EI MDMK09

Borislav Kiprin

iPhone Marketing Strategy

Analysis
Fundamentals of Marketing
Management Course Work
Course Leader: Maria Lopez Escorial

Plovdiv, Bulgaria
Phone: +359 89993700
E-Mail: bkiprin.mdmk2010@alumno.ie.edu
Web: www.borislavkiprin.com
2 iPhone Marketing Strategy Analysis

Table of Contents
PRODUCT DESCRIPTION ................................................................................................................................ 3

MARKET AND COMPETITORS ANALYSIS ....................................................................................................... 4

TARGET, POSITIONING AND MAIN DIFFERENTIAL ATTRIBUTES .................................................................... 5

PRICE STRATEGY ............................................................................................................................................ 6

DISTRIBUTION STRATEGY ............................................................................................................................... 7

UNIQUE SELLING PROPOSITION .................................................................................................................... 8

COMMUNICATION STRATEGY AND PLAN (INCL. DIGITAL MARKETING) ................................................... 9

MAIN MEDIA PLAN ...................................................................................................................................... 10

MAIN RECOMMENDATIONS FOR SUCCESS WITH ITS SPECIFIC ACTIONS ................................................ 11

Disclaimer

All information provided in this document is researched online. Relative resources are mentioned whenever
found needed as a footnote. Opinions are stated on a subjective basis by the author and should not be
taken as a pure truth. Should questions, comments and opinions be raised please contact me at
bkiprin.mdmk2010@alumno.ie.edu.

Due to space limitations, some of the findings are organized in table like formats. Those graphical contents
are either based on research or represent my own perception of the events that occurred.

Borislav Kiprin – IE MDMK09

3 iPhone Marketing Strategy Analysis

PRODUCT DESCRIPTION

For years Apple Inc. was considered as a computer manufacturer aiming at the “different, hip and
imaginative” individual as a customer. With the return of Steve Jobs as a CEO of the company in21996,
things changed tremendously and Apple Inc. brought matters to another level. First the company
introduced a new line of successfully marketed computers and later a portable music player that made the
world go mad - the iPod. And not so long after that came iPhone’s time to ravel yet another market - the
mobile phone consumers’. The iPhone combines features like mobile phone, music player, small personal
organizer and portable computing, all put in a small handheld with a widescreen display and multi-touch
screen capability.

The handheld device was introduced to the

American consumer on January 9, 2007 and was
made available on June 29 the same year through
the AT&T mobile communications provider. Initially it
was only available on signing 1 or 2 year contractual
basis. The same approach is observed everywhere
around the world, where Apple Inc. has decided to
make the iPhone available.

On the other hand "unlocked" iPhones were illegally

available through cracking the software. Those are
naturally not counted as official sales in the region
they are sold via third/fourth parties, but rather as
sales in the region they were originally purchased
with a signed contract. The leader in this "illegally" sold quantity (over 2 Mn handhelds in 2007 alone) is
China where a deal between Apple Inc. and China Mobile is to happen in the Q4 of year 2009. This will give
Apple official access to the fastest growing and the biggest mobile handheld market in the world.1

The iPhone is fully compatible with both Apple computers and software (Mac OS & iTunes™), as well as the
online application .Mac™ (now called Mobile Me). It is also "one-click-sync" ready for computers using
Microsoft™ OS through the iTunes™ Windows version. iTunes' users are enjoying calendar, contacts, emails
and documents synchronization, and also availability of all sorts of applications, music and video content.
In that sense the iPhone is a multitasking communicational device with the ability to satisfy many individual
needs in an all-in-one principle.

Portable
Mobile Digital Small
Music iPhone
Phone Camera Computer
Player

1 Forecasted at 450 Mn subscribers in 2010

(Source: http://www.researchandmarkets.com/reportinfo.asp?report_id=542976 )

Borislav Kiprin – IE MDMK09

4 iPhone Marketing Strategy Analysis

MARKET AND COMPETITORS ANALYSIS

At the time Apple Computers recognized the need for a handheld mobile device the market players were
a few and mainly business users. This explains the strong market share RIM had. Palm on its hand also was
also somewhat popular but having limitations in terms of usability and software, deprived the brand from
gaining significant position. Most of the devices present at the market in 2005-2007 were more featured
towards personal organizing, emailing and computing, rather than web browsing or customized application
usage.
$600

iPhone
$500
$499

$400

Blackberry Treo
$300
$299 $299

BlackJack
$200
$199

$100

$-

Apple has clearly taken the marketing challenging strategy attacking the market leaders Blackberry and
Palm. It has launched a full frontal attack right after the announcement of the iPhone in Steve Job's keynote
speech in 2007's MacWorld. On the other hand Apple Inc. has always a customer-centered orientation
spotting the growing market for smart phones, identifying an unrealized need for customization through
phone applications and nonetheless usability. 2
IPHONE SWOT ANALYSIS
STRENGTHS WEAKNESSES
Style/Brand No 3G capability
Rich UI High price/ High end
User Base Limited distribution channels
Blackberry Palm Samsung
Hype Missing features
•Strong •Business •New player on
business acceptence the market First Mover Unsafe for corporate use?
acceptence •Medium •Low premium
• High Premium premium •Closed Migrate people to Apple Intense Competition
• Closed •Closed software
software software Port existing apps Highly developed market
New social device
Distribute iTunes content

OPPORTUNITIES THREATS

2 http://www.appleinsider.com/articles/09/08/19/iphone_sales_predicted_to_top_80_million_by_2012.html

Borislav Kiprin – IE MDMK09

5 iPhone Marketing Strategy Analysis

TARGET, POSITIONING AND MAIN DIFFERENTIAL ATTRIBUTES

"To create great things that change people's lives" - Apple's CEO Steve Jobs

Up-and-Coming/Niche Leaders Main Differential Attributes:

Apple RIM
ENERGIZED BRAND STRENGTH

 All-in-one Communicational
Samsung Device
Declining
 Revolutionary Wide Touch
Leaders
Screen
Palm
 Large Storage Space
New/Undeveloped Eroded/Commoditized  Customizable Software
HTC Sony Ericson Availability
Nokia DELL  Enhanced User Experience
HP  Apple made
 Browsing Speed
BRAND ST ATU R E

Here Apple Inc. has faced a clear category

membership challenge. At the beginning of the century, the company was associated with its computers
and portable music players and the delivery of a mobile handset was a new thing. To fast forward to 2009,
Google Inc. is also facing the same problem when it introduced the Android OS for mobile devices.

There few pillars that Apple identified as market segments to target. Please see the table below!

Convenience Entertainmnent Staying Connected

•Age 25-54 •Age 18-25 •Age 20-40

•Primarily Male •Mixed Gender •Primarily Female
•Higher Salaries •Budgeting Skills •Secondary Ed.
•Multitaskers •Trendsetters •Hold Family Dear
•On-the-go •Educated •Tech Savvy
•Goal Oriented •First to go home

The interesting thing here is that Apple with its iPhone skipped the introductionary phase and went directly
to growth stage with rapidly rising sales, growing number of competitors and building a strong awareness
and interest in the mass market. This is mainly due to the satisfying unrealized needs, cool design, usability
and compatibility with different computer OS.

Borislav Kiprin – IE MDMK09

6 iPhone Marketing Strategy Analysis

PRICE STRATEGY

The iPhone was released in two different versions - 4GB and 8GB model. In the United States both required a
two-year contract with Cingular (a unit of AT&T).3 As you can see below, the same approach with the
difference between the 4Gb and the 8Gb models was kept in the other countries. Initially this action plan
has raised numerous acts of discontent among the consumers who failed to see why the German user had
to pay more that the American one, for example. In that sense Apple was going clearly for the
geographical pricing module.
iPhone Pricing Worldwide at Launch in 2007
4Gb 8Gb
$800 $699 $695
$599 $618 $608
$559 $514
Price (USD)

USA $499 $599 $600 $499

$400
Germany €399 €499
$200
UK £257 £309 $0
USA Germany UK Japan
Japan ¥700004 ¥80000
5

As discussed in Market and Competition Analysis chapter

the iPhone was set at a price much higher than the ones
of the competitor's smartphones. Apple Inc. seems to
have counted much on the new technology and the
huge fan base that allowed them to adopt the maximum
market skimming objective. The market research clearly
showed that there is a huge potential specifically in the
smartphone sector with an expected fourfold growth
between year 2007 and year 2011. (See Figure1!) Another
thing that the company did is create a survey and ask
the customers how much they are willing to pay. At first
the price was set at US $299(4GB) and $399(8GB)
models.6 But Apple Inc. and AT&T decided to use a large
premium in the markup pricing set up counting on the
uniqueness of the product, Apple's brand perception
and its loyal customer fan base. And this is fully consistent with the general Apple pricing policy observed
with the computers and music players it offers on the market. There are basically two options selectable
when purchasing an iPhone:

 Contract based - signing up to an annual or two year contract with Apple's exclusive iPhone reseller (in
US this is Cingular - an AT&T company). The contract involves monthly plan payments not only including
the phone lease, but also the communication service in terms of data, texting and voice transfer rates.

 Unlocked - in the event of having a plan with other than AT&T mobile provider, for example, the
customer is given the option to purchase the iPhone with factory settings and use it further as he/she
wishes. The price of this option naturally is set much higher.

3 Source: http://www.macworld.com/article/54769/2007/01/iphone.html
4 Source: http://www.mymapofjapan.com/blog/iphone-japan-launch-details/
5 Currency calculations are based on 1 USD =115 JPY, 2 USD = 1 GBP, 1.40 USD= 1 EUR
6 Source: http://www.iphoneworld.ca/news/2007/02/17/iphone-299-399-pricing-research-rumors-are-true/

Borislav Kiprin – IE MDMK09

7 iPhone Marketing Strategy Analysis

DISTRIBUTION STRATEGY

Distribution of the iPhone is set only to exclusive mobile carriers in each country the iPhone was launched. In
the United States the iPhone was launched first and then other countries followed unfortunately much later
than expected. This was due mainly to the strategic decision made to partner with a mobile
communication service provider. The technological time to set the parameters of the agreement was the
main reason for the delay. For example the iPhone up to August 2009 is still not launched in the biggest
market for mobile handhelds - China.

Apple Inc. Customer

•China based •Retail Distribution
•Various suppliers •Regional
•Logistic center warehousing •Service Plan
•One assembling
unit •Regional logistic and storage •Unlocked iPhone
centers
•Support Service
Production
Center Service Provider
Setting

Apple Inc. has chosen a hybrid distribution channel involving its online store, physical outlets and the retail
points of the exclusive mobile service provider.

Apple Store Apple Online Store Service Provider Outlet

• Test driving the iPhone
• Selecting the rate plan
• Signing the contract
• Picking up the iPhone right
away
• Creating an apple account
• Selecting a rate plan
• Purchasing the phone
• Having it delivered to a
preffered adress
• Test driving the iPhone
• Selecting the rate plan
• Signing the contract
• Picking up the iPhone right
away

Below you will find the main reason for Apple Inc. to choose Cingular over Sprint as an exclusive partner in
the United States.

Utilizing Cingular's Customer Base

Uptake rate from

Est. upt ake by
Cingular Cingular Cingular iPod
Cingular customers Cingular iPod
subscribers with subscribers with customers in 1st
- 58m customers in 1st
iPod - 30% iPod - 17.4m year -
year - 8.7m
50%(assumption)

7 Source: http://www.slideshare.net/rcastanon/iphone-for-latam

Borislav Kiprin – IE MDMK09

8 iPhone Marketing Strategy Analysis

UNIQUE SELLING PROPOSITION

The unique selling point/proposition of Apple's iPhone was not in the message but rather in the different
functions the handheld was offering.

As usual Apple was relating the message that they offer something cool and different.

Innovation Customization Personalization Connectivity Storage

•Unconventional •Aps for •Sync with you •Wi-Fi •Enough to get
buttons - just a everything Mac or PC •GSM you around for
large touch •Infrared as long as the
screen battery lasts
•Bluetooth

 Innovation - groundbreaking new device that allows a larger screen browsing and pop up of
navigational icon set up as well as a full QWERTY keyboard when necessary.

 Customization - iPhone application for virtually any desire the customer might have. this is the Long tail
marketing point Apple introduced as a new concept into mobile phone industry. Customers are
allowed and given the code to create apps that will allow them to execute, follow and stay in touch via
third party software.8

 Personalization - Simple and effortless synchronization with the address book, calendar and email client
through iTunes and .Mac9 (now MobileMe) applications.

 Connectivity - Stay in touch through almost all know ways10 for mobile handhelds.

 Music, Photos & Video Storage - Full featured iPod like ability to store and play music up to 4Gb or 8Gb.

As every Apple product, the main marketing message to the consumer is "something different, something
cool, user friendly and simply Apple". There is probably no other company that contemplates such customer
satisfaction and loyal brand fans. This is mainly due to the everyday maintenance of corporate and brand
image as well as creating the means for self-support, should the latter be needed.
Another pinpoint in their unique selling point is the utilization of iTunes to supply music, video and podcasting
content as well as customization outlet for iPhone applications. So far none of the competitors has either
created or offered a simple user friendly and all in one online store accessible to the consumer.

8 Visit http://www.apple.com/iphone/apps-for-iphone/
9 A web based personal address book, calendar and email platform.
10 3G was not considered in the development stage of iPhone, since it was not a widely implemented data transfer

protocol.

Borislav Kiprin – IE MDMK09

9 iPhone Marketing Strategy Analysis

COMMUNICATION STRATEGY AND PLAN (INCL. DIGITAL MARKETING)

Apple Inc. used both the pull and the push strategy in its communication with the customer. One was the
company advertising, promoting the product by itself employing the full spectrum of the marketing
communication mix channels and the other is relying on the selected exclusive distributor region wise to
advertise the iPhone. In that sense the customer was approached from two different sources creating
differentiation from the competitors and delivering the product message with added value service or
application.

•PR
•Blogs - Opinion Leaders & Specialized
Pre Launch Strategy Sites
•Sneak Peaks on R&D info
•Buzz & Viral Marketing
•Apple.com
•Printed Media
Launch Strategy •TV
•Outdoor Media
•Social Media
•Carrier handeld advertisement
•Apple.com
Post Launch Strategy •Independent review Websites
•Paind Online listings
•Digital Campaigning

Digital Marketing Strategy Break Up

Social Media
Email Marketing Display Ads
Advertisement
Blogs

•A message sent to •Banner Ads •Facebook •Industry Blogs

every Apple Customer •Interactive Ads •MySpace •Forums
few weeks before •Discussion Boards
launch

Crowdsourcing & Search Engine

Apple.com Opinion Leaders
Online Communities Marketing

•Extensive introduction •Word-of-Mouth, Apple •PPC •Handing free iPhone for

to the advantages the fan club websites, Blogs •Affiliated Marketing review
use of iPhone gives •Other paid listings •Supplying access to
•Hosting iPhone Apps iTunes iPhone apps
purchasing center section for free

As you one can see Apple has employed almost all digital channels known in 2007 and making business sense to use for
hosting its communicational message to the consumer and targeted audience.

Borislav Kiprin – IE MDMK09

10 iPhone Marketing Strategy Analysis

MAIN MEDIA PLAN

It is difficult to determine which media was more important to Apple for advertising its iPhone, since the
company has invested in almost every possible channel to bring the consumer to the P-O-P (Point of
Purchase). The POP for iPhone was either Apple.com or the exclusive mobile carrier website or outlet store.
That said signing a service contract through Apple.com is done the same way as if the consumer has done
that through the carrier’s website.

In 2007 Apples Advertising budget was $467 million11 and much of it was allocated specifically to market
the iPhone. This ad budget was allocate through most of the available media channels enabling integrated
and blended marketing campaign. The Main Media Plan looked like:

Target
Purchasing a mix of traditional (TV, Radio, Printed &
Reaching the primary target as described on page 5
Outdoor) media and Digital Space

Geographic Considerations
Advertising in areas that have high concentrations of the
Campaigning in the Top 25 US economic centers
target consumers

Reach and Frequency

Reaching the target within the specified area with Targeting an often on-the-go target with media buys that
everyday frequency reach consumers through modes of transportation

Schedule
Creating a campaign that reaches the target on a year Emphasizing on a pulsing schedule with Traditional and
round basis Digital media channels

Seasonality
Purchasing media that heavy’s up during holiday seasons Enfassizing on media buy times during product launch to
and other events drive traffic into Pointof Purchase

Creative Constraints
Picturing the iPhone as the number one choice among Useing innovative media buys that reach the target in
smart phones their daily life

Budget

Data gathering, analysis and taking respective actions

Using it in a way that most effectively reaches the target
upon recognized CPO & CPA

11 Source: http://www.techcrunch.com/2008/11/21/yup-apples-advertising-budget-is-bigger-than-microsoft-vistas/

Borislav Kiprin – IE MDMK09

11 iPhone Marketing Strategy Analysis

MAIN RECOMMENDATIONS FOR SUCCESS WITH ITS SPECIFIC ACTIONS

•Simultaneous lauch of the iPhone in USA, UK, Germany,

France, Italy, Spain, Russia & China
Broadening the •Stock availability in the Apple's North America, European
Distribution and Asian logistic centers
•Better demand anticipation through research
Channels

•Fostering viral campaigning on diffirent video social

networks (Youtubbe.com and alike)
•Enabling "Share" button on Apple.com
Heavier Employ of •Fostering User Generated Content advertisment & best
Digital Marketing practices

•Free MobileMe signup for 1 year with every iPhone

purchased
•Specialized workshops for corporate CTO's introducing the
Promoting the iPhone as a corporate smartphone
iPhone •Giving for free iPhones to Trend Setters (TV & Movie , Music
and Sport stars)

•Launching the iPhone at a 10% at least lower price for

acquiring bigger share from competition & new comers to
smart phones.
Price Offering •Rebate for iTunes Store - "With the purchase of iPhone you
will get 50 USD credit for your itunes account"
•Introducing the same price regionally as a equivalent to
the USD offer in the United States.

•3G capability
•Recording Video capability
•Preinstall regional GPS map
Improving Initial
•PDF and Microsoft Officer suit faste compatibility
Technological Offering
•Built-in eBook reader

Borislav Kiprin – IE MDMK09