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The internet changes everything it touches. This statement is even more accurate description of Apple iPod. Apple iPod’s popularity is due to its unique design and features. According to John Graham from The News, “The iPod is the anti-gadget. Gadgets have buttons and switches that only serve to frustrate users, while the iPod’s total simplicity allows it to become an extension of self. This is what makes it so compelling and essential.”
This report will be using the Gummesson’s 30R and the six markets model. The report will focus on understanding the various marketing relations of Apple’s iPod division. Let’s look at the various stakeholders involved with whom the company needs to communicate.
Stakeholders of Apple iPod
Public and the Press
The stakeholders can be categorised into four major groups:
Internal partners and
That is the Competitor, Distributor, Accessory manufacturer’s etc fall under the External partnerships. Subsidiaries of Apple, employees, share holders fall under the internal partnerships. Customer and Supplier fall under their respective categories.
Customers can be further classified as
Loyal customers can be defined as customers who have been using Apple products since a very long time. These customers would try out new Apple products irrespective of the price
These types of customers would buy Apple products because they want to be a part of the crowd and follow the latest trends in the market.
Apple’s suppliers can be classified as:
These are the contractors who build the components as well as those responsible of assembling the iPods
These would be the other partners like media, alliance partners etc
These are the accessory manufacturers who are dependant on Apple in a big way. They manufacture accessories for various iPod models and form a big industry in themselves.
Source: Adapted from Morgan and Hunt (1994) and Doyle (1995)
That is the Competitor, Distributor, Partner firms’ etc fall under the External partnerships. Employees, share holders fall under the internal partnerships. Customer and Supplier fall under their respective categories.
Gummesson’s 30 R’s:
Gummesson suggested that there can be 30 tangible relationships that can be a part of a companies marketing planning. We will be concentrating on the following relationships that apply to Apple’s line of business.
1) Classical Triad Relationship (Customer – Seller – Sellers Competitor)
The portable music industry displays a classical triad relationship i.e. a three way relationship comprising of Apple, the consumers and the competitors like Microsoft Zune, Creative music players etc. But the market is heavily dominated by Apple iPod with a 74% market share (Source: www.afterdawn.com – last accessed 9 September 2009)
2) Classic Network Relationship (Distributors – Company)
The relationship between the various distributors and the company are shown by the classic Network Relationship. In the case of Apple, the distributors could be the authorised retailers and the company owned retail outlets of Apple where Apple iPod and other Apple products are available.
In the special market relationship category, the following relationships apply to “Apple iPod”.
1) Customer as a “Member”
Customer as a member relation is the crux of Apple’s popularity in the market. One of the major factors that differentiate Apple iPod from its competitors is the intuitive design of the product. It’s not just iPod but all the Apple products are designed keeping the customer in mind. In one of the press releases, Steve Jobs said that the aim of Apple’s products is to make life simpler for the customers and this is reflected in the ease of products and the popularity that Apple iPod enjoys in the market. Apple fully understands that all aspects of the customer experience are important and that all brand touch-points must reinforce the Apple brand. This is reflected in the advertisements (all the iPod advertisements will focus on the trademark earphones and the Apple logo), the product (with its prominent Apple logo on the back of every Apple product.)
2) Green Relationships
The Green Relationship is another important relationship for music player industry. As most of the components in a music player are made out of plastic and other components which can be harmful for the environment, it becomes critical for a company like Apple to be sensitive towards environmental issues. Apple has a dedicated team of people trying to make the iPod as recyclable as possible and their products undergo a series of test to ensure that they have Arsenic-Free glass, their products are BFR-Free (BFR is a serious health risk to the customer. Apple has pioneered in making their iPods PVC free which makes them highly recyclable.
3) E-Commerce Relationship
Apple’s website, www.Apple.com is a one-stop shop for all Apple products. Customers can get information about various iPod models available; compare the features, read reviews about the product performances, buy Apple iPod and various other Apple accessories. Apple has created an online music store called iTunes, which complements the iPod. Apple has sold 70 million songs over the iTunes store and its success has been a boost to the sales of Apple iPod as well as the songs purchased over the iTunes stores can be heard only on an iPod or a music CD. Apples iTunes model revolutionalized online music industry by introducing single track purchase for 99 cents. Apple follow a delivery model similar to Dell by providing them on time delivery and they also provide product customization in terms of laser engraving on their Apple products for free.
In the mega relationship category, the following relationships apply to “Apple iPod”.
1) Mega Alliances
This is a vey important relationship. Apple has tied up with various other industries in an attempt to grow inorganically. For e.g. Apple has ties with mega brands like Nike and HP. Apple’s co-branding strategy has been a success in the sports segment. By tying up with Nike, Apple was able to tap into the sports segment catering to a very niche group of customers. Nike branded their products as Nike+ and was able to sell these products at a premium price
. Source: www.Apple.com
Apple also has ties with various carmakers like ford to have their cars iPod ready. Factory stereos in most new vehicles have an MP3 input jack. Consumers can connect their iPod directly into a car music system and enjoy their favourite music.
2) Mass Media Relationships
This is a very key relationship. Maintaining a good media relationship is very important for the company. Apple is known as. They deal with all the communication which goes to the public at large, which includes advertisements, communications, press releases etc. Apple is known for having grand press releases each year where Steve Job gives his keynote. The Apple event draws hundreds of reporters to a media event.
Ladder of Loyalty (Source: Peck et al, 1999)
Source: Christopher et al. (1991): Relationship Marketing: Bringing quality, customer service and Marketing Together
The ladder of loyalty was propagated by Christopher et al. to demonstrate that customers can move towards a closer relationship with the suppliers in a series of stages over time (GODSON, Mark). It becomes crucial for a business to identify the current level of loyalty shown by its customers and invest in marketing efforts to move the target customers to the desired level on the ladder of loyalty shown above.
The figure above shows that the gap between levels is equidistant which is not true in case of Apple. The effort of time required to move customers from purchaser to client to supporter is very small. Let’s look at the loyalty that Apple enjoys from the suppliers and Customers point of view.
Apple Suppliers can be found at the “Partner” level on the ladder of loyalty. Apple launched the iPod in 2001 and in the past eight years managed to re-launch 17 variants of the iPod model. Also Apple has the largest market share in the portable music player industry and with 50 million units sold worldwide. To keep up with the growing demand for Apple iPod, it is crucial for Apple to keep its suppliers at the Partner level in the loyalty ladder because having a dedicated team of suppliers helps Apple ensure consistent quality and performance demanded by the consumer. Also, time taken to launch a new product is reduced as the suppliers are accustomed to Apple’s products and the learning curve is reduced drastically reducing the time it takes to deliver the products to the market.
The Apple brand personality is about lifestyle; imagination; innovation; passion; hopes, dreams and aspirations; and power-to-the-people through technology . Apple customers can be classified into two groups.
The Apple enthusiast: These set of customers have been loyal to Apple since its inception. These set of customers will always buy Apple products without being too concerned about price. These customers are between supporters and advocates. They use word of mouth to propagate Apple products and peer- pressure to increase acceptance of Apple products like iPod.
The curious customer: These customers lie at the lower rungs of the loyalty ladder. They need most persuasion to adopt an Apple product. Apple is one of the few companies who develop products keeping the customers in mind. Apple’s co- founder and CEO, Steve Jobs, is totally focused on the customers’ experience with Apple’s products Apple boasts about its products and is confident that once a customer buys an Apple product he will become a loyal customer forever.
Six markets model
The six markets theory looks at the various relations that a firm has with six different groups of people. Relationship management is a progress aimed at understanding the demand of customers and provide products and service, besides build a long-term relationships with customers. These customers could be present in any of the six markets shown below. One of the most interesting relationships that Apple has is with the suppliers and Alliance markets. Due to the success of Apple iPod, various accessories suppliers have come onto existence. The following section sheds some light on the iPod accessories market.
The market for iPod and iPhone accessories, like speakers and cases is another arena where Apple rules. Apple determines when accessory makers can announce new products, and charges them a variety of fees, including one for putting a MADE FOR IPOD sticker on the items. With over 1,200 companies vying for a share of an Apple accessory market that’s approaching $1 billion in annual sales, even rumours of a new product spur producers of iPod cases, boom boxes, and car adapters to scramble with their Chinese suppliers to churn out a customized line of add-ons. According to Ross Rubin, director of industry analysis iPod retains 70 percent market share drives the overwhelming share of MP3 accessories.
Supplier and alliance
Staff recruits markets
Fig. Six markets model
Source: Christopher et al. (1991) Relationship Marketing: Bringing Quality, Customer Service and Marketing Together. Elsevier
Apple has had a habit of keeping its product launches a secret till the last minute. This creates problems for the accessories manufacturers. As soon as rumours of a new product launch appear on the internet the accessories manufacturers have to start speculating about how the new product would operate and develop accessories accordingly modifying the accessory to fit the new product at the very end. By maintaining a level of secrecy, Apple tries to cultivate this mini-economy, which helps spur ongoing buzz for its devices, by not developing many of its own competing accessories. The thriving market is good for the retailers as well. Retailers like Target and Best Buy don’t make a lot of profit selling iPods but can demand higher margins selling authorized Apple accessories. These include everything from customized cases for the assorted devices to an array of special docks with built-in speakers and adapters to connect an iPod or iPhone to a car’s stereo system.
The following matrix shows the various communication tools Apple uses to communicate to their various stakeholders.
Table 1: The communication matrix
We will look at 5 basis tools used by Apple to communicate with the customers: viz. advertising, public relations, sales promotions, direct marketing and personal selling.
Apple has used a variety of advertising campaigns to promote iPod. These include television commercials, print ads, posters in public places etc. All the ads have a consistent theme where the characters are shown in black silhouettes and the iPods shown in white with the company supplied iPod earphones. Other promotional tools adopted by Apple include Apple iTunes gift card which can be used to shop online at the Apple store. These cards are available easily at most of the departmental stores and can be used in the Apple Store from across the world. Sample advertisements are shown in the figure below.
Apple stores are one of the major crowd pullers. Unlike traditional stores where electronic products are kept behind a glass shelf for display, Apple products are placed in such a way as to invite customers to try and feel the products. Customers can spend as much time as they want in these stores and get accommodated to the products before making a decision. Thus Apple uses its employees as a mode of communication with the prospective customers.
The television ads also have similar style of presentation. The Apple iPod is targeted towards the younger generation with emphasis of people enjoying their music on their iPods.
Retaining the same style of advertising helps create a lasting impression in the minds of the consumer helping build a stronger brand recall in the minds of the customer.
Most of the manufacturing for Apple’s iPod happened in China with various manufacturers providing components for the final products. Apple has a huge command over its suppliers as it is the market leader. It has contract with the suppliers to ensure the design and technical information does not leak out to the competition.
One of the differentiating factors for Apple is the way the company manufactures and conceives its products. Apple treats its employees as customers and encourages innovative thoughts and suggestions. Employees are treated as experts in their domain. For e.g. in an Apple store, the employees are know as Mac experts or iPod experts who help customers decide which product best suits them.
CONCLUSION & RECOMMENDATIONS:
Overall the strategies followed by “Apple” and the mode of communication and channels used have been very effective and has proved highly successful in the consumer market. But still there are few areas; the company can focus on to strengthen its relationship.
Target economy segment consumers.
Apple has always been focused on innovation. Each product that Apple produces is targeted towards fulfilling a nascent need to the customer. Due to the high price of the Apple products, the price sensitive segment is left out. This segment which forms a huge chunk of the population look for cheaper alternatives (duplicates of iPod) to satisfy their need. Apple could re-price their models or come out with more economical variants to satisfy the needs of the price sensitive segment.
Apple iTunes and Apple store is a hit in the western countries like Europe and USA. Apple has yet to open the online store for Asian market. Asia is opening up to internet and e-commerce and will soon become the largest online shopping segment. Apple’s decision to not launch iTunes and Apple Store in India would be because of logistics issues or due to lack of scalability. Even today a huge chunk of the Apple’s market is in USA followed by Europe. Though in the recent past, Apple has increased its spending in retails chains in India, but it is still a long way from tapping into the huge potential of online customers in India. India is well known for its rich music heritage and if Apple launches the iTunes store in India, a lot of artists who did not get an opportunity to publish their work. Also, most of the Apple products like the iPhone and the latest product iPad will not be available for a long time after their release. Apple could try and develop a worldwide release method where products are available across the world on the day of their release.
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