Apple’s new iPad Marketing Plan Made by: Vu Tien Thanh Bouy Yang Shi Lei QiaoLing Ma 2012 Executive Summary Although facing fierce competition from other companies, Apple is still indisputably at the top of the tablet market (54. 7% market share in the 4th quarter of 2011). The company has sold nearly 33 millions iPad 2 in the year of 2011. On March 7th 2012, the company launched its “new” iPad (3rd generation) for this year.
This report aims at the marketing analysis for the Apple’s new iPad. As committed, new iPad is the upgrade of previous iPad 2, designed to bring the best user experience to its customers through its innovative hardware, software, peripherals, and services. Apple continues to use the same pricing strategy for the new iPad while reducing the price for iPad 2 (from $499 to $399) to put it into direct competition with those middle-range tablets of Amazon or Samsung.
It has also been decided that Apple should focus the demographic segment in general but more specifically be targeting their product primarily to the 25-44 years old age group along with the secondary targets of 13-24 years old and 45-54 years old or older. The company uses a variety of direct and indirect distribution channels for iPads, such as its retail stores, online stores, and direct sales force, and third-party cellular network carriers, wholesalers, retailers (BestBuy, AT&T, Verizon, etc. , and value-added resellers with the purpose of expanding its distribution network to effectively reach more customers and provide them with a high-quality sales and post-sales support experience. While the company is widely recognized as a leading innovator in the markets where it competes, the tablet market is highly competitive and subject to aggressive pricing. To remain competitive, the company believes that continual investment in research and development is critical to the development and sale of iPads. In addition, by cooperating with other restigious companies such as Facebook or Starbucks and implementing promotion strategies via multi-channels, the company aims to sell 65. 5 million iPads ($42. 6 billion revenue estimated) by the end of February 2013 while maintaining dominant share (60%) of the growing tablet market. Situation Analysis Cooperative environment. As of January 2012[update], Apple has opened 361 stores worldwide. The Apple Stores have been responsible for turning the boring computer sales floor into a sleek playroom filled with gadgets.
The iPad is assembled by Foxconn Technology Group, which also manufactures Apple’s iPod, iPhone and Mac Mini, in its largest plant in Shenzhen, China. Currently Apple’s biggest manufacturer Foxconn is experiencing some serious problems. Their work labors get low salary, work in poor working conditions and always work overtime. The Fair Labor Association group tasked with auditing Foxconn has found a “ton of issues” that need fixing, according to a report from Bloomberg. These problems may affect Apple’s reputation.
Competitive environment. Although Apple is still indisputably at the top of the tablet market (with 54. 7% market share in the 4th quarter of 2011), but the “new” iPad will face a host of competitors that are clamoring after their own little niches. The competition can be divided into two categories: direct and indirect competitors. The major direct competitors of the new iPad are: Amazon Kindle Fire (16. 8% market share), Samsung Galaxy Tab 10. 1 (5. 8% market share), Barnes & Noble Nook Tablet (3. 5% market share).
The other tablet-competitors, which in one way or another, distinguish themselves from Apple’s gadget are: Acer Iconia A500 (more memory than the iPad and more ports), Motorola Xyboard (better camera than the iPad), BlackBerry PlayBook, Sony Tablet S, ASUS Transformer, etc. (See Appendix) The main indirect competitors for Apple new iPad are desktop computers, MP3 players and smartphones. The iPad’s advantage over these products is that it offers several different features in one product. It’s making life easier for their consumers by being able to conduct many applications in the one product.
As a fact, according to Tim Cook, Apple’s CEO, Apple sold 15. 4 million iPads in Q4 2011, whereas HP sold 15. 1 million PCs in the same timeframe. Lenovo sold 13. 1 million units in Q4. Basically Apple sold more iPads in Q4 of last year, than any PC manufacturer sold of their products worldwide. Economic environment. Uncertainty about global economic conditions poses a risk as consumers and businesses postpone spending in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values, which could have a material negative effect on demand for the company’s products and services.
Other factors that could influence demand include increases in fuel and other energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence, and other macroeconomic factors affecting consumer spending behavior. Social environment. New information technology devices have become a new cultural feature in our life. People have developed a culture of mobility while staying connected and new technological devices like iPad are likely to become not only a social feature but a social need as well. Political environment.
The political factors affect the organization’s ability to operate efficiently in foreign markets. For example, Apple’s operations are affected by political conditions of some countries in Asia where it is unable to meet its organizational targets successfully. War, terrorism, geopolitical uncertainties and other business interruptions have caused could have a strong negative effect on the company, including channel partners. Moreover, the changing legal requirements regarding the sales tax, import and export duties also affect Apple in terms of its rising costs and limitation to have access to a greater market.
Legal environment. Proview Technology, a manufacturer of flat screens, launched a tablet called IPAD in 2000 and registered the trademark. The Chinese firm trying to stop Apple from using the iPad “name” in China has launched an attack on the consumer electronics giant’s home turf, filing a lawsuit in Silicon Valley that accuses it of employing deception when it bought the trademark. SWOT Analysis Strengths: * Brand perception and loyalty. Apple is very successful innovative company.
According to Fortune, it is the most admired company for fifth year in a row. * Ease of use and quality. Apple’s iPad is easy in use and handle to carry. It also has higher standard of quality than other competitor’s tablets. * Relative to its competitors, the iPad benefits from well-established distribution channels and first mover advantage. * Innovation and improvements. Innovation and capability of improvements its products are the strengths of Apple, which can be seen as 6 times upgrading its iPhone products or 3 times upgrades of the iPad. Compatibility: The Ipad can work with iTunes and with other Mac/Apple products and OS software tools, which means limitless potential for upgradeability. * Product features. Light, slim and great design. Better image quality (than iPad 2), improved cameras. Unique high-resolution screen. Available with access to fast “4G” wireless broadband networks. Long battery life (10 hours). Unmatched access to third-party applications, high-quality Apple software and the iTunes store. | Opportunities: * Increasing demand and chance to increase sales.
Based on Apple’s 2011 annual report, sales of iPad 2 and related products and services were $20. 4 billion in 2011, representing an increase of $15. 4 billion or 311% compared to 2010. Unit sales of iPad 2 were 32. 4 million during 2011, an increase of 334% from 2010. Thus, the new iPad’s launch is predicted to be even more successful and increase sales. * Industry trend and market development. Tablet computers industry is developing rapidly and has a huge potential market. * Based on better display quality, gaming and multimedia are the fields in which Apple can explore options. Better quality control and implementation. Apple can also implement better quality control procedures to enable in providing more magical and revolutionary quality product to consumers. * Partnership. Apple collaborates with many powerful global retailers to flood the marketing with iPads, which reduces costs in marketing and increases revenue through long-term agreement deals. | Weaknesses:- Price. iPad is quite expensive and only can be afforded by certain group. Therefore, keeps it away from potential consumers and giving them chance to opt other competitors’ brands such as Amazon, Sony, HTC, etc. Product features. iPad is available in only one screen size. Data storage cannot be expanded with memory cards. No flash supported. It has fewer applications than netbooks or laptops. | Threats: * Strong competition. Apple is facing tough competition in today’s global market as industry is being in? uenced by many major competitors such as Amazon, Samsung, Dell and others. * Financial crisis and political instability. Today’s inconsistency of global ?nancial stability and world stock market have major impact on company’s pro? t.
Apple can also face political instability in some countries such as internal political power struggle, transition of ruling power and others (Asia, South Africa, etc. ) * The company is offering the product at a higher price in Asia and Europe compared to USA, which is discrimination and not much appreciated by consumers. | Marketing Objectives * Keep the leadership in the global tablet market. * Boost the iPad market share to 60% by the end of 2012. * Increase sales from the new iPad to 65. 5 million units by the end of February 2013. iPad’s revenue increase to $42. 6 billion by the end of February 2013. Target Markets * According to age: According to survey by “comScore” company in 2011, iPad’s primary target market would be users from 25 – 44 years old (business utility of product); secondary target markets are users from 13 – 24 years old (entertainment, study), 45 – 54 years old (business use) and older generations (+ 55 years old) – newspapers, e-books or entertainment. * According to income: high and upper level (+ $70,000 annual income). (US market) * Geographic concentration: North and South America, Europe and some countries of Asia. * Innovative technology “geeks” and early adopters. * All prospective Amazon Kindle owners, who want more than a one-trick device. * iPhone owners who are comfortable with a touch screen, but want something bigger. * Mac owners who want a middle ground device for the coffee table that’s bigger than iPhone, but smaller than laptop. * Frequent travelers who like watching movies or playing games on the plane or train. Heavy users of FaceTime (video calls) or other video-chat apps. Marketing mix: Product iPad is a multi-purpose mobile device for browsing the web, reading and sending email, watching videos, listening to music, video call, playing games, reading e-books and more. On March 7th 2012 Apple introduced the “new” iPad, the third generation of its category defining mobile device and the upgrade of previous iPad 2 version. It started selling its new iPad in the U. S. and several other countries on March 16. The key differences between the new iPad and leading competitors are: * Stunning Retina display (resolution: 2048 x 1536) * Screen size: 9. 7 inches diagonally * Weight: 1. 44 pounds * Apple’s new A5X chip with quad-core graphics * Better image quality (5 megapixel iSight camera and 1080p HD video) * iPad with Wi-Fi + 4G connects to fast networks worldwide, including AT&T’s and Verizon’s 4G LTE networks * Still delivers the same all-day 10 hours battery life * Price: Starts at $499 for 16 GB of storage, goes up to $699 for 64 GB, more for versions with cellular data access. Marketing mix: Price * Premium pricing.
Apple sets prices of iPad higher than similar products from its competitors (at minimum 499$), because iPad focuses on high/upper income customers and the R&D or promotion costs for iPad are likely high. * Moreover, by reducing the cost for iPad 2 (from $499 to $399), that entry-level price in particular puts it in more direct competition with a slew of mid-range tabs that previously undercut the iPad, including Amazon Kindle Fire or Samsung Galaxy Tab 7. 0 Plus. * iPad’s prices vary widely due to taxes that in some countries must be included in advertisements or cost quotes.
In Europe, for instance, the VAT consumption tax must be included in the advertised price. Marketing mix: Promotion Advertising. Apple several videos spread around the web in addition to commercials on TV and Radio which all left the message for the audience. For example, the commercial “If you ask” shows that iPad is being used in amazing ways by everyone from a child to CEOs , or the latest advertisement focuses on the new iPad’s display called Retina, which made it the most advanced tablet screen at this point.
These messages are memorable and transcend the product features. As the result, customers easily repeat the messages to their friends and colleagues. Personal selling in the stores. Apple’s sales representatives offer excellent customer service. Consumers are encouraged to discover and try out the product themselves. In doing so, it also creates a trusting and reputable image for Apple as well as long-term relationships with its customers. In addition, the uniqueness and simplicity of Apple stores layout attract more and more people to visit. Public relations.
Apple’s press conference held for representatives of the media so the company can announce new products and technologies, present its position and plans for dealing with the situation. Press release in Apple official website is also the tool to inform members of media of a newsworthy event in the hope they will convert it into a story. Sales promotion. Apple offers one-year warranty for all products. The online store offers free shipping on orders over $50, iTunes gift-cards. Apple offers new iPad buyers the option to personalize their new gadget with engravings.
Similarly to the iPod, customers will be able to add a personalized message, a feature that tends to be quite popular when iPads are offered as gifts. Direct marketing. Apple uses email marketing extensively to deliver targeted information to its database of millions of existing and prospective customers. These digital communications are particularly vital in supporting product launches and in educating customers so that they can get the most out of the products they own. Use the image of iPad in product placement. Apple products appear in so many movies and TV shows nowadays.
Of the 40 films that were number one films in the US Box Office in 2011, 17, or 42. 5% of them featured an Apple product. That would be another way of promoting the new iPad into the market. New methods of promoting the new iPad: * Sales promotion. Encourage the customers to sign up a membership in Apple website, give them birthday discounts and award loyal customers gifts or club cards for discounts. Moreover, Apple can give discount for iPad during “Back-to-school” period (July to September), encouraging students and school staffs to purchase as what they did with Mac computers. Apple and Starbucks co-branding. Make the TV advertisement, using the image of a new iPad and a cup of Starbucks coffee. The goal of this commercial would be to show people how great the idea of using iPad while enjoying a cup of Starbucks coffee is. iPad is portable, easy to carry and much more convenient than bringing heavy laptops to the coffee shop. We believe that putting these two premium products together in the advertisement would benefit both companies as a result, and especially increase iPad sales. Apple and Facebook partnership. By using Apple fan-page on Facebook, the company can create a contest for its fans and anyone else who want to participate and win a free “new” iPad. The contest will start after the announcement of new iPad (7th March) and end just one day before iPad goes on sale (16th March). That means the only one winner would receive a “new” iPad before anyone in the world, so the contest could attract a lot of people to participate, and thus encouraging them to purchase the iPad later. * Public service announcement.
For every iPad sold 1 cent will be used to donate to poor children for their food, clothing, health care and education needs. That would really improve the company’s reputation worldwide and, obviously, increase sales. Marketing mix: Place/Distribution Apple has always focused upon building long-term relationships with its suppliers, wholesalers, and retailers worldwide because this way its supply chain management can become highly efficient. Substantially all of the company’s hardware products (including iPad) are manufactured by outsourcing partners, which are primarily located in Asia.
The company uses a variety of direct and indirect distribution channels for iPads, such as its retail stores, online stores, and direct sales force, and third-party cellular network carriers (that are licensed to sell Apple products exclusively), wholesalers, retailers (BestBuy, AT&T, Verizon, etc. ), and value-added resellers. Apple stores tend to be located in busy malls that sell a variety of different items. As a result, people without a strong interest in computers and high-tech gadgets see the front displays in Apple store. So, the placement helps Apple advertise its products to new customers.
Apple has 361 retail stores around the world. On 16th March iPad went on sale in the US and nine other nations, including Britain, France, and Japan, with 25 other countries getting it a week later. Implementation Project Plan and Measurement Activity| 2012| 2013| | Mar| April| May| Jun| Jul| Aug| Sept| Oct| Nov| Dec| Jan| Feb| Announcement of the “new” iPad| | | | | | | | | | | | | New iPad pre-order online| | | | | | | | | | | | | Apple and Facebook partnership| | | | | | | | | | | | | New iPad release | | | | | | | | | | | | | TV advertising| | | | | | | | | | | | |
Start selling Wi-Fi version of the new iPad | | | | | | | | | | | | | Start selling Wi-Fi+4G version of the new iPad| | | | | | | | | | | | | Start selling at Apple Online store| | | | | | | | | | | | | Start selling at Apple Retail stores| | | | | | | | | | | | | Start selling at Apple Authorized Resellers| | | | | | | | | | | | | Start selling in the first 10 countries (*)| | | | | | | | | | | | | Start selling in 25 other countries (**)| | | | | | | | | | | | | Start selling in other countries| | | | | | | | | | | | | Apple and Starbucks partnership| | | | | | | | | | | | | Educational “Back-to-School” Pricing| | | | | | | | | | | | | Donation| | | | | | | | | | | | | Other promotional activities| | | | | | | | | | | | | Lower the price and prepare for the next iPad launch| | | | | | | | | | | | | (*) – US, Australia, Canada, France, Germany, Hong Kong, Japan, Puerto Rico, Singapore, Switzerland, UK and the US Virgin Islands. (**) – Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Macau, Mexico,
The Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. “New” iPad unit sales estimated by the end of February 2013 (in millions units) | | 2012| 2013| | Unit sales| Share| Mar| April| May| Jun| Jul| Aug| Sep| Oct| Nov| Dec| Jan| Feb| Total| Wi-fi (16GB)| 30%| 1. 47| 1. 56| 1. 62| 1. 68| 1. 71| 1. 83| 1. 89| 1. 98| 1. 8| 1. 71| 1. 35| 1. 05| 19. 65| Wi-fi (32GB)| 17%| 0. 833| 0. 884| 0. 918| 0. 952| 0. 969| 1. 037| 1. 071| 1. 122| 1. 02| 0. 969| 0. 765| 0. 595| 11. 135| Wi-fi (64GB)| 14%| 0. 686| 0. 728| 0. 756| 0. 784| 0. 798| 0. 854| 0. 882| 0. 924| 0. 84| 0. 798| 0. 63| 0. 49| 9. 17| Wi-fi + 4G (16GB)| 7%| 0. 343| 0. 364| 0. 378| 0. 92| 0. 399| 0. 427| 0. 441| 0. 462| 0. 42| 0. 399| 0. 315| 0. 245| 4. 585| Wi-fi + 4G (32GB)| 9%| 0. 441| 0. 468| 0. 486| 0. 504| 0. 513| 0. 549| 0. 567| 0. 594| 0. 54| 0. 513| 0. 405| 0. 315| 5. 895| Wi-fi + 4G (64GB)| 23%| 1. 127| 1. 196| 1. 242| 1. 288| 1. 311| 1. 403| 1. 449| 1. 518| 1. 38| 1. 311| 1. 035| 0. 805| 15. 065| Total| 100%| 4. 9| 5. 2| 5. 4| 5. 6| 5. 7| 6. 1| 6. 3| 6. 6| 6| 5. 7| 4. 5| 3. 5| 65. 5| “New” iPad revenue estimated by the end of February 2013 ($ millions) | | 2012| 2013| | Unit sales| Prices| Mar| April| May| Jun| Jul| Aug| Sep| Oct| Nov| Dec| Jan| Feb| Total| Wi-fi (16GB)| $499| $733. 53| $778. 44| $808. 38| $838. 2| $853. 29| $913. 17| $943. 11| $988. 02| $898. 20| $853. 29| $673. 65| $523. 95| $9,805. 35| Wi-fi (32GB)| $599| $498. 97| $529. 52| $549. 88| $570. 25| $580. 43| $621. 16| $641. 53| $672. 08| $610. 98| $580. 43| $458. 24| $356. 41| $6,669. 87| Wi-fi (64GB)| $699| $479. 51| $508. 87| $528. 44| $548. 02| $557. 80| $596. 95| $616. 52| $645. 88| $587. 16| $557. 80| $440. 37| $342. 51| $6,409. 83| Wi-fi + 4G (16GB)| $629| $215. 75| $228. 96| $237. 76| $246. 57| $250. 97| $268. 58| $277. 39| $290. 60| $264. 18| $250. 97| $198. 14| $154. 11| $2,883. 97| Wi-fi + 4G (32GB)| $729| $321. 49| $341. 17| $354. 29| $367. 42| $373. 98| $400. 22| $413. 4| $433. 03| $393. 66| $373. 98| $295. 25| $229. 64| $4,297. 46| Wi-fi + 4G (64GB)| $829| $934. 28| $991. 48| $1,029. 62| $1,067. 75| $1,086. 82| $1,163. 09| $1,201. 22| $1,258. 42| $1,144. 02| $1,086. 82| $858. 02| $667. 35| $12,488. 89| Total| | $3,183. 53| $3,378. 44| $3,508. 38| $3,638. 32| $3,703. 29| $3,963. 17| $4,093. 11| $4,288. 02| $3,898. 20| $3,703. 29| $2,923. 65| $2,273. 95| $42,555. 35| To sum up, by implementing of marketing strategies that mentioned above, the company aims to sell 65. 5 million iPads ($42. 6 billion revenue estimated) by the end of February 2013 while maintaining dominant share (60%) of the growing tablet market.
The company’s future financial condition and operating results will depend on the company’s ability to continue to develop and offer new innovative products and services in the markets it competes in. Appendix Table1. Strengths and weaknesses of the new iPad’s major competitors | Strengths| Weaknesses| Amazon Kindle Fire(16. 8% market share)| – Price advantage over the iPad, starting at $199 instead of Apple’s$499. – Access to Amazon’s huge retail store. | – No-frills tablet lacks camera and microphone. – Small selection of third-party applications available from Amazon. – Available in only one screen size. – Data storage cannot be expanded with memory cards. – No option for wireless broadband. | Samsung Galaxy Tab 10. 1(5. % market share)| – Lighter, thinner and cheaper than iPad ($399 for 16 GB). – Longer, narrower screen better suited to movies. – Available with wireless broadband access. – Storage is expandable with SD memory cards. | – Selection of third-party applications not as good as iPad’s, but wider than Kindle’s. – Screen resolution lower than iPad’s. | Barnes & Noble Nook Tablet(3. 5% market share)| – Cheap and portable ($199 for 8 GB, $249 for 16 GB). – Storage is expandable with microSD memory cards. – Easy access to Barnes & Noble bookstore. | – Selection of third-party applications is small. – Barnes & Noble lacks wide range of content. | Bibliography 1.
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