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Apple Inc s iPhone:Group# 5: Sushan Rungta (08EM-048) Deepanker Agarwal (08EM-014) Sumit Agarwal (08EM-045)

Issues: Rational To Enter in the competitive Mobile Market Challenges while entering the Crowded Market Issues and challenges in pricing a product or service (pricing decisions, premium pricing, market skimming, etc). Consumer Reaction to reduction in prices Reaction from Consumers in Europe and Asia.

Introduction Apple s entry in the Mobile Phone Market Announcement: January 2007 Launch: 29-June 2007

Hype about the product Consumer Behavior used to mould Marketing strategy Enormous Sales Initially Large Prices cuts to sustain sales later

Issues: Rational To Enter in the competitive Mobile Market Challenges while entering the Crowded Market Issues and challenges in pricing a product or service (pricing decisions, premium pricing, market skimming, etc). Consumer Reaction to reduction in prices Reaction from Consumers in Europe and Asia.

Rational Transform from Computer Manufacturer to full fledged manufacturer of consumer electronic goods

APPLE COMPUTERS

TO

APPLE INC

Issues: Rational To Enter in the competitive Mobile Market Challenges while entering the Crowded Market Issues and challenges in pricing a product or service (pricing decisions, premium pricing, market skimming, etc). Consumer Reaction to reduction in prices Reaction from Consumers in Europe and Asia.

Challenges while entering the Crowded Market BREAKING THE SEGMENTS AND CATEGORY BARRIER- RAISING CONSUMERS EXPECTATIONS AND NEEDS Tech Savvy and Rich User, a growing and emerging segment iPhone was a segment creator

Differentiation 3.5 Inch Screen an industry First. Software development for iPhone, Opensource. Very fresh and responsive touch screen response. Tie-up with AT&T to provide plans for unlimited data-transfer.

Launching iPhone Generation of a lot of excitement among consumers Slowly released the details of the product Word of Mouth Marketing Tons of Free Publicity Videos of Demos on YouTube and other social sites Teaser of iPhone

Market Entry- Jobs Perfection Steve Jobs Focuses on Consumer need of the hour What Jobs does is he focuses like a laser on what makes the thing cool, they keep the fervor up. They are very good at managing demand and keeping people excited

The Marketing & Product Concept Assumes that consumers will buy the product that offers them the highest quality, the best performance, and the most features Product delivers the desired satisfactions better than the competition Marketing objectives: Profits through customer satisfaction

The Marketing & Product Concept.. Applied One of the intelligent things they have done with their advertising is they understood they didn t need to let the advertisement get in the way of the product The product itself in innovative enough that demo-ing it on the ads is enough to generate excitement Launch Advertisement

Result Apple Fans- not customers queued outside stores to buy the product as soon as it was launched on iDay, the Launch day of iPhone

Issues: Rational To Enter in the competitive Mobile Market Challenges while entering the Crowded Market Issues and challenges in pricing a product or service (pricing decisions, premium pricing, market skimming, etc). Consumer Reaction to reduction in prices Reaction from Consumers in Europe and Asia.

Premium Pricing Production constraint led to High Price and sent a message that this phone is for the cool, high heeled who have to have the best. Apple moped up almost 150 M $ excess due to premium pricing at $599 instead of actual $ 399

Why not Cheap Price earlier Rationale Production Capacity of 150,000 a month Production was constrained and Demand would exceed supply Cheap price could have increased demand many times and consumers would have been disappointed and left to never come back. Apple would have got bad name for misjudging the demand (PR Fiasco)

Price Reduction after 2 Months.. By holiday season the manufacturers were ready with to meet Apple s Demand. With Production increased 3 times production capacity Apple decided to cut the cost of iPhone to $399 ie by 33%. Also iPod Touch was to be launched with similar features so company did not want to face any ambiguity about the pricing of the product. And give consumers full freedom to choose iPhone or iPod Touch.

Issues: Rational To Enter in the competitive Mobile Market Challenges while entering the Crowded Market Issues and challenges in pricing a product or service (pricing decisions, premium pricing, market skimming, etc). Consumer Reaction to reduction in prices Reaction from Consumers in Europe and Asia.

Consumer Behavior or Reaction

What kind of response will customers give to the Price Cuts?

Really Bad Reaction Apple screwed you: So now what? Unofficial Apply Weblog Some early iPhone buyers irked; others have no regrets USA Today Apple cuts price on top iPhone, angering some early buyers The Boston Globe iPhone owners crying foul over price cuts New York Times

Apple s Remedy Steve Jobs wrote a letter explaining the price cuts. Those who purchased the product in last 14 days could refund the balance under Apple s exchange policy. Credit of 100$ to purchase any other Apple product

Remedy-A partial Healer Robbie D, one of the first customers say "I called AT&T said I was not happy after standing in line with my wife on the 29th so we could get 2 of them only to have it cost $ 400.00 less 66 days later. They said sorry and gave me a $100.00 per line credit!"

Credit Voucher? No Refund? A president of a Technology Consulting firm said A 100 $ credit could be perceived as adding insult to injury. It s a way to make you go and buy something else, and gives company a chance to make more money

Successful Relationships

Customer Value Customer Satisfaction

Customer Retention

Scenarios for Apple s iPhone

MIXED RESPONCESNO CONCUSIVE POINT

Should Apple have drastically cut down the price of the iPhone?

Issues: Rational To Enter in the competitive Mobile Market Challenges while entering the Crowded Market Issues and challenges in pricing a product or service (pricing decisions, premium pricing, market skimming, etc). Consumer Reaction to reduction in prices Reaction from Consumers in Europe and Asia.

Consumers in Europe Initially iPhone seemed like a success in Europe, Sold 330,000 units in 2 Month in 2007 However, European legislation does not allow tying up with a single carrier for a handset. Users compelled to contract with one service provider for 2 years Also European customers were accustomed to any phone any network choice

Consumers in Europe The post sales revenue of iPhone was not impressive. The sales started dropping due to: Premium Price Carrier Exclusivity Lack of 3G Capability

Apple again reduced the prices and planned a 3G Version

Consumers in Asia Bharti Airtel got 200,000 queries Vodafone got 100,000 queries However, the success is limited due to the binding contract with the service provider and the premium pricing

Phone Unlocking Apple lost close to 300-400 M $ with every 1 Million phones being unlocked. Unlocking was due to the customer being forced to be with one service provider.

Consumers Behaviour They REACT not ACTCompanies Actions Announcement of Launch Social Media Marketing Teaser Advertisement Product Concept Product Demo Advertisements Launch Day Premium Pricing Price Drops Binding on Service provider (Europe) Consumer Behavior or Reaction Anxiety Curiosity Awaiting for the product Innovation is always welcome Inquiring about the product Lines outside Apple Store Cool, Tech Savvy Customer buys Consumers feel cheated Unlocked Phones in Market

Thank you