The Marketing Strategy of Apple

Introduction

The on-going technological advancements in the electronic devices industry make it very competitive (DeGusta, 2012). Companies, therefore, need to be very strategic in their marketing activities. Being among the market leaders in such an industry, Apple lays the emphasis of its strategy on innovation (Lyons, 2010). While it has the advantages of its strong financial position (Johnson et al., 2012), brand name (O'Reilly, 2014a) and excellent data access manager (Webster, 1991), it also has the disadvantages of changing management (Myslewski, 2013) and ineffective use of the cloud (Frommer, 2011). In the external environment, its loyal customer base (Elmer-DeWitt, 2012) and the growing use of smartphones (Gibbs, 2014) may prove to be beneficial for the company, while it may need to beware of the competitive rivalry arising out of technological advancements (DeGusta, 2012), impact of uncertain economic conditions (Reardon, 2009) and pressure from regulatory bodies (Kaynak and Jain, 2012). Based on its concept of differentiation (Nielson, 2014a), it designs and implements its strategies which form the marketing mix. Apple management thus needs to consider the different viewpoints about its strategies in its decision making process.

Situational Analysis

Strengths

Apple leads the worldwide capital market, which makes its strong financial position its valuable asset (Johnson et al., 2012). The closing financial statement of Apple in December 2014 reported a net income which was the largest in the history of public limited companies (Bradshaw and Platt, 2015), making its cash in hand the highest as well (Yoffie and Rossano, 2012). Another advantage that Apple enjoys is its operating system with data access manager, which is superior to that of Windows (Webster, 1991). The $118.9bn brand name of the company is also a strategic strength as it tops the list of the world's most valuable brands (O'Reilly, 2014a).

Weaknesses

Apple experienced the greatest loss in its history in 2011 when Steve Jobs, the genius mind behind Apple's innovation, creativity and success passed away (Griggs, 2011). After his death the Chief Operating Officer Tim Cook took over as the CEO of the company (AppleInsider, 2011). This change in management turned out to be a major weakness as Tim is skilled in operational excellence, while Apple is famous for its innovation (Myslewski, 2013). This weakness was most significantly portrayed with the failure in customer experience from the newly launched iPhone5, when complaints were registered about scratches on the phones, spotty maps app replacing Google Maps, leaking light and screen issues (Gross, 2012). Moreover, Apple also has not been able to make effective use of the cloud; it bragged about the iPad 2 as being a 'Post-PC' devise, whereas it still needed to be connected to a computer to access or transfer files (Frommer, 2011: 1).

Opportunities

One of the greatest opportunities Apple has in the market is its strong customer base; its customers are more seen like followers of the company. The strategy that Apple may follow is to keep the customers happy and their willingness to pay a premium price will increase (Anon., 2014). In a survey conducted, about 94% of the iOS users stated that they will only consider Apple when buying their new tablet or smartphone (Elmer-DeWitt, 2012). Farber (2013) argues that Google and Microsoft have the potential to manufacture the finest quality products on which Apple boasts, but they lack the potential to manufacture the long queues of people waiting in anticipation of buying their new iPad or iPhone. Smartphone has replaced many devices which people used to carry; watch, pocket calculator, camera and walkman are just a few examples (Gibbs, 2014). This fact creates opportunities for smartphone companies to come up with more innovative applications and features which would be well accepted and used by customers.

Threats

The rapid advancement in technology can be seen as a threat for Apple as all the competing organisations are always in the look-out for options to progress. Research suggests that the use of smartphones has increased like no other technological device (DeGusta, 2012). This automatically puts a pressure on the electronic gadgets producers to be a step ahead of the competition at all times. The unpredictable economic situations also pose to be a threat to electronic device producers like Apple (Reardon, 2009). During the financial crisis, the unemployment levels were high and because of lowering disposable incomes of consumers, luxury items like electronic gadgets were among the first items to be removed from their budget lists, thus shrinking the market for smartphones, tablets etc. (Fawzy and Dworski, 2011). Many smartphone companies are now approaching developing countries to carry out their manufacturing process in anticipation of hiring low-wage workers (Chu, 2014). As a result, there may be a threat of increased pressure from regulatory bodies and social groups regarding the working environment in factories, which may eat up the high profit margins generated by this strategy (Kaynak and Jain, 2012).

Understanding Customers

Some experts believe that if one understands the customers of a brand, he almost understands the brand itself (Clifton, 2009). Some companies like to associate the personality of their brand with the user characteristics, while there are others who would associate the elements of their brand personality with that of their spokesperson (Brengman and Willems, 2009). Apple seems to use the former strategy as it serves its 'socioeconomically elite' customers by elite devices (MetaFacts, 2009: 1). Research suggests that Apple owners are economically more sound that those without Apple devices (MetaFacts, 2009 - Appendix Graph 1).

Unique Selling Proposition

The differentiated products of Apple are a source of its competitive advantage (Johnson et al., 2012). Lyons (2010) argues that no company has a better spirit of innovation than Apple. In such a highly competitive market, it is able to ensure that no other company is able to imitate its unique capabilities (Terwiesch and Ulrich, 2013). Although Sony is also able to produce high-tech products, the design and integration of Apple are still not easy to replicate (Rothaermel, 2013). Hestad (2013) identifies the level of intricacy that is taken care of while designing Apple products; even the white colour of the iPod was finalised with the mutual consent of the chief designer Jonathan and Steve Jobs himself. Furthermore, other companies are trying to catch up to Apple's vertical integration system, but they find it difficult to do so because Apple owns just the right chip manufacturers, standards and controls, whereby all its devices sync easily with each other (Nielson, 2014b).

Segmentation, Targeting and Positioning

The market for smartphone is growing at a fast pace (Visions, 2012), which depicts how important it has become for people where they cannot imagine their lives without their phone (Duerson, 2012). There are different views and ongoing debates about Apple's target market. There is some evidence about Apple focussing on the tech-savvy youth, mostly students (Appleyard, 2008), however, Apple devices are also widely used by affluent business professionals for their work (Apple Inc., 2015a). Considering the media habits of Apple customers, research suggests that they prefer reading Big Guardian or Grazia and spare about 1-5 hours watching TV per week (O'Reilly, 2014b). They are also seen as being status and brand conscious (O'Murchu, 2015). Because its competitive advantage lies in its design, Apple's most loyal customers include graphics designers, editors, artists and digital video producers (Franzen and Moriarty, 2015).

Carmi Levi, the VP of marketing at a multinational agency, believes that the marketing of Apple creates a differentiating factor by positioning it as a solutions company, as opposed to a tech company (O'Murchu, 2015). Its easy-to-use technology and user-friendly nature goes with the tagline it introduced for Macintosh: 'The computer for the rest of us' (Gartenberg, 2010: 1). The brand position has evolved throughout its journey, but Apple management claims that the brand promise is still the same (Marketing Minds, 2015). However there are controversies about this statement after the documentary "Apple's broken promises" by BBC Panorama (Thomas, 2014: 1).

The Marketing Mix

Product

The strategy Apple follows is to create the best product which generates a better user experience with every new launch, which is why their focus is not on producing products needed by customers, but desired by them (Bulik, 2008). 'Simplicity' and 'intuitiveness' are the two major characteristics of its products (DeMers, 2014: 2). The Mac Computer was the first launch by Apple, which was then considered overpriced and was perceived to be targeting only a niche market (Wouters, 2014). The company outstood in the industry for the first time after launching its portable music player, the iPod (Khan, Alam and Alam, 2015). The other products by the company namely the iPhone, iPad and Apple TV further strengthened the company and helped build its brand image (Bulik, 2008).

While Apple's management states that its product strategy revolves around peoples' feelings of excitement and pride have when they own Apple products (M2 Presswire, 1998), there are criticisms about its strategy, pointed specifically at the Apple Watch. Critics state that Apple has lost its focus after this launch, as watches have nothing to do with the smartphone or tablet business (Benzinga, 2014). On the other hand, supporters of the Apple Watch think it is a great innovative step, whereby the concept of smartwatches will be introduced in the mass market. It is also considered to be ideal for software developers, who can create innovative apps by using it (Bajarin, 2014).

Promotion

Apple also incorporates its concept of simplicity in its promotion, as it believes that flashy messages, giving too much information are too mainstream and not appreciated by the people (DeMers, 2014). It therefore prefers a simple white background in its commercials with light, catchy music (Wouters, 2014). The communication messages revolve around the emotions aroused by the brand; these include one's desire and dreams, hopes for the future and urge to be socially superior (Azzawi and Ezeh, 2012).

At the time when iPod was launched, Jobs realised that a conventional form of advertising was required in order to inform the customers about its features. It revolved around the brand's social acceptability concept, whereby owners would feel proud of owning such a devise (Marketing Minds, 2015). On the other hand, Apple's promotional alliance in UK and Germany was greatly criticised with assertions that it had probably lost other means of promotion. Through this alliance, Coke was to link its website with that of iTunes and millions of free downloads were offered to music lovers on purchase of Coke bottles (Ward, 2006).

Price

Due to its differentiated products, Apple focusses on premium pricing strategy (Nielson, 2014a). It gives the company an advantage, whereby it does not have to get into price wars with competing organisations. Steve Jobs strategised to give higher priority to profits instead of market share, which resulted in production of high-end products and pricing them accordingly (Nielson, 2014a). Wouters (2014) stresses that Apple has never competed on price, and because of its brand recognition created over time, customers are willing to pay the higher price it charges.

Critics argue that Apple will soon face challenges related to its pricing strategy as other companies may give it a tough competition through their low-priced products (Nielson, 2014a). An example is the case of iPads; research indicates that most of iPad users are not very loyal Apple customers and they may switch to tablets from other companies if they get them at cheaper prices (Anon., 2010b). It is therefore predicted that due to its premium pricing approach, Apple may lose the tablet market to competitors (Anon., 2010b). Chulkov and Nizovtsev (2014) further strengthen the argument by using the iPhone example. After two months of the launch, the company abruptly reduced the price by $200, which resulted in the loss of confidence of the early adopters, who had waited in long queues at the launch time to buy their iPhones. Due to this price change, Apple's share price also dropped and some analysts predicted that the company would not be able to keep up with the competition if it continues with the same pricing strategy (Wingfield, 2007).

Place and Distribution Strategy

By introducing its own retail outlets and online store along with dealership with other mobile stores, Apple's approach was to adopt a hybrid distribution strategy (Wouters, 2014). In 2002, there were concerns about the customer service provided by small-scale dealers of technology devices and since Apple did not want its image to be jeopardised, it reduced its number of small-scale dealers to only 1% (Viardot, 2004). Apple's strong supply chain can be considered as one of the reasons behind its success because outsourcing is also done strategically (SupplyChain 24/7, 2015). It relies on many suppliers all over the world for the same raw materials, so that if one company is not able to provide the material on time, another one can help to keep up with the rising demand (SupplyChain 24/7, 2015).

There are, however, allegations about ethical dealing regarding Apple's Supply chain as portrayed in the documentary by BBC Panorama, which shows that Apple factories are provided in from dangerous and illegal mines (Thomas, 2014). Although Apple management did claim that those accusations were false (BBC News, 2014), there is no source to prove the truth of those statements as yet.

People

According to Borison (2014), Apple takes pride in its workers who become a source of inspiration for their peers and customers. This example was set forward by Steve Jobs himself, who was said to be the most influential figure in the top 100 list by the MediaGuardian (Anon., 2010a). Employees at Apple state that they feel great about being a catalyst to change because of working in an organisation that emphasises on innovation (Hughes, 2010). Apple claims to provide the best employee working conditions in the technology industry (Nuttall, 2012), however, the investigation by BBC Panorama portrayed long working hours, poor living conditions and intimidating work culture in factories where Apple products were manufactured (Thomas, 2014). In the same documentary, there were also concerns revealed about the suicides at another factory supplying Apple products.

Process

The strategy behind production of Apple's innovative devices remains mysterious as it is mostly considered as a secret recipe (Panzarino, 2012). All of the devices undergo standard process guidelines set by the company, which include product design, testing, polishing, packaging etc. (Satariano, 2013). Initially there is an idea generation stage, after which a dummy device is created which is tested and after being reviewed by the team of experts, a standard process is devised for its production (Elmansy, 2014). Analysing Apple's design and creative strategy, one may say that it is not an abrupt plan to invent novel solutions, but it takes an excellent team work, driven by enthusiasm (Elmansy, 2014).

Physical Evidence

According to Gmoser (2014), all the space in an Apple retail store is designed in such an attractive way that it interests people to buy their devices. Singh, Katiyar and Verma (2014) emphasise the importance of store layout and design in creating great customer experience, which helps in translating the desire to a final purchase decision. Due to this reason, the store design strategy was slightly tweaked for Apple Watch. While Apple Stores are normally seen without carpeted floors, the specific design for Apple watches included carpeting on the floor because the store designers overheard a conversation between some customers mentioning that they would not be likely to buy a watch from a carpet-less store (Hughes, 2015).

Relationship Marketing

According to Kotler and Keller (2012), exceptional value creation by organisations does not only result in customer satisfaction, but is raised to the level of customer delight. It is perhaps this customer delight which Apple intends to create through its enhanced user experience (Johnson et al., 2012). The iPad has a CRM tool specifically designed for business users who would need to have customer information such as meeting with clients and the like. This imparts that Apple is not only concerned about understanding its own customers, but it is also thoughtful about coming up with a better solutions whereby they can also deal well with their customers (Apple Inc., 2011). According to Temkin Experience Ratings 2015, Apple is ranked the highest along with Amazon in providing valuable customer experience (Close-Up, 2015). It goes so deep into delivering exceptional value to its customers that it organized a training session, whereby Mac users were given an opportunity to learn different functions of the computer in which they had problems. It was led by expert tutors who ensured that the customer experience was worth the effort and the money they were paying for it (Boudreau, 2008).

Sustainability

Apple claims to be involved in responsible management practices to benefit the environment (MH, 2015). The management plans to employ renewable energy to run its operations worldwide, introducing a new product packaging made from virgin paper (MH, 2015). In order to create such types of forests from which virgin paper would be prepared, Apple formed a partnership with the Conservation Fund (Apple Inc., 2015b). A 2014 report indicates that Apple tops the technology companies list as being most environmental friendly, as it is the only organisation which avoids usage of detrimental chemicals in all its products, thus protecting human health (Ritchie, 2014). Apple also has regulations for its suppliers to be environmentally responsible. On the contrary, the BBC Panorama investigation depicted that Apple suppliers owned mining ships which endangered the marine life and the environment (Thomas, 2014). Where analysts criticise Apple's aggressive strategies of high-scale production to stay ahead of competition as being hazardous to the environment (Bradshaw and Platt, 2015), Apple claims to have preventive measures to support its high-scale production by using energy obtained from cleaner sources to protect the environment (Apple Inc., 2015b).

Conclusion

Like every company, Apple also plans its strategies and implements them considering its own perspective. In the environment, however, there are different views about understanding the initiatives taken by the company. Positive aspects of these opinions will further strengthen Apple as a brand, however, the negative opinions need to be tactfully handled, as they may do serious harm to the company. Critical evaluation of each aspect of their marketing strategy would make them sustain their strengths and overcome their weaknesses.

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Appendix Graph 1

Apple customers have higher incomes

Source: (MetaFacts, 2009: 1).