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Apple Inc has been very successful especially when it revolutionized its business and customer-focus by providing an operating system which was specifically designed with graphical user interface, even when it has been experiencing rigorous competition in both software and hardware marketing. Out of Apple’s major visions are its marketing strategies such as differentiation, unique design, own-store retailing, complete solution and brand loyalty that in turn have helped the company achieve sustainable competitive advantage and create its very own market with long-term profitability.
Apple has been amazingly impacting the technology, society and the world at large and it continues to innovate to the date. Computer and digital music machines have long been presumed to be high-tech devices reserved for scientists, mathematician, intellectuals and professional musicians, but Apple, with its technology and innovation, has turned them into an essential tool of everyone’s daily lives.
Framing of the Research Issue
The main issue being discussed in this paper is the retail store marketing strategy adopted by Apple Inc and its impact on Apple’s overall business. This piece of research work is an attempt to explore and answer what is Apple’s retail-marketing and why Apple Inc has chosen this strategy? The paper will interpret the advantages of implementing the own store retailing strategy to Apple Inc and analyze how this has contributed to its business success.
Apple Inc is one of the large multinational companies of today and its marketing strategies, that have helped it achieve this success, have gained increased popularity and attracted attention of academic and business experts. Companies use different strategies at different times. Some of them may turn to be highly useful while others may not be so. Due to a number of factors like globalization, fierce competition between firms, technological advances and changing consumer behaviour, business contexts have become increasingly complex (Grover and Kettinger 1995, p. 58 ) and companies therefore require adopting effective strategies to survive these challenges and complexities. Apple’s retailing strategy has been thus an effective ideology it used to survive competition and other marketing challenges.
As Pearce and Robinson (2004, p. 6) stressed, strategic issues usually have multi-functional and multi-business consequences. Decisions regarding strategies like customer mix, competitive emphasis, organizational structure and customer focus necessarily involve a number of firm’s strategic business units, divisions and programs. These strategies will yield positive outcome when they are well structured and effectively managed. When it comes to Apple Inc, a number of marketing strategies it adopted has been found to be extremely beneficial to the company’s success. This research paper relates to one of its strategies- own store retailing.
Research Contexts, Scope and Limitations
No area of marketing and economic development has perhaps been more popular than retailing. Retailing has long been a critical pillar of a strong economy (Findlay, Paddison and Dawson 1990, p. 21). Similarly, retailing has been found to be a powerful marketing element that contributes much to the economic and financial well-being of a company as well. Many large multinationals operate retail stores, may be as part of its Supply Chain strategy or to promote direct marketing of their goods or services to the customers, with an aim to seize enormous opportunities of retailing.
Large scale retailers like Wal-Mart, Sainsbury, TESCO and others have been studied extensively to assess their effectiveness and find the secrets behind their success. Their marketing techniques and how their retailing helps them maintain long-term profitability have been studied by a number of researchers. But, the significance of retailing as a strategy being implemented by a particular large-scale company is seldom explored, except that some of the researchers have indentified ‘retailing’ or ‘own store retailing’ only as a strategy with no extensive research on its importance and contributions to the company. Rather than generally talking about the importance and benefits of retailing strategy adopted by Apple Inc, this paper aims to explore literatures regarding the same and articulate specific factors that explain why it is important to adopt retailing strategy to a company like Apple Inc and what are the major benefits of it.
The researcher would like to learn different aspects of using retail marketing to a large-scale business, Apple Inc, and for this purpose, researcher would review and evaluate the literatures and examine how customers respond to this marketing facility, what consequences of such retail marketing can have on the reputation and customer satisfaction of the business. The researcher will review literatures to find relations between retail marketing of Apple Inc with a number of marketing variables like customer satisfaction, brand building, brand loyalty, customer relationship, value proposition etc.
By reviewing the literature about Apple’s Retail-marketing, the researcher would establish the importance of using retail-marketing as a marketing strategy to enhance greater long-term profitability and gain sustainable competitive advantages. This research is merely about Apple’s retail-marketing and therefore the findings and conclusions of this research may not be directly applicable or closely comparable with other businesses or manufacturing firms.
Statement of Research aims and objectives
This research paper aims to illustrate the benefits of retail-marketing to Apple Inc and find out how retail-marketing has contributed to Apple’s unique success stories in recent years. The main objectives of the study are:
To define and explain retail-marketing with relation to its implementation by Apple Inc.
To study and interpret the literature review of the importance and benefits of using retail-marketing as a business strategy,
To ascertain what literatures talk about Apple’s retail-marketing strategy and how this has helped the company achieve its organizational goals like gaining sustainable competitive advantages,
To examine how retail-marketing is closely related with various other marketing variables like customer focus, customer satisfaction, better servicing, direct marketing, brand loyalty, brand equity and customer relationship marketing etc,
To suggest some successful measures and techniques that can be used along with retail-marketing strategy in order to help the company achieve its business goals.
To establish what results can bring a retail-marketing on the competitive advantages of a firm, from the case of how Apple has successfully used it.
Structure of the dissertation
The introductory chapter provides a brief overview of the structure of the research paper and an introduction in to the main issue being discussed in this paper- ‘retail marketing of Apple Inc’. The framing of the research issue, the scope and limitations of researching retail-marketing in relation to Apple inc, and statement of objectives of the research are detailed in the introduction.
In order the research to be clearer, it is highly important to have an outlook into Apple’s business and its various marketing strategies. Second chapter will briefly examine Apple’s business overview, market-share, market strategies, competition rivalry and value propositions it delivers to its customers. The researcher considers various literatures to be reviewed in chapter 3 and discusses previous works and studies in retail marketing of Apple Inc. Chapter 4 provides an overview in to the theoretical framework and methodology that this research uses for studying retail marketing of Apple Inc. The findings and results of literature review will be discussed in chapter 5. The researcher will summarize and list out major findings, results, suggestions and recommendations, based on the research in the conclusion chapter.
APPLE INC: MARKET OVERVIEW
In today’s highly rigorous competitive market landscape, Apple’s hot selling of iPod, iPhone, 3G phone, and digital music players, directly or through its own-store retailing, promises to revolutionize the market opportunities of digital entertainments as well as to meet varying customer needs for advanced technology. Brand loyalty, unique hardware and software design, differentiation and own store retailing have been some of its strategies that helped the company gain greater competitive advantages.
Porter (1998a, p. 29) emphasized that an effective marketing strategy take either an offensive or a defensive action in order to create a defendable position against major competitive forces. Apple’s marketing strategies, especially its retail-marketing and unique hardware design were more or less capable of establishing strong defense against major competitive forces like Acer, Dell, Fujitsu, Microsoft etc. Walker (2003, p. 4) found that Apple’s management has guided the company to create a focal point for effective decision making which in turn has been extremely useful for the company in certain ambiguous and uncertain situations. Basically, a strong marketing vision, with support of certain effective strategies has helped Apple Inc maintain a very strong profitability and ever-increasing sales figures, as accounted to be $42,905 million in financial year ending of 2009 (Datamonitor 2010).
Apple Inc is a multinational company, headquartered in Cupertino, California, that is engaged in designing, developing and marketing of personal computers, severs, communication devices, network solutions, portable music digital players and relate accessories (Datamonitor 2010). It delivers its hardware and software products and services through its own-retail stores, online stores, sales force and third party sellers (Sander and Slatter 2009, p. 81).
Apple Inc has always been prospering on innovation. It has ignited the personal computer revolution in early 1990s with the development of Apple-II, reinvented the personal computer within the next decade by the development of Macintosh and gained a very successful and deeply routed brand loyalty with its iMac by 1990s (Kerin, et al, 2005, p. 395). Finally, it identified vast opportunities for very new technologies that the market until then was less aware of them and developed new markets with iPod, Apple i-phone, and 3G i-Phone in very recent years.
Apple Inc, through out its plants, offices and retail stores, employs 34,300 employees around the world and offers a wide range of products and services including iPods line of portable digital music and video players, iPhone handsets, iPad portable multimedia and computer machines and software like Mac OS, iLife, iTune, iWork, and internet applications such as Safari, Quick time etc (Datamonitor, 2010). The company’s inexorable efforts on ease of use, utility, customer value, simplicity, efficiency and fun have helped Apple Inc make iPhone, 3G iPhone, and other products seem to be a very different species from that of the competitors. These newer products have recently turned to be more approachable and ultimately very desirable that many or almost all brands in the market (Newsweek, 2007).
Apple’s major competitors are Acer, Dell, Fujitsu, Hewlett-Packard company, IBM, Lenovo group limited, Microsoft Corp, Motorola Corp, Nokia Corp, Oracle Corp, Samsung, Sony and Toshiba (Datamonitor, 2010). Apple designed a number of marketing strategies to compete with these large companies and grab a better slice of the highly competitive market pie.
Latest reports show that Apple’s share in the worldwide PC market is constantly surging, as more and more customers have continuously been preferring Mac PCs even when there were rumors of iPad and iPhone that have grabbed news-headlines. According to Gartner’s report, Apple has become the fifth largest PC seller in the US market for the first three months quarter in 2010. Around 1.398 million Mac computers were shipped by Apple inc and thus it stands just behind HP, Dell, Acer and Toshiba (Tilmann, 2010).
Apple sold 1.4 million Macs in the first quarter of 2010 which remains to be highly impressive and has been recorded to be a very healthy 34% year on year growth. With 8% market share, Apple stays to be fifth largest in worldwide PC market (Kahney, 2010).
The company has recorded a total revenue of 42,905 million US Dollars during the financial year ended in September 2009, showing an increase of 14.4 % over 2008 figures. The increase in sales has been mainly due to the growth in sales of iPhones handsets and third party digital contents and other utilities, through its online as well as own-stores. iTune stores too played an important role in its increased revenues in 2009. The operating profit of the company during 2009 has been accounted as $11,740 million, showing an increase of 41% over the same of 2008. The net profit also has been recorded to be $8,235 million, with an increase of 34.6% over 2008 figures (Datamonitor, 2010).
Gartner’s (2010) research reported that Apple is the third largest Smartphone marketer in the world just after Symbian and Research in motion. In worldwide cell-phone marketing, Apple holds 2.7 % market share, being the seventh largest worldwide cell-phone marketer. It is observed that Apple’s share in worldwide cell-phone market has been growing with a 112.2% increase in mobile device sales. iPhone OS release and Apple’s focus for the new communication service providers in UK markets increase its opportunities and to gain greater competency in its markets (Gartner, 2010).
Company-Owned retail marketing
Large-scale companies implement a number of different marketing strategies like its-own retailing, franchising, merger and acquisition and so on. Company-owned retailing is not a new marketing strategy, but has first been used by IBM in early 1980s. Mohr, Sengupta and Slater (2009, p. 326) found that IBM opened its first product centre and own-store retailing for the personal computer in New York City in April 1982. By 1986, the number of IBM’s own stores had grown to 84.
Gateway expanded aggressively in to its own stores retailing during the PC industry boom, but it had to shut all 188 stores in 2004. Sony also launched its own-stores retailing in United States to showcase its products to the customers and expanded them in 1996, and reached 57 stores by June 2008 (Mohr, Sengupta and Slater 2009, p. 326). Manufacturer’s own retailing thus has long been considered to be a strategically powerful tool to enhance better marketing. Many of firms adopted own-store retailing has found success where as many other failed to continue retail-operation. Gateway and IBM failed and others like Apple Inc succeeded with this direct retail channel strategy. Companies found it successful were able to cut middlemen costs and middle men profits and thus to make its products quite cheaper to the customers, to establish closer relationship with customers, to deliver quality services directly to the customers and create brand loyalty to enhance long-term profitability.
Marketing mix and Company’s own retailing
Company-owned retail marketing strategy is closely related to the ‘place’ element of the Marketing-mix concepts. Out of the four Marketing-mix Ps, namely product, price, place and promotion, place or distribution is a very critical element that determines the extent of business’s success. The channels a marketer chooses for marketing its products always largely influences its marketing effectiveness.
The above depiction illustrates how theoretically and strategically Apple designed its marketing-distribution strategy through its own-store retailing. As Hill, O’Sullivan and O’Sullivan (2003, p. 243) emphasized, distribution addresses the issue of how to establish an appropriate and more profitable relationship with the maximum number of relevant customers at the minimum cost to the organization. A well-designed and developed distribution strategy can lead to coverage of a wider audience, accessing more numbers of customers and enabling existing customers to have a more satisfactory expedience. When it comes to Apple’s case of retail-marketing, there are three factors to be highlighted, a) profitable relationship, b) with maximum number of potential customers and c) at the least costs being possible by eliminating all middle-men involvement. It thus not only attracts wider audience but also delivers all those that can increase satisfaction of the existing customers.
For a manufacturer, choosing own-stores for retailing is generally justified on the ground that it eliminates middle-men costs, reduces risks of handling inventories, enables closer relationship with consumers and delivers maximum satisfaction to them. But, Raysman (2002, 4- 4) argued that the most effective form of retail distribution is likely to be through third party distributors who are well-established in the market place and have a strong distribution infrastructure, though it is possible for technology product producers to sell directly to their own retail outlets. He justified his argument that selling through third party established firms can help the producer relieve from significant logistical concerns, and third party distributor will give the producer easy access to markets which may otherwise have been time-consuming and helps reduce the producer’s overhead expenses (Raysman 2002, 4- 4).
Apple has virtually been integrating different distribution channels. It not only used third parties for sale, but also online stores and its own retailing stores in order to grab the maximum potential opportunities from the existing market. Third part sellers helped Apple spread of its valuable information over regions and countries, its won store retailing helped it maintain closer relationship with customers and deliver direct services to them.
Retail marketing / Own-store marketing strategy of Apple Inc
Apple Inc used a number of different distribution channels including own store retailing or retail marketing, online store, sales force and third party sellers. Among these channels, retail marketing remains to be a very specific and unique marketing strategy that helped the company overcome difficulties associated with big-box sellers and their staffers who are ill-informed of Apple’s products. More over, this marketing strategy helped the company establish stronger relationship marketing in order to create customer loyalty and customer satisfaction.
Apple opened its first own-store retail-marketing in McLean, Virginia in 2001. By June 2008, with phenomenal records of greater success throughout its stores, Apple operated 215 retail stores in six countries, they are USA, Australia, UK, Japan, Canada and Italy. By 2008, these 215 stores were able to contribute nearly 20 % or more as growing of Apple’s total revenues (Mohr, Sengupta and Slater 2009, p. 326).
Kerin, Hartley and Berkowitz (2005, p. 395) found that Apple has been thriving on innovation from Apple- II to Macintosh, to Apple’s PCs and iMac, but its step forward to starting its own store retailing in 2001 was merely a better promise to revolutionize its market landscape. As Kerin, Hartley and Berkowitz (2005, p. 395) noted, beginning with one or two stores in 2001, Apple Inc has been able to launch more than 25 stores per year. By 2004, about half of the US population were residing within 15 miles of an Apple store. These stores created an atmosphere where consumers were able to experience the thrill of owning and using Apple’s complete line of Macintosh computers, wide range of entertainment equipments and utilities like digital cameras, camcorders, and the entire iPod family devices.
Apple’s retail-stores were selling its products and services exclusively, targeting tech-savvy customers within its store-products presentation and workshop. These stores facilitated displaying of a full lines of its products, software and accessories and ‘Genius Bar’ staffed by an Apple specialist (Kotler and Keller 2006, p. 485). These stores were friendly places where all of its customers, especially Mac and PC users are freely allowed to play with and explore Apple’s technology-lines and get software or useful utilities (insidecrm.com, 2011).
Lamb, Hair and McDaniel (2009, p. 339) found that Apple’s management has been dissatisfied with how third part distributors were selling the computers and others products of the company and this has been the main reason behind Apple’s thought of starting own-store retailing. Apple observed that some third party distributors buried Macintosh displays inside major retail stores, surrounded by PCs running the more popular Windows operating system by Microsoft. This brought their attention to hire a retail executive to develop a retail strategy.
Mainly due to the disappointment regarding Apple’s resellers, the company announced that it would begin opening and operating its own Apple stores. Steve Jobs conveyed his major concern that most resellers had been unsuccessful in making the products of Apple stylish and more appealing at customers level (Gitman and McDaniel 2008, p. 345). Most of the literatures, apart from the two mentioned above, stressed that Apple’s thought to start retail marketing has been mainly driven by its findings that third party resellers didn’t deal with its customers in a way Apple expected how it should be. The retail stores not only must be able to sell the products to the final customers, but also, these stores must be able to deliver quality services, valuable information and facilitate customers’ entertainment etc. Apple’s stores were designed by considering all such important factors.
What was predicted about Apple-stores?
When Apple Inc first opened its retail-store in May 19, 2001, there were rumors and many experts and media predicted the failure of its specialty stores. They argued that Apple’s users already knew where to buy Apple’s products and therefore Apple’s investment in establishing retail-stores would bring nothing more that higher fixed costs (Gitman and McDaniel 2008, p. 345). Such specialty stores might increase Apple’s expenses and its products will be more expensive to the customers, as Apple might like to cover its costs by increasing the prices and this ultimately cause less-appeal to the mass consumer.
Knowing Apple’s attempt to launch of retail stores in 2001, Business Week wrote “Sorry Steve, Here is Why Apple Stores Won’t Work”. The street.com opined “It’s desperation time in Cupertino, Calif”. Well known retail-consultant David Goldstein predicted “I give (Apple) two years before they’re turning out the lights on a very painful and expensive mistake” (Jerry, 2007). A number of business experts and media were looking Apple’s retail stores quite surprisingly as an attempt for no use. They found nothing more than just add costs to the company and to the customers. But, the story was surprising to them that its design, outlook, services offered in-store and amenities being provided to the customers were extremely appealing to them and it finally added greater share of its total revenue.
Those who predicted failure of Apple’s store might have generalized what was known about CompuAdd, IBM, Gateway and Microsoft. Dvorak (2010) stated that the retail-marketing has been tried by a few computer companies before Apple tried it out and they all except Apple failed for obvious reasons. CompuAdd, once a head-on-head competitor with Dell and IBM, rolled out a number of stores which in turn bankrupted the company. IBM opened few stores, even before CompuAdd’s stores. IBM aimed at more professional market and therefore had to shutter them all at once. Gateway opened many stores called Country Stores, but stores themselves were boring and ominous and they too created almost same story. Microsoft’s stores opened in 1999 were not up to the mark due to that there were no buzz or energy in the place.
Apple’s experience of unique success with Retail-marketing
Steve Jobs and Steve Wozniak didn’t realize that they were establishing one of the most multibillion-dollar PC industry of all times when they invented the Apple-I in a garage on April 1976 (Kerin, Hartley and Berkowitz, 2005, p. 247). The same story repeated for its retail-marketing as well. Apple’s retail-marketing, despite predictions of experts and media about it to be failure, has become one of its greater achievements to be unparalleled as a ‘wise move’. These stores achieved $1 billion revenues faster than any retail business in history, just taking three years to reach that success-point. Around 40 % of the people purchasing items from Apple stores are new customers (Kerin, Hartley and Berkowitz, 2005, p. 395).
Gitman and McDaniel (2008, p. 345) found that Apple Inc, just three years after opening its retail stores, was attaining around one-seventh of its total revenues from its stores alone. More interestingly, customers attracted to these stores were not just current Mac or other Apple’s products users, but rather, half-of the Mac sold in these stores were to first time Mac buyers.
Though Apple’s launch of a line of new retail stores in 2001 was met with major skepticism around the US, Apple has been able to turn its retail-stores to be one of the crowning achievements of the resurgence (O’Grady 2008, p. 14) that many other large retailers failed to achieve. When Gateway announced closure of its line of retail-outlets in April 2004, Apple reached its retail-market growth by opening its 53rd store.
O’Grady (2008, p. 14) identified that this great success has been the result of effective strategic planning. Apple built a prototype store in one of its warehouse near the Apple campus to test the concept and possibilities and it arranged a combination of photos, videos, music and kids. By October 2007, it announced completion of 200 retail-stores throughout USA and other five countries. The Fifth Avenue location in New York was able to attract more than 50,000 customers per week. Apple’s store sales has become the top in the industry, with an average earning of $4032 per its square foot (O’Grady 2008, p. 14).
Twice (October, 2008, p. 28) reported that, TWICE was awarding Apple’s retail-stores the Award of Excellence in Retailing in the Best Vendor Retailer category in 2008. It opined that Apple’s retail stores, from just one in 2001 to reach 200 by 2008 is an excellent and rather a very unique success in retailing history itself. Twice (2008) found that Apple has been providing consumers a hands-on way to experience its products which are displayed in a variety of specific-categorized areas that encouraged customers to test and play with Apple’s products. These stores have also carried third-party’s accessories and software titles that are compatible with Apple products. Twice’s (2008) observations about Apple’s stores designs, customer attraction, revenue-generating capacity and customer feedback have led it decide to give its award to Apple’s stores. As Twice (2008) observed, The ‘Genius bar’ facilitated in Apple’s retail stores and moreover its sales growth of 40.5% in 2007 from the sales of 2006 have been some other very significant factors that are highly impressive about Apple’s stores.
Most amazingly, Apple stores have won Twice’s Excellence in Retailing Award four times from 2006 to 2010. Olenick (2010, p. 30) reported that Apple continued to pipe up TWICE retail awards as Apple took home the Best Vendor Retailer trophy, which was the fourth time it gained since 2006. As Olenick (2010) opined, Apple was able to take this award home due to its ongoing ability to operate unique destination stores and because of its merchandising excellence, store designs, customer service and retail innovation etc (p. 30).
Apple’s retail-store design
Apple always thrived on innovation. When it comes to its products, unique design created the brand ‘Apple’. When it comes to its retail-stores, design played pivotal roles in its success, even when many large-manufacturer’s own retail stores created failure-stories. For no doubt, Apple’s innovative store design has been one of the very powerful tool it strategically used to make its retail-stores winning.
As Davis (2009a, p. 340) evaluated, Apple-owned retail stores have been designed and facilitated in a way that it has become a cultural phenomenon, with their bright lighting, clean layout, easy access to products and almost museum-like zeal for captivating its products-displays. Customers are automatically encouraged to play with its products and all of its stores have arranged an in-store ‘Genius Bar’ which offers customers a place to ask questions and get answers for their doubts and troubleshoots.
Jones, Comfort and Clarke-Hill (2009, p. 243) found that Apple’s stores, for instance one of its store opened in 2004 on London’s Regent Street, offer a variety of programs for customers. the 24,000 square feet store offers free basic ‘getting started’ workshops, including showing customers how to set up a new Mac, connecting to the internet, sending e-mails, downloading or uploading photos and transferring music and television shows to an iPod etc. Apple stores have facilitated a ‘Personal Shopping’ program which the company claims as new way to shop which is intended to give customers attention and allow them to take all the time they need to test drive the products they are interested in.
As Danziger (2006, p. 12) noted, Apple’s retail-stores are clearly revolutionary in today’s increasingly cluttered retailing environment and its very specific layout is the key to a unique ‘shopping experience. the sparkling contemporary design showcases each computer and piece of peripheral devices, with minimum of products on displays. Customers are always welcome to get hands-on with computer machines, check their e-mail, use networking, and make test drive of the computer machines. This very different store design and layout is intended to ‘guide the intellectual and emotional experience of the customers through the store’ (Danziger 2006, p. 12).
Apple consistently listens to its network and customers at large. One of the very significant point in its store is ‘Genius Bar’, a tech-support station, which answers customers’ questions and deal with their troubleshooting and thus serves as Apple’s commitment to superior customer service. Superior customer service comes to life in the form of problem solving and helping build bigger loyalists out of Apple’s customer base (Davis, 2009b, p. 98).
There are many strategic elements that the company planed carefully about the effectiveness of its retail store in any new location and carefully considered how each floor space can be converted in to long-term profitability. Floor (2006, p. 206) stressed that Apple opened its stores only when it expected them to be profitable within a short period of time itself. As Apple believed, using a computer is as simple as buying one would be. The store layout was so simple and logical and its design and fixtures are kept as simple as possible. Apple’s stores were white box with a lot of lighting, being equipped with materials like stone, metal, glass, transparent synthetic and beech-wood. Large pictures and glasses are used to differentiate departments within its stores.
As the image above illustrates, Apple has designed its store in a way it can maximize net profit per square foot of the available space. Customers enter or exit the store from ‘cashwrap’ area and all varieties of Mac and iPods are located in the
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