Apple Marketing Strategies

Running head: THE MARKETING STRATEGIES OF APPLE INC. 1

The Marketing Strategies of Apple Inc.

Adrian Tullock & Wilfred Brown

Texas A&M University - Commerce

THE MARKETING STRATEGIES OF APPLE INC. 2

Contents

Company Overview ............................................................................................................... 5

Market Opportunity Overview ............................................................................................... 5

Situation Analysis .................................................................................................................. 5

SWOT Analysis ................................................................................................................. 6

Strengths ............................................................................................................................ 6

Weaknesses ........................................................................................................................ 7

Opportunities...................................................................................................................... 9

Threats.............................................................................................................................. 10

Target Market Analysis........................................................................................................ 11

Demographic Characteristics of Market .......................................................................... 11

Psychographic Characteristics of Market ........................................................................ 11

Behaviors of Target Market ............................................................................................. 11

Strategies Appealing to Market ....................................................................................... 12

Marketing Mix ..................................................................................................................... 12

Product Strategy ............................................................................................................... 12

Pricing Strategy ................................................................................................................ 13

Distribution Plan .............................................................................................................. 13

Promotion and Advertising Plan ...................................................................................... 13

Positioning Strategy ......................................................................................................... 13


Competitive Analysis ........................................................................................................... 13

Challenges/ Contingency Plan ............................................................................................. 14

Internal Risks ................................................................................................................... 14

External Risks .................................................................................................................. 14

How Risks Will Be Avoided............................................................................................ 14

Actions When Risks Occur .............................................................................................. 16

Recommendations/Growth Plan .......................................................................................... 16

Strategies for Market Penetration .................................................................................... 16

Strategies for Market Development ................................................................................. 16

Strategies for Diversification and Product Development ................................................ 17

Conclusion ........................................................................................................................... 17

References ............................................................................................................................ 18


Abstract

Apple Inc. utilizes a marketing plan that benefits from its position as a globally desired

luxury brand. By creating a cohesive experience within its product lines, users can easily become

invested in the brand. While research and development of new market products has not been a

strong point for Apple, recent partnerships and moves into new product-markets may still prove

to be winning moves by the firm to further solidify its dominance in some markets, while

affirming their marketing competency across new ones. Though not immune to its own set of

vulnerabilities as an industry competitor, Apple’s diverse set of strengths may be more than

enough to come out on top.


The Marketing Strategies of Apple Inc.

In the world of consumer goods today, within the electronic equipment industry, it is far

from common to not know the name Apple Inc. This tech giant, originally birthed in 1976 by the

trio of Steve Jobs, Steve Wozniak, and Ronald Wayne, has become a household name through

market and technological innovation and the execution of a marketing strategy on a scale unlike

anything the industry has seen before. The brand loyalty enjoyed by Apple has been widely

deemed as cult-like, much to the envy of its competitors. To dig into the success of Apple Inc. is

to understand the type of company that Apple is, how they view themselves in the market, and

how they strategize their marketing.

Company Overview

Apple Inc.’s current acting CEO is Timothy Donald “Tim” Cook, who officially succeeded

the late Steve Jobs on August 24, 2011. The company’s product mix largely focuses on computer

hardware (Mac computers) and related software (iOS, OS X, Safari), consumer electronics (iPod,

iPhone, Apple TV), and digital distribution of media and apps, generally to its own platforms

(iTunes store, iCloud). Apple’s worldwide, diversified market presence elicits a broad range of

competitors, including the likes of Samsung Electronics, Sony Corporation, Dell Inc and

Microsoft Corporation. Their 2014 revenues ($182.35 billion) and profits ($39.51 billion) both

saw increases greater than 6.5% above their 2013 measures ($170.87 billion and $37.04 billion,

respectively). As of mid 2015, the company staffs 92,600 employees. This information is

summarized in Table 1 at the bottom of the document.

Market Opportunity Overview

Apple is well positioned to secure significant market share in numerous emerging and

growing markets up through the year 2020. IDC has projected the IoT (Internet of Things)

market to reach $7.1 trillion in 2020 (Lund, MacGillivray, Turner, Morales, 2104); a market that

Apple’s existing software platform well-positions them to take advantage of. More recent

ventures into the wearable gadgets and mobile payments markets, via the Apple Watch and

Apple Pay, respectively, have notable potential to increase brand value and improve user

experience. BI has projected the wearable gadgets market alone to reach 148 million shipments

in 2019 (Danova, 2015) and for Apple to dominate said market. Lastly, the partnership

announced last year between IBM and Apple could develop into a big pay off as they aim to

make an impact in the mobile enterprise management market; a market projected to reach $1.8

billion in 2016 by IDC (McCarthy, 2015).

Situation Analysis

Within the realm of consumer electronics of the type Apple produces, the state of the

economy at large has a significant effect on the demand for goods. As the economy grows, the

demand for higher-end products will follow. Also, as the economy shrinks, the demand for

luxury and higher-end goods will decrease as consumers move to more value products to


compensate for decreased purchasing power. Although the state of the economy has been on a

somewhat sluggish recovery over the last half-decade, Apple has continued to see value growth

as a brand; much credit given to the faith and investment of consumers in the Apple brand across

the globe. Further, by strategically catering to the markets, Apple has grown a more diverse

product mix that has enabled them to maintain an industry presence in multiple markets.

SWOT Analysis

Based on the book, SWOT Analysis Template: Grow Your Business Strategically, by

Theresa Delgado, a Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis, is a

tool designed to help organizations make strategic planning decisions by proactively analyzing

the organization’s current state and identifying possible future opportunities. By evaluating

Apple from a firm’s point of view, we have identified several strengths and weaknesses within

the company’s core business. Further evaluation of Apple from an industry perspective

illuminates external opportunities and threats to the organization’s core business.

Strengths

Research suggests that Apple’s core strengths can be found in four essential areas:

Financial Security, Marketing Efficiency, Vertical Integration, and Mature U.S. Distribution

Channels.

Financial security. As of March 28th, 2015 Apple announced a 27% growth in revenue and

a 40% growth in earnings per share which both set new second quarter records for Apple.

Despite recent debt accumulation by Apple, the company still had $14,489 billion in cash and

cash equivalents heading into the second quarter of 2015. During the first quarter, Apple

maintained a 40.77% gross profit margin and a net profit margin of 23.39%. The occurrence of

both a high profit margin and net profit margin seems to indicate deep efficiencies in Apple’s

core operations. With first quarter sales of $58 billion, Apple seems to be well on its way to

posting strong year end financials. With increasing revenue, cash on hand to invest in marketing,

research and development, and high net profit margins; Apple can leverage its current financial

prowess to meet current challenges or invest in innovation in order to build for future success.

Marketing efficiency. Since it incorporated in 1977, Apple has made a name for itself by

employing its 3-point marketing system. This system incorporates empathy for customer needs,

complete focus on only the most pertinent opportunities, and finally, the ability to impute the

desired qualities of their product to their customers. Through implementing this 3-point plan,

marketing has become one of Apple’s most coveted strengths. By the end of 2014, Apple’s

marketing budget totaled $1.2 billion and their 3-point marketing system is still going strong

after 38 years. Though a marketing budget of $1.2 billion is substantial, it is the returns on

marketing spent at Apple which has made marketing one of the firm’s most obvious strengths.

From 2009-2015, Apple won the CMO Survey Award for marketing excellence; an award that

goes to companies that set the standard for marketing excellence within their industry and across

all others. What sets Apple’s marketing above its competitors is its efficiency. For example, in

2013 Apple spent just 0.64% of total sales on advertising compared to Samsung’s 1.75% of total

sales spent. In essence, Apple is getting more “bang” for its marketing buck than Samsung, one

of its closest direct competitors. Apple’s marketing efficiency is further recognized by Forbes

and Interbrand, acknowledging Apple as the most valuable brand in the world. Forbes values


Apple’s brand at $124.2 billion, while Interbrand values the brand at $118.8 billion. Both Forbes

and Interbrand agree that Apple is among the world’s fastest growing brands but, unlike its rivals

Samsung and Microsoft, Apple is not breaking the bank to do it.

Vertical integration. Another one of Apple’s strengths is its integrated business model.

Apple has managed to integrate four successful businesses into one and capitalize on the

economies of scale and operational control that comes with such a setup. Essentially, Apple

operates a hardware business, a software business, and a service and retail business all in one.

While the other personal computer companies struggle with product differentiation and depend

on external software companies to improve their product, Apple develops its own software and

thus, holds its customer’s user experience solely in its own hands. Creating both software and

hardware makes Apple extremely flexible in is innovation and design phase of production and

can greatly increase operational excellence within the company. Apple’s control over the

majority of its value chain is a feat that not one of its competitors has yet to master. Vertical

integration has enabled Apple to decrease costs through economies of scale and operational

excellence as well as, increase profit margins. Vertical integration has also allowed Apple to

provide a seamless experience to its customers and, in turn, has increased Apple’s brand value

and loyalty substantially.

Mature US distribution channels. A crucial strength of Apple is its mature distribution

channels in the United States, which includes its highly successful retail outlets. The United

States is the second largest smartphone market in the world behind China and is the leading

market for nearly all high-end technology devices. Apple prides itself on its product quality and

incorporates a premium pricing model. With the U.S. being the number one market for high-end

electronic devices in the world, it is imperative that Apple have strong distribution channels in

this nation. Through its strong U.S. distribution partnerships Apple has with other U.S.

companies like Best Buy, Wal-Mart, and Target, Apple generated earnings of $68.9 billion in the

U.S. alone or, 37.7% of total Apple sales, in 2014. A large part of Apple’s sales success in the

U.S. has come from its dominant position in stand-alone retail outlets versus its competitors. To

date, Apple currently operates 265 Apple retail locations within the United States. Based on U.S.

Census Data, 93% of all total retail in the U.S. was generated at traditional brick and mortar

retail outlets and only 3% of retail revenue was generated through ecommerce. Based on the

numbers provided by market research firm eMarketer, Apple leads all U.S. based retailers in the

metric of average sales per square feet, with $4,551 of sales per square foot over the most recent

trailing 12-month period. With dominant U.S. retail operations and a strong U.S. distribution

network base, Apple’s mature U.S. distribution channels will continue to be one of its biggest

assets in the market.

Weaknesses

Like all companies, Apple is not immune to internal weaknesses, and research seems to

suggest that Apple has three major weaknesses they must work to overcome: premium pricing,

lack of innovation, and weak distribution channels in China and India.

Premium pricing. Apple’s product offerings are typically among the priciest ones on the

market (iPhone 6 $650, iPhone 6 Plus $750 and iPad Air 2 $499). For years, Apple has made

inroads by targeting wealthier consumers and, by doing so, has had much success; but this

strategy has its limitation. Based mostly on slow economic growth in the developed world, in


2014, Apple’s sales in the U.S. only grew 4% and only 8% in Europe. Compared to 9% sales

growth in the U.S. and 8% sales growth in Europe in 2013, these trends seem to signal that the

developed world’s market for high-end electronic devices are beginning to be oversaturated. This

is a problem for Apple because the Americas and Europe represent two of the biggest markets in

terms of revenue generation, with the Americas being first and Europe being third behind China.

Though China has been an area of growth for Apple sales in the last few years, Apple’s luxury

position has opened the door to harsh competition in China from companies like Samsung and

Xiaomi, who offer a variety of products that can meet consumer demand at multiple price points.

Apple did attempt to expand into the large value segment when it launched its scaled-down

iPhone 5C smartphone in September of 2013, but the product was not met by consumers with

much enthusiasm. Most of the future growth in the world smartphone market will be in the

emerging markets but, due to its premium pricing model, Apple has gotten off to a poor start

compared to its competitors.

Lack of innovation. In recent years, Apple has spent less money on research and

development, and this action has led to fewer patents and less products being introduced into the

market. Though innovation was the cornerstone on which the Apple Empire was founded, in

recent years the company has failed to create a truly disruptive product that would enable the

company to enjoy substantial growth and increase market share. To Apple’s credit, the company

has steadily increased R&D spending from $3.4 billion in 2012 to $6 billion in 2014, though

only being 3.3% of their total revenues for that year. Even as R&D spending has almost doubled

since 2012, the only truly new product Apple has brought to market is the Apple Watch. Further

analysis shows that though Apple has begun to invest more in R&D, they are still being out spent

by some of their closest competitors. In 2014 Google, Samsung and Microsoft all spent more

money on R&D than Apple. In the years from 2011-2013, Apple was granted less patents in the

United States than both Samsung and Microsoft, while in the years 2012 and 2013, they had

fewer patents granted than Google as well. In 2014, Apple had 2003 patents granted in the U.S.

compared to 2119 by LG, 2566 by Google, 2829 by Microsoft, and an impressive 4936 by

Samsung, which was second to only IBM in total patents. For Apple to maintain its edge as one

of the world’s most innovative companies, it may be time for it to actually innovate.

Weak distribution channels in India and China. In 2014, Apple earned 66% of its

revenue in the world’s developed markets, with 37.7% of revenues coming from the United

States. During the same time period, Apple’s revenue from China, the world’s largest economy,

was only 17%. The disparity between the revenue generated in the U.S. versus China may be

attributed to Apple’s weak distribution channels in China. In the United States, Apple operates

265 stores but, only 19 stores in China. In 2014, 28%, or almost one-third, of Apple’s total

revenue came from direct distribution channels which include sales from Apple’s retail outlets

and online stores. In recent months, Apple has shown signs of improving its distribution channels

in China. In the fourth quarter of 2014, Apple became the number one seller of smartphones in

China, spurred by the opening of 7 of their total 19 stores during the same year. Apple plans to

further address its distribution weaknesses in China by opening 40 stores in China by 2016. As

for India, Apple still has a long way to go in meeting the demands of the Indian market. In India,

Apple has a smart phone market share of only 2%. Its biggest competitor in the smartphone

market is Samsung, and in comparison has a 27.9% market share. India is predicted to outpace

China in economic growth in the coming years and become the world’s most populous country


by 2028. Surely, if Apple desires to continue generate sustainable growth, India must be a big

part of their future plans.

Opportunities

Apple has three major opportunities the company can pursue in order to increase its

shareholders return on investment in the near future. These opportunities are: the increasing

market for wearable gadgets, strategic partnerships, and the emerging market of Africa.

Increasing market for wearable gadgets. Most market analysts agree that wearable

technology will be a $100 billion industry by 2020. In April of 2015, Apple introduced the

market to the Apple Watch; Apple’s first attempt at an intelligent wearable gadget. Some

analysts have estimated that more than 2 million Apple Watches were preordered. Demand for

wearable devices is expected to grow at an average rate of 35% each year until 2019. With the

cheapest smart watch starting at $349, the device could generate an extra $14 billion in revenue

for Apple by the year 2019. Though the wearable market is just beginning to develop, it is likely

that Apple will see huge growth opportunities in the coming future as millennials who grew up

immersed in technology, will push humans one step closer to full human-machine integration. As

the line between what is human and what is machine continues to blur, the market for smart

accessories such as watches, glasses, and clothing will continue to grow.

Strategic partnerships. After a nine year hiatus, in July 2014, Apple rejoined forces with

IBM with the goal of bringing IBM’s expertise with big data to clients, using Apple’s skill at

creating easy-to-use devices and user-friendly applications. Mobile enterprise is poised to be the

next billion dollar market after cloud computing. As computing power doubles and companies

move more toward subscription based software, companies will start to look at smart mobile

devices to empower their employees and drive operational efficiency. The partnership with IBM

places Apple in a prime position to capitalize on the growth of the Mobile Enterprise movement,

which analysts estimate will be a $1.8 billion business by 2016. To date, the partnership has

developed more than ten applications which target a wide range of business customers, from law

enforcement agencies to commercial airlines. With companies spending hundreds of millions of

dollars transforming their organizations with cloud technology, bold partnerships like the one

with IBM could be an essential key to Apple gaining a foothold in the $40 billion a year software

analytics market, as well as the emerging market for enterprise grade gadgets or smart devices

designed to help employees do their jobs more efficiently. Another partnership that could prove

highly lucrative for Apple could be with Chinese retail behemoth Alibaba. Alibaba’s online

payment service, AliPay, dominates the Chinese market and could help Apple in its quest to

expand its mobile pay capabilities and its market share in China. Forrester predicts that the

mobile payment market will grow by 48% annually, and by 2017 will reach $90 billion just in

the United States. Another strategic partnership that may help Apple penetrate the athletic

wearable market is its pending partnership with athletics apparel giant Nike. The two companies

are teaming up to make fitness applications that will connect Nike’s millions of customers to

Nike and each other digitally using Apple’s products, such as the Apple Watch. Through savvy

strategic partnerships, Apple can grow revenue streams in different sectors within markets they

already have saturated and continue to expand in emerging markets such as China.


The emerging market in Africa. Africa is the world’s second largest continent and is

home to five of the twelve dozen fastest growing economies in the world. Limitations of scarce

natural resources have countries like China, Russia, India, and Brazil investing heavily in Africa.

With the combination of blistering economic growth from a population boom and productivity

growth from gains in infrastructure, Africa is primed to be the world’s next emerging market.

Standard Bank operating throughout the African continent, reported in a recent study that eleven

sub-Saharan nations (Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Sudan,

Sudan, Tanzania and Uganda) will all see a boom in their middle class populations in the next 16

years, from 15 million to over 40 million by 2030. A recent article by Deloitte Consulting found

that if the current African growth trajectory continues, the African middle class will grow to 1.1

billion in 2060.

Threats

Research suggests that Apple will face two major external threats in the near future: one,

increased competition and two, a strong U.S. dollar.

Increased competition. In Apple’s publish 10-K from the year 2014, the firm stated in its

risk section, “Global markets for the Company’s products and services are highly competitive

and subject to rapid technological change, and the Company may be unable to compete

effectively in these markets.” Apple has always competed well in a highly competitive market

but, the smartphone sector, in which the company in the past has dominated with its iPhone

brand, has become highly saturated. The developed market, where Apple makes 66% of its

revenue, is in a period of slow economic growth due to low birth rates and stagnant productivity.

Slow economic growth and market saturation in developed markets means that Apple must look

for opportunities in the emerging markets to maintain sustainability but, emerging markets

competition in this section is highly price based. For example, Samsung has launched a new

operating system called Tizen in the Samsung Z1 smartphone at a price of $91, which has

become the number one selling phone in Bangladesh during Q1 2015. Though Apple has proven

it can compete in China, the biggest problem for Apple competing outside the developed world

may not be price competition after all but instead, the protection of its copyrights and patents in

emerging markets where such legal infrastructures are still evolving. Finally, Apple faces

significant pressure from the constant growth of the Android operating system. Apple phones

come with its own patent designed operating system called iOS, but iOS only represents about

18.3% of global smartphone market share while the Android operating system covers about 78%

of the market. The growth of the Android operating system threatens one of Apple's biggest

revenue streams in iTunes, which grossed $10.2 billion in 2014. With the rise of Android,

application developers have come to prefer it. Thus, more applications are becoming available on

Android devices before Apple devices; making Apple products less desirable. Figures 2 and 3,

found at the end of the document, further illustrate some of the competition Apple faces in two of

its highly competitive markets.

Strong U.S. dollar. The number one risk factor Apple cited in their 2014 annual report

was, ‘global and regional economic conditions,’ which they felt could ‘materially adversely

affect the Company’. In the report, there were immediate concerns over the strengthening of the

U.S. dollar, spurring Apple to state, “Demand also could differ materially from the Company’s


expectations as a result of currency fluctuations because the company generally raises prices on

goods and services sold outside the U.S. to correspond with the effect of a strengthening of the

U.S. dollar.” Three-fifths of Apple’s revenues come from outside of the United States. This

means that most of Apple’s profits come in currencies other than the Dollar. A strong U.S. dollar

could mean fewer margins for Apple due to price discounting, weaker sales due to higher prices,

and loss of market share in markets outside the United States. A strong dollar will definitely have

a major impact on Apple’s future in the coming years as the U.S. economy continues to recover

ground lost during the great recession.

Target Market Analysis

Demographic Characteristics of Market

Apple’s main market consists of middle to upper income men and women from the age 18-

34. This can be seen in iPhone usage where 45% of total Apple product users are men and

women ages 18-34. Users age 35-54 make up another 31.5% of all users. More men tend to be

iPhone users than women, with men representing 60% of all iPhone users and women

representing only 40%. iPhone users tend to be highly educated with a large number of users

being college graduates, as well as, holders of postgraduate degrees. A large number of iPhone

users are professionals, who work white collar jobs and typically have an income of over 75,000

dollars on average.

Psychographic Characteristics of Market

Apple has always targeted customers who hold a deep seated feeling of uniqueness. Apples

first ad “1984”, based off of the George Orwell book by the same title, portrayed a society of

older, all male conformist listening to a fascist leader giving orders to proletariats who thought

the same, looked the same, and acted the same. Then suddenly out of nowhere, being chased by

heavily armed guards; a vibrantly beautiful, young heroine came to the rescue and destroyed the

projector screen with a large projectile. From that point on, Apple has built its brand by targeting

a diverse consumer base by getting customers to identify with the company through embodying

the very essence of individuality and free thought. In essence, Apple’s branding strategy has

attracted a loyal following of customers who enjoy a wide range of hobbies and interests, by

selling a mindset. By making customers believe that by purchasing an Apple product they are

exceptional, Apple can charge a premium to customers by helping them to reaffirm their

predetermined beliefs of themselves. Along with selling the mindset of uniqueness, Apple has

almost exclusively focused on marketing their products to people of affluence. As such, Apple’s

target market tends to enjoy a life of relative financial comfort, as the majority of their

consumers make up the upper middle class and above in the countries Apple operates in.

Behaviors of Target Market

Most Apple users in general tend to follow technology trends but are not for the most part,

hard core technologists who research the hardware specification and software capabilities of the


products they buy. Typically after people buy one Apple product, they tend to continue using

Apple products in the future because of the familiarity they come to have with the company’s

software. Consumers usually start off by buying a trending product like the iPod or iPad and then

fall in love with the user experience of the product software and eventually become so used to

the software that they begin to invest in bigger purchases, like the iPhone or Mac computer.

Once Apple users adapt to the products and begin to perceive enhanced utility from them, they

begin to behave as if they belong to an exclusive club, where membership is reserved for only

those who own Apple products. This fraternal behavior amongst Apple Users is what seems to

drive Apple’s cult like following.

Strategies Appealing to Market

The main marketing strategy that Apple employs to woo their consumers is value based

marketing. In other words, Apple uses its marketing and branding campaigns to tap into their

consumer’s value system, in a way that aligns pre-established consumer values with Apple

products and offers buyers the opportunity to fulfill core personality needs purchasing Apple

products. In this way, a person may have a core personality need to feel important, that person

fill these need by buying an Apple Watch that costs 10,000 dollars and wearing it places that

people will recognize its value. In such a transaction Apple may make a sale but, the customer

gains the opportunity to fill an internal psychological need. Value based marketing can also be

used to turn your product into a values statement. Apple has had great success making customers

feel like their products represented clear statements of important values, like individuality,

hedonism, and intelligence. Finally, Apple has succeeded where others have failed because the

company understands when to shift their offerings as consumer sentiment changes. Apple

focuses the majority of its consumer research on customers who are loyal to the brand already

and makes it a point to understand their customer’s desires, beliefs and behaviors. In doing so,

the company can stay in synch with their clients as their values change.

Marketing Mix

Product Strategy

While phones, tablets, and computers comprise most of Apple’s product lineup, the

introduction of the Apple Watch is expected to see the company firmly break into the wearable

gadgets market as well. Apple’s media players (iPod and Apple TV) and other products also are

built to be compatible with numerous services offered by Apple, such as iBookstore, iTunes

Store, and iCloud. Apple devices generally run on their proprietary software platforms, such as

OS X and iOS, and are engineered to interface with each other through their Wi-Fi capabilities.

This gives consumers the sense of Apple being able to deliver quality goods and services as well

as an ecosystem and experience that has been attributed as a big part of their success.


Pricing Strategy

Apple sells their products at premium prices, looking to score its revenues from high profit

margins. It is not uncommon to find Apple products priced above their competition. However,

they do practice price skimming and have shown they will reduce the asking price on their

products when required by the market. On another note, the tech company often releases multiple

versions of its products, allowing for consumers to acquire their products at different, and at

times more affordable, price points.

Distribution Plan

When Apple products are manufactured, they are sent off to wholesalers and, from there, to

retailers for direct sale to customers. Apple products go to physical stores of certified retailers,

online retailers, and to Apple’s own physical stores. Apple stores are typically found in more

upscale shopping centers and business districts to target their higher income demographic. Many

certified retailers of Apple products also sell complementary goods and services, such as cell

network carriers and electronic accessory distributors. This helps to keep the brand visible and

relevant in the market place.

Promotion and Advertising Plan

Apple doesn’t work much in the way of the promotional messages and advertising plans,

choosing to instead let other retailers carrying their products do the talking via TV ads, billboard

ads, and online ads that tend to emphasize the features, capabilities and local availability of the

product being commercialized. This is very much the case with popular products such as the

iPhone, where the demand for such products, and the brand reputation held by Apple, has usually

been strong enough to drive sales. Apple does, however, promote its products in its own retail

stores, where customers are allowed to learn about and trial products under the guidance of store

employees. The employees at Apple stores are well-versed in how to operate and navigate the

features and capabilities, and are able to advertise and educate customers on the products.

Positioning Strategy

In order to be a globally recognized brand, Apple has taken steps to be viewed as a brand of

desirable and exclusive high-end products, as well as a familiar and user friendly experience by

aiming to have a strong presence in schools and in the work place. As a widely-trusted brand,

Apple enjoys the ability to jump into various markets with pre-determined levels of success.

Also, with a chain of physical locations where consumers are allowed to get comfortable with

Apple products before purchase, they can maintain a level of the luxury feel without seeming too

far out of reach for potential new customers to take interest and share in the experience.

Competitive Analysis

The success experienced by Apple has not come unchallenged. There is no doubt that

Apple’s product promotion strategy of targeting the characteristics of their existing, avid


customer base has kept brand loyalty strong, and has granted them a comfortable niche in the

upper middle class consumer demographic. This strength of influence also has allowed Apple to

release the Apple Watch with immediate intrigue by the market; establishing the inherent

promotional capabilities of the brand. However, Apple’s competitors do have a few notable

strengths of their own. For one, a strong consumer following does not always indicate product

superiority as well as it indicates product traction and familiarity. With other companies having

invested more resources into R&D, Apple products are not always the most advanced on the

market. Second, with Apple products tending to aim for higher margins, there are always less

expensive products ready to fill consumer’s technology needs. This is a big contributing factor to

competitors of Apple being able to sell better in the world’s emerging markets, where price-

sensitivity plays a bigger part in purchasing decisions than more developed markets. This will

potentially cost Apple market share, as will their competitors’ willingness to focus on specific

areas of the market to challenge Apple’s dominance versus challenging Apple as a whole.

Examples include Samsung overtaking Apple in the smartphone market, thereby also taking

market share away from Apple’s iOS and into the android market. Table 2 and figure 1, located

at the end of the document, give a high-level view of some competition Apple faces in the

smartphone market, while figure 2 grants some insight into the areas where Apple faces specific

challenges in the market.

Challenges/ Contingency Plan

Internal Risks

As discussed in detail in the Weaknesses portion of the S.W.O.T analysis, premium

pricing, lack of innovation, and weak distribution channels in developing markets, especially

India and China are all substantial internal risk which Apple must address in order to build

continued shareholder value in the future.

External Risks

Key external risks involve increased competition from other firms and a strong U.S. dollar,

which may negatively affect long term profits for Apple. As discussed in detail in the Threats

section of the S.W.O.T analysis, increased competition from other firms (especially in pricing)

and volatile economic conditions around the globe (specifically its effect on currency exchange

rates) are all major top-of-mind concerns for Apple executives.

How Risks Will Be Avoided

This section is designed to give Apple leadership a strategic framework to follow in order

to either avoid aforementioned risks. To avoid the internal risks that premium pricing imposes,

Apple must create a strategy to keep other firms from encroaching upon their market, as well as

continue to increase demand for their product. Demand for niche products tends to be inelastic,

but as more firms enter the market, prices have no choice but to go down due to the laws of


supply and demand. In the current state, more producers are entering the consumer technology

market than consumers, and thus the prices are dropping rapidly over time.

Apple must avoid direct competition with other firms either in reality or in the minds of

their consumers. To accomplish this, Apple must continue to offer superior products and services

than their competitors. When consumers compare Apple products to their competitors’ products,

there must truly be a real difference in both quality and utility. This must be done through

innovation. Apple must raise the amount it spends on research and development from 3.3% of

total revenue to at least 6% of total revenue, in order to continue to be a trailblazer in the market

and sustain product differentiation amongst consumers. Second, Apple must continue to separate

itself from its competitors through marketing by creating cognitive disassociation in the minds of

consumers between itself and its competition. Finally, a third strategy would be for Apple to

grow its market at the rate that would keep it ahead of new entrants. Though this is a short term

strategy because of the saturation of most the world’s middle class in this sector, there are still a

few markets Apple has not fully exploited. Apple still has room to grow in India, Africa, and to a

smaller extent, China (market share by location: China 25.4%, India and Africa less than 5%).

To avoid the risk that a lack of innovation may impose, Apple must do two things: One,

follow a financial strategy that is conducive to innovation and two, rebuild the organization using

a framework for innovation. Since the succession of current CEO Tim Cook, Apple has not

created a truly innovative product. One reason is that the financial strategy of Cook tends to

focus on short term profit and not the long term creation of shareholder wealth. As of April 27,

2015 Apple announced that it planned to spend more than $200 billion of cash by the end of

March 2017, as part of the revised program to repurchase $140 billion worth of shares and pay

60 billion in dividends to shareholders. This financial strategy diverts $200 billion dollars from

innovation and uses it instead to artificially raise share prices. Apple needs to go away from such

short term financial strategies and invest in the future growth of the company. Once Apple has

adopted a financial strategy conducive to innovation, the company must transform its corporate

culture using a framework for innovation.

Dr. Niek D du Preez and Louis Louw (2008) from Stellenbosch University, Department of

Industrial Engineering outlines what a successful innovation framework looks like:

Successful innovation requires an integrated design process, i.e. integration in the design of

the enterprise, the design of the product, as well as the design and implementation of new

technologies. Such an integrated design effort requires good collaboration and management

of the designs, and should be supported by efficient knowledge management techniques

and tools. (p. 1)

Apple must reengineer its design process to reduce layers of hierarchy and promote greater

innovation. To avoid this risk, Apple must realign its culture and processes to allow for design

flexibility and creativity.

To mitigate the risk of weak distribution channels in India and China, Apple must establish

their brick and mortar retail stores within these two countries, as well as develop partnerships

with established local retailers in order to diversify the distribution channels as they have already

done in the developed markets. Adapting their distribution channels to the country they are

operating in is key to success.


Finally, to avoid the risk imposed by a strong U.S. dollar Apples CEO must take broad

measures to hedge against U.S. currency appreciation including futures contracts, currency

options, and currency forward contracts. It may be wise for Apple to invest in expanding certain

groups in the finance department to help forecast exchange rates and assess potential risks to

profits. Seeking the advice of external consultants who specialize in currency hedging and

operation in high market volatility may be advantageous for the short-run, as these contractors

can be used as needed without increased permanent payroll and can bring specific expertise into

planning when needed.

Actions When Risks Occur

In the event that the U.S. dollar becomes stronger compared to other foreign currencies,

Apple must cut costs and reduce unnecessary capital spending. As the U.S. dollar appreciates

and economic growth outside of the United States continues to slow, Apple has no choice but to

cut costs throughout business. To reduce costs, the company needs to form an internal oversight

committee to investigate internal costs and decide which costs are justifiable and which costs or

initiatives are unnecessary. One cost that can be reduced immediately is the company’s extensive

stock buyback program, which can be eliminated and the money diverted to research and

development and the hiring of top engineers, designers and programmers.

Recommendations/Growth Plan

With Apple being among the top brands worldwide, they have a solid foothold in various

markets and an opportunity to capitalize on their high level of brand familiarity and brand

insistence. Aided by R&D and innovation, there are potential growth opportunities in Apple

bolstering the value of current product lines. This can be done by expanding the depth and

breadth of its existing product lines, further segmenting of product-markets within its existing

assortment of products, and partnerships and joint promotions with other firms and companies.

Strategies for Market Penetration

As the established luxury brand amongst its competitors, Apple has to explore creative

ways to increase its market share if competing on a leveled pricing model is out of the question.

Opening more Apple store locations in competitive markets has proven to be an effective way to

increase its customer base and will likely be a result of Apple’s current expansion plans. One

potential way for Apple to increase usage from current users is to explore the idea of high-value

exclusive content being paired with its media services such as Apple TV and iTunes.

Strategies for Market Development

Regarding new markets, the emerging markets in Africa could be a great new investment

for the company. Gaining early support and a positive image in Africa before its competitors

gain sufficiently strong traction could be the difference in gaining a competitive market share,

and dominant market share as the economy takes off. There may also be potential opportunities


in sub-markets within existing markets for Apple. Grand openings and special events may be

draws for new customers if marketed well. Further, if it is found that there are a few common

uses or software commonly paired with their products, perhaps Apple could begin offering

specialized packages of their products; i.e. studio recording packages for Mac computers if data

shows a high usage of Mac computers in studio recording. Lastly, joint product promotions with

complementary products may bring new customers. One possible example could be a promotion

supporting Apple TV being sold along with new TV purchases at physical and online retailers.

Strategies for Diversification and Product Development

Apple has recently diversified its product mix by introducing the Apple Watch into the

market, establishing a place in the wearable gadgets market. With the large investment made into

this product, it would be wise for Apple to focus on promoting this product, instead of another

new major one, in order to avoid cannibalizing the current investment. With the Apple Watch

running on iOS, the same operating system as the iPhone, it also serves as an opportunity to

spread iOS into the newly established market while simultaneously providing a new product to

the market enamored with Apple’s iOS experience. With the devices using iOS all being able to

communicate with one another, this essentially makes existing Apple products complementary

products to the Apple Watch as part of the iOS family.

Conclusion

Apple is a technology company, representing a large portion of the consumer electronics

and computer products and services markets across the globe. Benefiting from a reputation as an

innovative firm known for its luxurious products and trusted services, Apple enjoys some of the

most favorable conditions for its four Ps within its marketing strategies. The efficiency of their

marketing plan, the vertically integrated business model, and their level of brand insistence has

allowed them to overcome challenges such as premium pricing and weak distribution channels in

foreign markets. In light of increased competition in some markets and the challenges to come

with a stronger U.S. dollar, Apple retains the wherewithal to find success in opportunities within

the emerging African market and through strategic partnerships that foster innovation. If Apple

maintains the high level of customer satisfaction with its target market as it has been known to

do, it may be able to stave off significant loss of market share to competitors by avoiding direct

competition where its weaknesses are exposed while it finds its next incentive to increase

investment in R&D.


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Table 1

Company Overview of Apple Inc.

Apple Inc. Company Overview

Name Apple, Inc.

Industries served Computer hardware

Computer software (iOS, OS X, Safari, iLife, iWork, iMovie, iPhoto)

Consumer electronics (iPod, iPhone, iPad, Apple TV, Apple Watch and

mac products)

Digital distribution (iTunes store, iCloud, App StoreSM, Mac App Store)

Geographic areas served Worldwide (retail stores in 16 countires and online stores in 39 countries)

Headquarters Cupertino, California, United States

Current CEO Timothy Donald “Tim” Cook

Revenue $182.35 billion (2014), $170.87 billion (2013)

Profit $39.51 billion (2014), $37.04 billion (2013)

Employees 92,600 (2015)

Main Competitors Samsung Electronics Co., Ltd., Amazon.com, Inc., International Business

Machines Corporation, Cisco Systems, Inc., Google Inc., Microsoft

Corporation, Dell Inc., LG Electronics, Sony Corporation and many other

technology companies


Table 2

Comparison of Top-Selling Smartphones


Figure 1. Comparison of Top-Selling Smartphones


Figure 2. Marketing Mix Heat Map of Smartphone Competition


Figure 3. Marketing Mix Heat Map of Personal Computer Competition

Apple Marketing Strategies

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Transcript of Apple Marketing Strategies