Every company has a different technique or way that contributes to their success. For some, it is the way they advertise their products/services and for others it is way the product/service is presented to the customers. However, most companies are known for their marketing strategies used in the marketing mix. The marketing mix is a planned mix of the controllable elements of a product’s marketing plan commonly termed as 4Ps: product, price, place, and promotion. The marketing mix is a powerful strategy that contributes to the success of Apple Inc.
Apple Inc. is an American corporation established in 1976 by Steve Jobs that designs and manufactures computer hardware, software and other consumer electronics. The headquarters of the company can be found in Cupertino, California while there are 284 retail stores located 10 different countries. Apple currently has more than 33,000 employees and revenues that exceed $42 million. They carry a variety of products such as iPhones, iPods, iMacs, and the list goes on.
However, the most successful products of Apple is in the mobile phone industry. This includes the iPhones. Apple has released eight generations of iPhones since 2007 when the 1st generation was released. Recently, the iPhone 6/6 Plus was released and it said to be the biggest seller product of Apple. Now, Apple dominates the mobile phone industry with 86% share of the profits. A part of Apple’s big success relies on their marketing strategies, specifically, the marketing mix.
This paper aims to investigate the extent to which Apple’s marketing mix assists the company to be successful in the mobile phone industry hence the question ‘To what extent does the marketing mix lead to Apple Inc. success in the mobile phone industry’?
Part 1 – Price
In the marketing mix, one of the four P’s is price. Price is explained as the amount consumers are charged for a product, indicating the value customers perceive the product to have. A firm’s pricing decision is often aimed at attracting a particular market segment. There are many pricing strategies within the marketing mix which is very important when it comes to selling the product. They are cost plus pricing, hour based pricing, penetration pricing and skimming. Cost plus pricing is when the price of a particular product is determined by calculating how much it costs to do the job and adding on a given percentage as a return for the job. Hour based pricing is when the business determines the price for every hour of work they complete, typically seen in small businesses. Penetration pricing is when a business starts off by offering the product or service for a low cost and when market penetration is achieved, the costs are raised. Last but not least, skimming is when you offer a product for a high price because many customers are interested in it due to the brand of prestige it has. Apple’s pricing is quite different from other companies in the mobile phone industry. The pricing mix of Apple iPhones includes costs, competition, mark-ups, discounts and geographical area. The Apple iPhone costs usually start at $99 with contracts and it increases depending on the features such as the amount of GB and the company service that the phone operates with. The company reduce prices after the initial launch of products, usually using the skimming strategy. For example, this is seen when Apple started selling its 8GB product for $599 and later reduced the price of the same product to $399. The benefits of the skimming strategy is that it allows the company to reach its target market, products are perceived as high-quality products so consumers will be attracted to it and consumers who are status conscious may purchase higher priced goods for prestige which allows the company to get more recognition. This strategy is very successful with Apple because, generally, the products of Apple are purchased at by high class people who can afford it so no matter how high the price is, it would be sold in large amounts. However, the disadvantages of the skimming strategy is that it limits its sales which means that it cannot lower costs by building sales volume, if the price of the particular product remains very high for too long, it may delay or entirely prevent acceptance of the product by the general market and early customers of the product may be highly annoyed when the company later drops its price for the product, and as a result, generate bad publicity and cause a very low level of customer loyalty. As an Apple buyer, I can attest to this disadvantage because it can become irritating when the prices are dropped after buying the iPhone at a high price because I would’ve rather purchase it at a low price.
Furthermore, Apple implements the premium pricing strategy which ‘involves setting the price of a product higher than similar products. It is usually used to maximize profit in areas where customers are happy to pay more, where there are no substitutes for the product, where there are barriers to entering the market or when the seller cannot save on costs by producing at a high volume.’ The advantages of premium pricing is that if a company invests heavily in its premium brands, it can be extremely difficult for a competitor to offer a competing product at the same price point without also investing a large amount in marketing and there can be an unusually high gross margin associated with premium pricing. However, the disadvantages of premium pricing is that the costs required to establish and maintain a premium pricing strategy are massive, and must be maintained for as long as this pricing strategy is followed or the premium brand recognition by consumers will falter, and the company will have difficulty maintaining its price points, there will be a continual stream of competitors challenging the top tier pricing category with lower-priced offerings and since the company using this strategy is restricting itself to low sales volume, it can never generate the cost reductions that a high-volume producer would be able to achieve.
Overall, Apple’s pricing contributes to the company’s success in a major way, specifically when it comes to the iPhone in the mobile industry as it encourages consumers to buy products due to their strategies involved. For example, in July 2007, Apple released the iPhone for $599, which was a high costing phone at the time. However, the product was the most innovative on the market which gave Apple the freedom and ability to price their phone at whatever cost they chose. Also, since the iPhones are usually aimed towards business people and younger customers, they have a higher chance of the product being bought due to the income of their customers and brand loyalty.
The most important area of the marketing mix is the product itself. According to Armstrong and Kotler, product is defined as ‘ anything that can be offered to a market for the attention, acquisition or consumption that might satisfy a want or need.’ Product decisions involve deciding what goods or services should be offered to a group of customers and it also involves differentiation, product lines, branding and image positioning.
Since Apple Inc. is one of the leading brands in the mobile phone industry, the company takes product into great consideration. The marketing mix of Apple is mainly product driven. Due to the rapid change in customer’s taste and technology, Apple is continually updating their products, specifically iPhones, adding features to satisfy the wants and needs of the customers. For example, Apple has released the iPhone 3, 3GS and 4 which are all considered to be of the same product line because they all derived from the same product with similar physical characteristics, customer segments, distribution channels, pricing methods and promotional campaigns. However, what makes the versions different is the innovations added to the features of the phone to make it up to date and trendy.
There are four major distinctions about the Apple iPhone that makes product so important in the marketing mix. ‘Firstly, the quality which people loved in the iPhone was access to the prominent Apple iOS operating system. As android and Windows operating systems came later on smart phones, Apple was able to spellbind its customers with its mobile operating system. Secondly, the operating system was not enough to keep customers attracted because it required processing speed as well. iPhone hardware was quite compatible with the software and the OS used to run smoothly. Therefore, the high quality processing speed also contributed the popularity of the product. Thirdly, iPhone does not compare itself with other companies. When promotions are given from Apple, they are independent from competition. It would be a communication of what Apple has done in its current version of iPhone as compared to its previous versions. Therefore, on the product level, Apple does not enter competition with other smart phones. Finally, iTunes is the major attention grabber for Apple iPhone. The Apple store has more number of apps than the Google play store which is a compliment for the large developer network which iPhone has. As a result, iTunes, the Apple store and the developer network form the secondary products for iPhone’. Although there are many good qualities to the features of the iPhone, it has its cons as well.
Furthermore, Apple ensures that the iPhone is at its best. ‘One thing that the company ensures is that the iPhone will have a full year warranty. They also ensure that the iPhone is packaged as attractive as possible to mirror other Apple products.’ ‘Additionally, to ensure that the product keeps afloat, the company intends to introduce unique editions of the iPhone which will attract more customers through the provision of quality services. Apple has shipped a cheaper less advanced iPhone in 2008 which best suited professionals with the following features; removable disk storage capacity which supports USB memory sticks, the product had a lower weight and was much thinner, and the battery life was extraordinary’.
Generally, the iPhone as a product has been a big money-maker for the company as it dominates the total sales of Apple with a 39% lead percentage. Apple invests a lot of thought, time and money and their products and it is specifically seen in the creation and upgrades of the Apple iPhone. Therefore, the product of Apple in the marketing mix contributes greatly to their success because of the good qualities it possesses.
Place refers to a product’s location or channels of distribution used to get the product to the consumer. Usually, businesses decide their place and how the product should get to the consumer by seeing which way would be most cost effective and accessible to them. The business decides on their channel of distributions and if they decide on having retail stores, this involves setting up stores in convenient locations then designing a store that would be most attractive and inspirational to the consumer. There are several different methods that can be used for the channel of distribution. One method that be used is where the product is given to the manufacturer by the producer where it is manufactured , then taken to a wholesaler which sells the products to the retailers where the it can be purchased by the consumer However, this method is not as cost-effective and can result in a low profit margin for the producer. Another method that can be used is where the retailer is cut out and the products are sold from the wholesaler who allows the consumers to come in and purchase the products either in bulk or smaller quantities. However, with this method, there is a lower profit margin for the manufacturer. Also, a business can use the method where the products can be purchased directly from the manufacturer without any middleman involved. The fourth method that can be used is where the wholesaler is cut out of the distribution channel and the products are purchased directly from the manufacturer and sold in the retail stores. E-commerce can also be a way of distributing products to their consumers. This is where a business can set up a website and allow customers to visit the site and purchase items directly from their stores. In this way, a business can spend less on marketing products internationally because the site can be used for distribution and promotion. With the channels of distribution, more than one method can be used for one business. Likewise, a business can be their own wholesaler and retailer and just use an outside manufacturer to make their products for them.
In this case, Apple Inc. satisfies a few channels of distribution methods. Their aim is to cater to the needs and wants of all of their consumers on an international basis. They have an online store, retail outlets as well as wholesales involved in their distribution strategy. With the online store, customers can purchase the iPhone of choice at any point, 24/7 and it can be directly delivered to the consumers. Using this method, it saves the company the cost of maintenance of the physical store, however, the disadvantage is that they will have to pay for shipment, taxes and import duties. Apple Inc. is a multinational Corporation Company whose headquarters is located in 1 infinite loop, Cupertino, California State with about 394 different numbers of retail stores that designs, develops and sells consumer electronics. They are located in Asia/Pacific, Africa, the Middle East Europe and Latin America. Their retail stores are located in premium malls and outlets. They are commonly referred to as iStores and they are given the product directly from the company at the best discounts. Additionally, the iPhone can be distributed from a carrying and forwarding agent. Whereas, in some cases, individual stores can be given the product through distributors. With all their locations and in all of these countries, the iPhone is known to provide an excellent service backup.
Apple takes a big initiative to make the customer’s buying experience unforgettable. Recently, Apple was given the latest trademark certificate by The U.S. Patent & Trademark Office which represented the ‘distinctive design & layout’ of all of their stores. The trademark has two designs where one is in black and white and the other is in color. The typical store layout had wide tables in the middle with and benches around the sides where customers can try out new products. In my opinion, this is quite effective because it allows customers to feel good and welcomed when entering their stores and it can also attract customers into buying the products as they allow them to try it before purchasing. Figure 1 gives an overview look on how the store would be set up.