult figures. The Apple brand already has a strong share of mind percentage as well as a share of heart percentage within consumers, so we only wish to reinforce this notion, and disregard any thoughts that the iPhone Mini is a blind move for greater market share in the industry. We will be using this post-release focus groups and surveys as a means of measure whether the iPhone mini comes up in the discussion of best-priced smart phones on the market, as we are not looking to place it in juxtaposition with our “cash cows” (iPhone, Macbook, iPad). In conclusion, we seek to be viewed as the only brand option when considering a smartphone, regardless of different price elasticities in customers, whether it be our 32-Gigabyte iPhone or our 8-Gigabyte color-customizable iPhone Mini. Marketing Mix
Apple Inc. will be introducing the iPhone Mini in 2015. The iPhone Mini will be the first customizable and greatly economical smart phone for children. We acknowledge that we are in a world where technology is no longer a want, but a need. For this reason, Apple has begun to focus on the children of today, and the professionals of tomorrow, our Tweeners. The iPhone Mini will give parents the ability to grant children the smartest safest phone, that not only thinks for today, but for tomorrow. The iPhone Mini will imitate the quality of the iPhone 5, with a few variations to its features, which have given us the ability to lower our prices. Quality. The iPhone Mini will contain the A6 chip, the same chip used in the iPhone 5. With the A6 chip, everything you do will be noticeably faster. This A6 chip “has more than enough battery power to last throughout the day – up to 8 hours of browsing on a cellular connection and up to 8 hours of talk time” (Apple Inc., 2013). The iPhone Mini will also contain the Nano-SIM. This Nano-SIM, or Nano- Subscriber Identity Module, is a memory chip that stores personal information, text messages, and other data.
The Nano-SIM is “44 percent smaller than a micro-SIM,” yet it has the capabilities of one greater. This innovative SIM uses two memory chips, one for voice and one for data, but are combined on a single memory chip. This has helped us build a younger designed iPhone for our tweener generation. Design. The iPhone Mini will revolutionarily thin and light, weighing only 3.95 ounces, with a depth of .30 inches, a height of 4.5 inches, a width of 2.31 inches, and a retina display of 3.5 inches. Making a thinner, lighter iPhone meant even the display had to be thinner. Apple engineers are accomplishing that by creating the first Retina display with integrated touch technology. Which means instead of a separate layer of touch electrodes between display pixels, the pixels do double duty — acting as touch-sensing electrodes while displaying the image at the same time. With one less layer between you and what you see on iPhone 5, you [will] experience more clarity than ever before. All on a display that’s 30 percent thinner than before. (Apple Inc., 2013)
This slick and thin design will be manufactured in black and white but can be color customized and engraved for an additional cost. These wonderful up and coming customizable colors can be seen in Appendix A. Features. The iPhone Mini will contain 8 gigabytes. It will have Wi-Fi and cellular capabilities, along with digital compass and assisted GPS. Every iPhone Mini will come with iTunes U, which will contain free complete courses and educational content from universities and other schools. Guardians will also be able to monitor and regulate phone use. Guardians will be able to restrict children from accessing various types of webpages, using the phone and Internet for too long and prohibiting some types of contents.
When you purchase the iPhone Mini, you will be able to access more than 1.5 million free books from the iBooks application. Finally, the iPhone Mini will have the Find My Friends application, which will allow guardians to track their children by using the integrated GPS. Packaging. Every iPhone Mini will come with a charging wall port, USB cable, and EarPods. These new EarPods fit comfortably in various ear types, without falling off. These new headphones are being made “with the goal of creating earbuds that rest comfortably inside — and stay inside — a variety of ear types, while also producing quality sound. The result is a breakthrough for earbud headphones: Apple EarPods…unlike anything you’ve ever seen or heard” (Apple Inc., 2013). Price
With all these wonderful qualities, services, and designs, pricing is a very important ingredient in the new iPhone Mini. Our aim is to be the product-quality leader in the market. We want our consumers to know they are receiving an affordable luxury, which has high levels of quality, style, and features, but its price is in a consumers’ reach. With our loyal customer base we hope to offer premium prices in order to attract new consumers.
The pricing of iPhone Mini must support the objectives of the plan. The main focus of the objectives is gaining market share and penetrating Asian markets. The most determining factor of lower market share of iPhone is the high price. In order to achieve the desired objectives Apple will have to sacrifice part of its profit margin on iPhone Mini to make it cheaper and more available even in Asian markets.
For price calculation the production costs of iPhone 5 and iPhone 4S were used (Patel, 2012).
For an iPhone Mini to be cheaper, cost savings are necessary. These will be achieved mainly by reduction of physical material needed, flash memory reduction, reduction of display, and using some cheaper parts from iPhone 4S. After research we have concluded the following production costs for a single iPhone Mini, which will make it $40 less to produce compared to iPhone 5 16GB. Variable Costs: Production Costs|
Memory| $15 |
Retina Display Screen | $30 |
A6 Processor | $17.50 |
Camera| $18 |
Wireless Section| $23 |
User Interface & Sensors| $6.50 |
WiFi/ GPS| $5 |
Power Management| $7 |
Battery| $3 |
Electro-Mechanical| $27 |
Box Contents| $7 |
Manufacturing| $8 |
Total Production Cost| $167 |
Since the objective of iPhone Mini is to increase market share, the drop of price will have to be higher than the cost reduction achieved, therefore affecting the profit margin of the new phone. Based on the objectives the no contract price of iPhone Mini will be $399.
However, in the U.S. market most of the phones are sold with contracts. Competitors’ prices, and offers were analyzed. As per our research, there are three main competitors to be aware of, Samsung’s Galaxy S 4 and Nokia’s Lumia 928 and HTC’s ONE. Samsung’s Galaxy S 4 starts selling for $199.99, the Nokia Lumia 928 has an offer for $99.00 with a 2-year contract, and the HTC’s ONE has a starting price of $299.95 (Guglielmo, 2013). Minding the competitors’ prices, and consumers, we have developed a contract starting price of $139. Profit Margin [(Revenue-Cost of Goods Sold) / Revenue] x100| Profit Margin = 58.15%|
After analyzing the production costs, we plan on a profit margin of about 58.15% compared to 68% for iPhone 5. By using a market-penetration pricing, we hope that by offering lower prices, we will be able to have higher sales volume, higher long-run profit and hopefully maximize market share. In order to have some partial cost recovery, we will offer color customizing and personal engraving. Color customizing and engraving are other ways to increase profit margin. These added customizations would both be an additional $40. If a person decides to get a bundle package that includes the color customizing and engraving features, the additional cost will only be $50. Now that we have our final price, we must correctly promote it in order to correctly establish our product in the right target market. Promotion
In order to successfully sell our product, we will be promoting the iPhone Mini in many ways. The first way is through a sales promotion and then through a three-tier advertising strategy. Based on past research and development figures, we have developed a promotional budget. As shown in the table below, during 2012 Apple Inc. invested $3.38 billion on research and development (Market Watch, n.d.). This year, we hope to invest $4.50 billion on research and development, from this we will use $1.485 billion exclusively on advertising.
Sales Promotion. As part of our sales promotion we will be offering incentives for students who have good grades. Students with grades above B’s will be able to color customize and engrave their iPhone Mini for free. Proper proof of grades, i.e. report cards, will be necessary in order to receive this incentive. We will also be creating bundle plans for larger families. These bundle plans will offer special pricing when buying more than one iPhone Mini.
Advertising. Given our advertising budget, we have formulated an advertising budget breakdown. Given our advertising budget of $1.485 billion, we will mainly focus on public relations and digital advertising, which will take up 38% and 37% respectively. Social advertising will account for 9%, while print and search advertising will account for 8% each.
As part of our pre-launch strategy, we project to spend $591,437,500. From this projection and our advertising budget breakdown, we will be spending $282,150,000 in public relations. We will first hold an introductory presentation with the Chief Executive Officer. This presentation will introduce the iPhone Mini design, its features and services. Although the presentation will be streamed online through the Apple website, we will invite local news agencies along with families and children in order for them to try the iPhone Mini. We will also be doing press releases and newsletters. With the advertising budget of $183,150,000, we will be advertising digitally, through viral videos and commercials. In order to introduce our new product, we will be creating viral videos that show the functions and design of the iPhone Mini and use Pandora in order to advertise during commercials.
Part of our pre-launch strategy will also include using social and search advertising, which will take $55,600,000 and $39,600,000, respectively. Focusing on social networking outlets, like, Twitter, Facebook, Instagram, Pinterest, Tumblr, and LinkedIn will help the iPhone Mini gain popularity and attention. We will also do search advertising by placing iPhone Mini advertisements on targeted webpages. The final part of the pre-launch strategy is through print advertisement. Due to our other advertisement strategies, we will only allocate $30,937,500 on print advertising. Mainly we will focus on advertising the iPhone Mini in children’s magazines and parenting magazines. During the launch stage, we will be advertising the iPhone Mini through our Apple website and stores, social networks, and TV commercials. Along with print advertisement and search advertisement, as discussed above, we will have a strong presence in the digital advertising world. We plan on advertising 30-second commercials during the weekends where parents, families, and/or guardians are with their children. Commercials will be aired mainly in family networks, like AbcFamily and ABC (Guglielmo, 2013).
For the first 2 months after the official launch we plan to have a strong presence in the market, not only though commercials but with newsletters and press releases that will be sent to current Apple customers. A detailed budget can be seen below. After the iPhone Mini has matured through the launch stage, we will be focusing on researching its position in the market and a contingency plan, which is why we have only allocated a small amount of money for the post-launch strategy ($283,185,000). The post launch strategy will include advertising through specified carriers, specifically through digital and print advertising. Having ads in carrier stores will help the iPhone Mini maintain a presence in the market, even in the decline stage. We will also be advertising though social networks and online search engines, where consumers will be constantly reminded of the new iPhone Mini.
Channels. In order to contain some control of our products, we plan on selectively distributing. We will only distribute the iPhone Mini through our Apple stores, online store, and certain phone carriers. Cellphone carriers like AT&T, Sprint, T Mobile, and Verizon will be our main focus (Apple Inc., 2013). Apart from these carriers, consumers will be able to purchase the iPhone Mini from one of our 250 conveniently located Apple stores in the United States. Additionally, consumers will be able to access the product through the online Apple store and chat with a live employee concerning any iPhone Mini questions or technical questions. This type of exclusive distribution will help us control the service level and outputs offered by the resellers. Financials
Apple is financially a very strong company, currently holding about than $10,746,000,000 in cash and cash equivalents (Yahoo Finance, 2013). Therefore, Apple can afford to spend generously on research & development and advertising of its products. The overall R&D and advertising costs calculated for the project are $5.985 Billion. In order to calculate how many iPhone Minis will Apple need to sell to make profit a breakeven analysis was calculated. Breakeven Point| =| R&D + Advertising|
| | Price – Variable Costs|
Breakeven Point| =| $4.50 Billion + $1.485 Billion|
| | $399 – $167|
Breakeven Point| =| 25,797,414 Units|
The breakeven analysis shows that in order for Apple to breakeven it must sell 25,797,414 units. Based on the past sales figures of iPhone sales this number should not be a problem because just in the fourth quarter of 2012 47.8 million iPhones were sold (Albanesius, 2013). Controls
Each month Apple will hold a review in order to assess the progress off the marketing efforts, and implement changes as necessary. As the iPhone Mini continues to grow, the frequency of these meeting may decrease if the current plan is effective. The iPhone Mini will include an Apple Customer Service Bar and a customer service phone number stored in the phone book so that consumers can contact the main headquarters about any possible technical problems. This will enable us to react swiftly in correcting any problems that may occur Marketing Organization
Apple offers a wide array of products to customers worldwide, so it is necessary to organize the iPhone Mini’s marketing function separately from all other products. This will allow Apple to concentrate and analyze the success of their marketing efforts exclusively on the iPhone Mini. Apple will organize an iPhone Mini consulting group that will hold the overall responsibility for the iPhone Mini’s marketing strategy and direction. To better adjust our strategy to markets, we will have regional marketing managers to execute localization strategy. By separating regionally and by the product, iPhone Mini marketing will be able to be more flexible and creative in meeting customer needs. This is best implemented from the top down. In order to for our strategy to work, we will need CEO Tim Cook to dedicate an iPhone Mini team of Marketing Managers, Operations Managers, Design Engineers, Hardware Engineers, Software Engineers, Product Managers and Business Development Managers. These people will be essential in building not only the product, but also the relationships necessary for sustained growth. Implementation
Our marketing plan will utilize several phases of implementation: 1. Finalize the strategic plan with input from all invested parties 2. Align the budget to annual goals
3. Produce various versions of the plan for each group
4. Establish a system for tracking and monitoring the plan 5. Establish a performance management and reward system
6. Present the plan to the entire organization
7. Build annual department plans around the corporate plan 8. Schedule monthly strategy meetings with established methods of reporting progress 9. Set annual review dates for new assessments and an annual plan review Apple’s marketing managers will need to seek ad agencies to implement our promotion. However, company CEO will be the ultimate media spokesperson. As marketing managers come up with new feature and attributes, operations and engineering will need to implement them quickly to ensure customer satisfaction and loyalty.
Implementation activities are to begin at the start of the next fiscal year. After the first month the iPhone Mini has been in the market, sales and customer satisfaction will be reviewed and analyzed. By analyzing financial and customer satisfaction progress Apple will be able to determine if the marketing objectives are being met. This review will occur monthly for the first three months. After four months of being in the market Apple will review the first quarter sales of the iPhone Mini. If sales are not consistent with financial goals our contingency plan will go into effect. Contingency
As discussed, the main target market Apple will focus on is the tween segment along with their families. In the event that the market is unresponsive to our marketing efforts, we will then target lower-income individuals. This segment is very sizable being that this will include individuals who simply could not afford the traditional iPhone or did not find it cost effective. Among these consumers, there will also be customers who were not motivated to try the Apple brand before the release of the iPhone Mini, which will elicit great interest as a very similar product at a friendlier price. Another step that would be used to attract this segment would be the introduction of a pre-paid option. This would allow the lower income people to enjoy the luxury of the iPhone without having to commit to a pricey contract. If no progress has been made after a month of this implementation we will begin shifting our focus on the original Apple products and let individual carriers focus on this product.
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