apple – an introduction to marketing strategy | manifested marketing blog

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Apple An introduction to MarketingStrategyThis company almost needs no introduction. Although I am not really a fan of their products,there is no denying the huge success of Apple: the technology company now has the highestmarket capitalization in the world at $573 billion, which is more than Microsoft and Googlesvaluation combined; the firm is the most admired company in the world; and the Applebrand value is worth $153.3 billion alone. The list is simple endless

Having only briefly spoken about Apple before, this post will show how the firms success is

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based on simple marketing concepts.

The Product Life Cycle (PLC)

Apples iPod is a textbook example of how to manage the PLC from introduction through todecline.

The PLC consists of 4 stages: New Product Development, Introduction, Growth, Maturity,Decline. But it is the introduction and maturity stages where Apples marketing ability reallyshows.

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What sets Apple apart from every other technology company is how it utilises its Apple stores tocreate over-the-top product launch events and generate free publicity. Every time Apple launchesa product (not just iPods), all employees make an effort to ensure each customer is congratulatethe new owners. It is simple but effective: thousands queue outside even camping out forseveral days just to experience a product launch by Apple. This is entirely unique to Apple one cannot even imagine consumers showing the same amount of passion for a Microsoftproduct. The stores are simply great for free PR.


As the maturity stage is the most profitable time of PLC, it is crucial to extend this period to be aslong as possible and delay a decline in sales. This is very much true with the iPod. The iPod hasalready experienced massive growth; now sales are stagnant and predicted to decline. Hence,



Apple continuously roll-out extension strategies, updating the iPod with more features, morecolours, larger memory, faster processors, a smaller size anything to keep on getting a short-term sales boost. The cumulative effect of these short-term updates is that, combined, theyactually increase long-term sales see this great infographic on how the evolution of the iPodhas grown sales.

Apple also recognise that decline is inevitable one day they will have to stop selling the iPod. But they are more than prepared for this the iPhone is almost a direct substitute for the iPod,while the Apple Store is becoming more and more orientated to iPad and iPhone users.

Product Development

Product development is just one of the growth options in Ansoffs Matrix, but perhaps the mosteffective for global brands.

As you can see (above), product development involves launching a new product to the firmsexisting customers. If you, like Apple, already have a global presence, in major markets, andunderstand your customer inside-out, it arguably offers the best trade-off between risk andreward. By launching the iPad, iPhone and operating systems to the same audience Apple buildsup integrated customer relationships across multiple platforms and therefore creates brandloyalty. This increases the likelihood of new products being a success. Conversely, Googlesinnovations have high failure rates.

The effect on sales of this product range filling strategy has had a cumulative effect on Applessales growth:



The Boston Consulting Group Matrix/ Product Portfolio Management

The famous BCG matrix classifies a firms product portfolio into four strategic business units(SBU): Stars, Question Marks, Cash Cows and Dogs. Within each SBU, there are again fourpotential strategies to take: build market share, hold market share, harvest (reduce investment)and divest (phase-out).

Star: This would be the iPad because it has a high share of the rapidly growing tablet market. Asthe iPad is in its growth phase of the product life-cycle, the product is beginning to lose its first-mover advantage as other manufacturers begin to launch their own tablet devices. Hence,Apple should invest heavily into marketing the iPad in order to grow sales to maintain their share(sales need to grow at the same rate as overall market sales to maintain market share within agrowing market). But in the future, when market sales become stable, Apple should harvest the



product to turn it into a Cash Cow to fund other SBUs.Question mark: Despite Apples best attempts, PCs with Microsoft operating systems stillcontinue to dominate the PC market. Much of this is down to strong business-to-businessmarketing and high switching costs for businesses and consumers, alike. Apple could potentiallyused three strategies for their Mac software:

1) Divest this could allow Apple to devote more time on their most profitable products, but it ishighly unlikely as the Mac is part of the firms brand identity.

2) Build Apple could potentially invest lots and lots of resources to try to turn Macs into a star,however even with Apples huge cash pile, it is questionable if it is even possible to beatMicrosoft-powered PCs.

3) Hold this is the most likely strategy. Apple will probably continue to develop new Macs andsupport existing customers, however investments will be kept at a minimum and be targettowards the iPad.

Cash Cow: Apples source of steady flows of income are clearly the iPhone and the iPod; both theMP3 and mobile phone market have reached saturation and Apple has a high share of both thesemarkets.



As the iPod is reaching the decline stage of the PLC, Apple is beginning to harvest the product. That is, slowly reducing investment in marketing iPods to increase their profitability; bygenerating more cash, further investments can be made into question marks or stars.

In the future, Apple will probably only maintain their market share of the iPhone. It is a highlyprofitable to generate sales from existing customers from upgrades, which can be almostguaranteed after a consumer invests heavily in downloads from the app store.

Dog: Lastly, Apple TV a device that allows media files in iTunes to be played on a TV hasnever really caught-on. By launching a second and third generation, Apple have shown theyare committed to building sales. However, unless the overall market for digital media receivergrows, it could be more profitable to divest the product.

Competitive Positioning



Apple have a clearly defined premium strategy: they offer more benefits for a higher price. According the Value Proposition Matrix (above), any of the white squares are competitivestrategies. But, I personally believe a more for more position is perhaps one of the moreeffective. This is because it is highly profitable and hard for competitors to copy a premiumidentity.

Developing a premium, or luxury image, is incredibly hard for both new and existing brands. Hence, it is highly unlikely any of Apples competitors will risk undertaking an upward brandstretch and gain a premium status. Moreover, this type of branding allows a premium price tagto be attached to any product regardless of the quality with an Apple logo, allowing the firmto make huge gross margins.

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This heavily links into Micheal Porters famous generic strategies:

A firms scope can be either to target a niche market (narrow scope) or a mass market (broadscope); and their strategy can be based on low-cost, or differentiating themselves, with additionalbenefits, from their competitors.

Apple has been very clever with their choice of strategy, depending on the product. Initially and for a long time the firm used a Differentiation Focus strategy while Apple only sold Maccomputers. The firm was very niche and was targeting Innovators and Early Adopters:

According Everett Rogers Diffusion of Innovations theory and Kotler, those who adopt newtechnological products act as opinion leaders and brand evangelists who spread word-of-mouthpromotion about your product. This then attracts the Early Majority, where the bulk of salescomes from.

After Apple used a Differentiation Focus strategy and masses of consumers where becoming



more aware of the Apple brand, the firm has moved towards a pure Differentiation strategy. This is seen by the iPod and iPhone that are used by wide range of consumers.

Many firms make a mistake these days of not targeting the Innovators and Early Adopters theytry to immediately win huge sales. Seth Godin (and I) believe this is a poor strategy:

Branding Corporate Branding / Family Branding

If you have read my previous post on Proctor & Gamble, I am a very strong believer in thepower of corporate branding. This is where a single brand image of the firm is used to promotetheir range of products, rather than developing a brand for each product category. Apple is agreat example of this.




Apples own brand values innovation, simplicity, style have been consistently emphasisedacross all of their products. These have even been personified by former CEO Steve Jobspersonality.

This is highly beneficial to the firm because it makes new product launches much more likely tobe successful; it seems that Apple could launch an iWhatever and consumers would buy it. Moreover, Apple customers have been so conditioned to Apple brand values that it is naturallyassumed a new Apple product will be any of the above brand values.

Further to this, Apple also benefits from something called the Halo Effect. This is where acustomer purchases/likes one product from a firm and is then interested to try out otherproducts the same company has to sell.

As the graph shows, after a big rise in iPod sales in 2003/4, Mac sales also started to pick upmore significantly. Many think this is down to the Halo Effect consumers enjoy theirexperience so much with their iPods they decided to fully make the switch to Mac computers. Ithas been found by Apple Insider that almost 20% of Mac sales have come from once PC owners



who first purchased an iPod. More recently, the same Halo Effect is occurring because of theiPad

To reiterate: it is because Apple has such a good corporate brand that consumers believe if theylike one product by the company, they will like all of their products.

Services Marketing

Although I have already blogged about the Genius Bar, it is worth mentioning it again here as itprovides a good lesson in services marketing.

Ever since the end of WW2 services marketing has been given growing attention by businessmenand academics. Now, in the 21st Century, offering additional services to a product has become amajor source of competitive advantage and brand differentiation. Apple, for example, achievesdifferentiation from other technology firms through having retail outlets that allow them toprovide superior customer service.

The Genius Bar, offers Apple customers face-to-face technical support; a very welcome change topoor after-sales service provided by their competitors. This helps augment their products andsupport their More for More competitive positioning, hence it is an important way to add valueto Apple products.

In addition to enhancing their value proposition, it gives Apple an unrivaled chance to practice



interactive marketing engagement between employees and customers. Where as othertechnology firms often only practice external marketing, Apple can use interactive marketing toenable customers bond with the firm. This is helped by the fact that employees are or at leastperceived to be brand ambassadors that truly believe in what they are selling.

Marketing Communications

Lastly, there is no point in doing any of the above unless consumers know about it. However, it ishard to say what makes great campaigns. But one thing is sure: they have to be original. There isno real strategy or science behind it, but Apple have managed to get it right on so manyoccasions.


I hope I have managed to cover the main theories, and used Apple to help explain these, but if Ihave missed anything out please let me know in the comments below. I also hope I havehighlighted how important the Apple stores are to the firms success as I feel this is somethingthat is often overlooked by other business writers.

And thank you for reading the whole post!



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Josh Blatchford, author of Manifested Marketing and Bitcoin Marketing Consultant,29/03/2012

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Related posts:1. 5 Reasons why Apple Rocks at Marketing2. Ford Focus Global Marketing Strategy3. Apple Genius Bar Loss Leadership4. Heineken Social Media Marketing

Posted by Josh on March 29, 2012

http://manifestedmarketing.com/2012/03/29/apple-an-introduction-to-marketing-strateg/


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