MARKETING ASSIGNMENT

Apple's iPhone Launch: A Case Study in

Effective Marketing

Iqbal AS Putra L

C1B017088

UNIVERSITY OF BENGKULU

FACULTY OF ECONOMY AND BUSINESS

Product Description

One year after Apple Inc. CEO Steve Jobs announced the company’s industry-changing
iPhone on January 9, 2007, at the Macworld convention in San Francisco, the share
price of Apple’s stock has more than doubled to a January 9, 2008, value of $179.40.
This stock price incorporates all of Apple’s business, but a large part of the rise in value
can be attributed to the launch of the cutting-edge iPhone, of which four million have
already been sold through mid-January 2008 (Carew, 2008).

The handheld device was introduced to the American consumer on January 9, 2007,
and was made available on June 29 the same year through the AT&T mobile
communications provider. Initially, it was only available on signing 1 or 2-year
contractual basis. The same approach is observed everywhere around the world, where
Apple Inc. has decided to make the iPhone available.

On the other hand "unlocked" iPhones were illegally available through cracking the
software. Those are naturally not counted as official sales in the region they are sold via
third/fourth parties, but rather as sales in the region they were originally purchased with
a signed contract. The leader in this "illegally" sold quantity (over 2 Mn handhelds in
2007 alone) is China where a deal between Apple Inc. and China Mobile is to happen in
the of the year 2009. This will give Apple official access to the fastest growing and the
biggest mobile handheld market in the world.

Industry Analysis

All of these benefits and features of the iPhone come for a price though; the initial price
of the 4GB model was $499 and the 8GB model cost $599. Aimed at the high-end,
tech-savvy consumer, who is often a business user, the iPhone is marketed to a
sizable, fast-growing market. Before the recent fears of a pending recession, analysts
predicted that the aim to sell 10 million iPhones through 2008 would be an attainable
goal.

Apple has clearly taken the marketing challenging strategy attacking the market leaders
Blackberry and Palm. It has launched a full frontal attack right after the announcement
of the iPhone in Steve Job's keynote speech in 2007's MacWorld. On the other hand,
Apple Inc. has always a customer-centered orientation spotting the growing market for
smartphones, identifying an unrealized need for customization through phone
applications and nonetheless usability

SWOT Analysis

1. Strengths
1.1. The tag of innovation – Besides the brand equity, the tag of innovation has
always been applied to Apple. From iPod to iPhone and Ipad, Apple has been
responsible for many tech revolutions.
1.2. Consumer loyalty – An Apple loyal customer will proudly proclaim in front of the
whole world that he is an APPLE guy. The brand loyalty of Apple iPhone can be
compared with the Harley Davidson brand loyalists. Just like the HOGS are
known to be furious Harley enthusiasts, so are the iPhone owners.
1.3. Amazing software and OS – The IOS which is the operating system of Apple
iPhone is a respected mobile platform because of its flexibility and speed. The
user interface is fantastic, and once you use an iPhone, you get addicted to its
ease of use.
1.4. Brand equity – Apple is one of the top most companies of the world for its brand
equity. From the days of mcintosh computers, Apple is known to be a brand with
promise.

2. Weaknesses
2.1. High budget – With such brand equity, you are bound to target the A grade
segment itself. But even then, the Apple iPhone is costlier as compared to
Samsung phones which offer similar features.
 2.2. Restrictions on the phone – There are unnecessary restrictions on the Apple
iPhone out of the box. There is no Bluetooth, expandable memory is absent, and
the battery is the nonremovable battery. With such a high priced phone you
expect more features from the phone.
2.3. Low Variation – Apple iPhone design is very consistent which is a plus point. But
at the same time, there is a large population which continuously changes
phones. They don’t get the variety that they expect from Apple iPhone.
3. Opportunities
3.1. Continued technological advancement – Apple has delivered hits every decade
or even every 5 years. So people have started expecting more unique products
from a company like Apple. And products which are technologically advanced
can take the company to even higher levels.
3.2. Geographic expansion – To date iPhone is selling only in urban areas. But there
is bound to come a time when Apple iPhone will look towards geographic
expansion. At that time, the opportunities will grow even further for the iPhone
because there is a lot of markets pending to be covered by the iPhone.
3.3. More dependency on digitization – People are becoming more and more
addicted to the internet and apps. So much so that nowadays hardly anyone is
seen without a smartphone. As people become more digitalized, and as
spending power increases amongst consumers, smartphones like iPhone Will
see a boom in the industry.
3.4. Market potential of smartphones – Smartphones are the rage nowadays and the
market is not going to get smaller. Thus the large market of potential customers
is there for the taking for a brand like Apple.

4. Threats
4.1. Android – The single biggest threat to Apple iPhone is the Android operating
system. Google has taken the world by storm due to its mobile operating system
and Android is poised to grow even further because it is free for all.
4.2. Samsung – Another threat to Apple iPhone is Samsung with its large arsenal of
mobile phones coming in all shapes and sizes. Samsung had really shown the
 world the power of Android phones and has brought android OS in cameras as
well. Thus Samsung us the biggest competitor for Apple iPhone.
4.3. Lack of innovation – In the past few years, as said before, Apple has not brought
any new product in the market and people expect Apple to come out with
innovative products. This lack of new products might become a threat to the
followers of Apple iPhone.

Price Strategy

Apple Inc. seems to have counted much on the new technology and the huge fan base
that allowed them to adopt the maximum market skimming objective. The market
research clearly showed that there is a huge potential specifically in the smartphone
sector with an expected fourfold growth between the year 2007 and year 2011. Another
thing that the company did is to create a survey and ask the customers how much they
are willing to pay. At first, the price was set at the US $299(4GB) and $399(8GB)
models.6 But Apple Inc. and AT&T decided to use a large premium in the markup
pricing set up counting on the uniqueness of the product, Apple's brand perception and
its loyal customer fan base. And this is fully consistent with the general Apple pricing
policy observed with the computers and music players it offers on the market. There are
basically two options selectable when purchasing an iPhone:

- Contract-based - signing up to an annual or two-year contract with Apple's exclusive

iPhone reseller (in the US this is Cingular - an AT&T company). The contract involves
monthly plan payments not only including the phone lease, but also the communication
service in terms of data, texting and voice transfer rates.

- Unlocked - in the event of having a plan with other than AT&T mobile provider, for
example, the customer is given the option to purchase the iPhone with factory settings
and use it further as he/she wishes. The price of this option naturally is set much higher.
Distribution Strategy

Distribution of the iPhone is set only to exclusive mobile carriers in each country the
iPhone was launched. In the United States, the iPhone was launched first and then
other countries followed unfortunately much later than expected. This was due mainly to
the strategic decision made to partner with a mobile communication service provider.
The technological time to set the parameters of the agreement was the main reason for
the delay. Apple Inc. has chosen a hybrid distribution channel involving its online store,
physical outlets and the retail points of the exclusive mobile service providers.

Apple made some changes in its traditional consumer distribution channels, choosing to
eschew third-party dealers/retailers such as Best Buy and RadioShack Corp. when
planning where to sell the iPhone. AT&T offers the phones in its roughly 1,800
company-owned stores; iPhones are also available in Apple stores or through Apple's
website. While impossible to predict a possible backlash for Apple as it continues to
market its entire product line, altering established distribution channels can confuse
customers and risk future distribution plans with those retailers who were cut out of the
iPhone plan.

Unique Selling Proposition

The unique selling point/proposition of Apple's iPhone was not in the message but
rather in the different functions the handheld was offering. Apple was relating the
message that they offer something cool and different.

 Innovation - a groundbreaking new device that allows a larger screen browsing

and pops up of navigational icon set up as well as a full QWERTY keyboard
when necessary.
 Customization - iPhone application for virtually any desire the customer might
have. this is the Longtail marketing point Apple introduced as a new concept into
 the mobile phone industry. Customers are allowed and given the code to create
apps that will allow them to execute, follow and stay in touch via third-party
software.
 Personalization - Simple and effortless synchronization with the address book,
calendar, and email client through iTunes and.Mac9 (now MobileMe)
applications.
 Connectivity - Stay in touch through almost all know ways for mobile handhelds.
 Music, Photos & Video Storage - Full featured iPod like the ability to store and
play music up to 4Gb or 8Gb.

Like every Apple product, the main marketing message to the consumer is "something
different, something cool, user-friendly and simply Apple". There is probably no other
company that contemplates such customer satisfaction and loyal brand fans. This is
mainly due to the everyday maintenance of corporate and brand image as well as
creating the means for self-support, should the latter be needed. Another pinpoint in
their unique selling point is the utilization of iTunes to supply music, video and
podcasting content as well as customization outlet for iPhone applications. So far none
of the competitors have either created or offered a simple user-friendly and all in one
online store accessible to the consumer.