Assignment I

Of Product & Brand Management

Topic Pricing and promotional Strategy of Apple iPhone

Submitted to Mr. Pardeep Bawa

Submitted by Navjot Singh Reg no 11012664 Sec no Q2002

Executive Summery
The Past Steve Jobs, Steve Wozniak and Ronald Wayne established Apple on April 1, 1976 in order to sell the Apple 1 Computer Kit that was hand built by Steve Wozniak. The Apple 1 was sold as a motherboard (with CPU, RAM and basic textual video chips) less than what is considered a personal computer today. Apple was responsible for creating the desktop publishing market due to their innovative programs, PageMaker and LaserWriter. Between 1983 and 1996 Apple experimented with a number of failed consumer target products including digital cameras, portable CD players, speakers, video consoles and TV appliances. Market share and stock prices decreased. In 2001, Apple introduced the iPod portable digital audio player. The product was phenomenally successful over 100 million units were sold within 6 years.

Product Description
For years Apple Inc. was considered as 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 in 1996, 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 iPhones timer to ravel yet another market the mobile phone consumers. The iPhone combines features like mobile phone, music player, small personnel organizer and portable computing, all put in small handheld with wide screen display and multi-touch screen capability. The handed 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 a observed everywhere around the world, where Apple Inc. has decided to make the iPhone available. On the other hand unlocked iPhones were illegal available through cracking the software. Those are naturally not counted as official sales in the region they are sold via parties, but rather as sales in the region they were originally purchase with a signed contract. The leader in this illegally sold quantity (over to 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. The iPhone is fully compatible with Apple computers and software, as well as the online application. Mac (now called mobile me). It is also one-click-sync ready for computer using Microsoft OS through the iTunes windows version. ITunes users are enjoying calendar, contacts, e-mails and documents, sync, organization, and also availability of all sources of application, music and video conferencing. In that sense the iPhone is a multitasking communicational device with the ability to satisfy many individuals needs in an all in one principal. Mobile phone + digital camera + portable music player + small computer = iPhone.

Market and Competitor analysis

At the time apple computers recognized the need for a handheld mobile device the market player 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 them of usability and software, deprived the brand from gaining significant position. Most of the devices present 2005 and 2007 were more featured towards personal organizing, emailing and computing, rather than web browsing or customized application uses. iPhone - $499 Blackberry - $299 Treo - $299 Blackjack - $199

Apple has clearly taken the market in challenging strategy attacking the market leaders Blackberry and Palm. It has launched a full frontal attack right after the announcement of iPhone in Steve Jobs keynote speech in 2007 MacWorld. On the other hand Apple inc. has always a customer center orientation supporting the growing market for Smartphones, identifying an unrealized need for customization through phone, application and nonetheless usability.

Target, positioning and main Differential attributes

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 mobile handsets was a new thing. To fast forward 2009, Google Inc. is also facing the same problem when it introduced the Android OS for mobile devices. There are few pillars that identified as market segments to target: Convenience Age 25 54 Primarily male High salaries Multitaskers On the go Goal oriented

Entertainment Age 18 25 Mixed gender Budgeting skills Trendsetters Educated

Staying Connected Age 20 40 Primarily female Secondary Ed. Old family dear Tech Savvy First to go home

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

Price Strategy
The iPhone was released in two different versions 4GB and 8GB model. In the US both required a two year contract with Cingular. 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 act of discontent among the consumers who failed to see why the German user had to pay more that the American one in that sense Apple was going clearly for the Geographical model. USA 4GB $499 & 8GB $599 Germany- 4GB Euro 399 & 8GB Euro 499 UK 4GB Pound 257 & 8GB Pound 309 Japan 4GB Yan 70000 & 8GB Yan 80000 In market and competition analysis the iPhone was set at a price much higher than the ones of the competitors Smartphones. Apple Inc. seems to have counted much on the new technology and 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. 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. 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, Apples 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 Apples exclusive iPhone reseller. 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 setting and use it further as he/she wishes. The price of this option naturally is set much higher.

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 partners with a mobile communication service provider. The technological time to set the parameters of the agreements was the main reason for the delay. Apple Store Test driving the iPhone. Selecting the rate plan. Signing the contract. Picking up the iPhone right away.

Apple Online Store Creating an apple account. Selecting a rate plan. Purchasing the phone. Having it delivered to a preferred address.

Service Provider Outlet

Test driving the iPhone. Selecting the rate plan. Signing the contract. Picking up the iPhone right away.

Unique Selling Proposition

The unique selling proposition of Apples iPhone was not in the message but rather in the different functions the handheld was offering. Apple was relating the message that they offer something cool and different. Innovation Groundbreaking new device that allows a larger screen browsing and pop up of navigational 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. Personalization Simple and effortless synchronization with the address book, calendar and email client through iTunes and Mac applications. Connectivity Stay in touch through almost all know ways 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 simple 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 customer.

Marketing Mix Strategy of Apple iPhone

Product Full year warranty along with an optional three-year Apple Care warranty Same taste as all other Apple products Special edition version to be launched (including the iPhone Beatles edition celebrating their 40th anniversary) Launching a cheaper version in 2008 with less advanced features along with a more advanced version for professional use Adding the following features to the iphone (large disk storage capacity, lower weight, thinner device, long battery life, 4G wireless, GPS and improved camera) Price Set the base model at a cheap price of $349 A more advanced model for $399 Special limited edition Beatles iPhone for special prices Generally lower our prices to ensure we establish market dominance in as short of time as possible Place Massive rollout worldwide at all reputable major retailers. Massive rollout Online, Showrooms and in all cell phone providers.

 All Apple Stores the Apple website will dedicate themselves to the iPhone Eye catching displays will be found at all physical stores featuring the iPhone to make the product stand out from the pack. Apple Stores will have the iPhone on display a full month before its worldwide release. Promotion Integrate Apple message of revolutionary communications and audio/visual experience together in all media advertisements. Differentiate the iPhone against others is the touch screen functionality Emphasize Apple brand prominently and associate the iPhone with the iPods groundbreaking lineage. Original but tasteful advertisements at the same time. A massive TV campaign is planned before launching the iPhone featuring a soon to be legendary ad to be the talk of the country. Advertising will be appearing on a regular basis to maintain general public awareness.

Quick Facts
The Apple iPhone is easily the most publicized new mobile device in recent memory. But despite all the discussion about the product, there's relatively little hard information available to the public on its impact. How is it being used? What effect is it having on customers and on the technology industry? Here are some of the key findings:

iPhone users are very satisfied. The iPhone users we surveyed report very high levels of satisfaction with the product. They are using its features extensively. E-mail is the #1 function. The most heavily used data function on the iPhone is reading (but not writing) e-mail.

The iPhone increases mobile browsing... More than 75% of iPhone users say it has led them to do more mobile browsing. It has drawbacks. About 40% of iPhone users say the iPhone has trouble displaying some websites they want to visit. The iPhone is expanding the Smartphone market. About 50% of iPhones replaced conventional mobile phones, 40% replaced Smartphone, and 10% replaced nothing. Among conventional phones, Motorola Razor was the phone most often replaced. Among Smartphone, Windows Mobile and RIM Blackberry were most often replaced. A third of iPhone users carry a second phone. There have been anecdotal reports of iPhone users carrying a second mobile phone, either for basic voice calling, or for other functions like composing e-mail. The survey confirmed those reports. A quarter of iPhone users say it's displacing a notebook computer. 28% of iPhone users surveyed said strongly that they often carry their iPhone instead of a notebook computer. Users are young. About half of iPhone users are under age 30 and about 15% are students. Apple sells to its installed base. At least 75% of US iPhone users are previous Apple customers -- they used either iPods or Macintosh computers. The iPhone increases phone bills. The iPhone has increased its users' monthly mobile phone bills by an average of24%, or $228 extra per year. The iPhone leads people to change carriers. Almost half of iPhone users changed carriers when they got the iPhone. AT&T's gamble pays off. The iPhone has probably increased AT&T's gross service revenue by about $2 billion per year.

Implications
What do these findings mean for the mobile industry and mobile users, and what will happen next?

A good example of how to grow adjacent markets Apple's growth in the last ten years is a case study of growing a company through expansion into adjacent markets. Apple leveraged its Macintosh installed base to establish the iTunes music store, and then built the iPod business on top of that. iTunes and the iPod enabled Apple to renew its franchise with young people, and attracted millions of Windows users into becoming Apple customers. Now Apple is leveraging both the Macintosh and iPod customer bases to kickstart the iPhone. More than half of the iPhone customers we surveyed are iPod owners, and another 25% use Macintosh computers. Apple's large and very loyal installed base makes it much easier for the company to branch into a related market. The lesson for other companies is that satisfying customers is about a lot more than just selling them upgrades of what they have today. Managed properly, a loyal user base is also a springboard for creating new businesses. AT&T made a good choice When AT&T decided to offer the iPhone, some people in the mobile industry criticized it for making too many concessions to Apple. The terms of the AppleAT&T deal have not been released to the public, so it is impossible to judge its precise effect on AT&T. But based on the findings of our study, it looks very likely that AT&T made a good decision. AT&T gains services revenue from the iPhone in two ways. First, the iPhone increases the average monthly phone bills of existing AT&T customers who switch to the iPhone. Second, because AT&T is the exclusive carrier for the iPhone in the US, it causes some people to switch from other carriers to AT&T. Based on the findings of the study, AT&T is probably getting about $2 billion in incremental yearly service revenue due to the iPhone deal, and that figure will increase as more iPhones are sold. Total revenue increase per year: $2 billion An unannounced part of that revenue gets shared with Apple, so not all of it goes to the bottom line for AT&T. But it is still a substantial source of growth in a US mobile phone market that is saturating, and doesn't have many new users available. These numbers mean the iPhone probably accounted for a substantial proportion of AT&T Wireless' total new subscriber growth in the second half of 2007.

What the iPhone means to competitors To Microsoft: Severe challenges. Microsoft's Windows Mobile is sandwiched between two big competitors, Google and Apple. Apple is crafting hardwaresoftware systems that deliver a great user experience, while Google is giving away an operating system to the very companies that license Windows Mobile today. It's possible for Microsoft to try to compete on both fronts, but creating a proprietary device and at the same time selling an operating system to others is extraordinarily difficult (Palm tried to do it and ended up splitting the company in two). We think Microsoft should probably decide whether it wants to compete in devices (in which case it will need to create its own phones, as it did for music players with the Zune) or compete in operating systems (in which case it will probably have to give away Windows Mobile for free). Both alternatives are very high-risk, and require business models that are outside Microsoft's core competencies. The company's recent purchase of Danger, which designed the T-Mobile Sidekick, may indicate that it intends to go the device route. Changes to watch for New form factors. The market for mobile data devices has always been heavily segmented, so it's impossible for a single hardware design to please everyone. The iPhone users we surveyed confirmed that -- 43% of them strongly supported making at least one major physical change to the iPhone: making it larger or smaller, adding a keyboard, or adding a keypad. Undoubtedly there are also other customers who want those features so badly that they haven't bought an iPhone at all. This is an opportunity for Apple to increase its sales by serving those customers, or it's an opportunity for competitors to steal share by addressing segments that Apple's not serving. Better browsers. The improved, more PC-like browsing experience of the iPhone is clearly one of its major draws. But as the survey respondents pointed out, the iPhone browser fails to properly display a lot of websites, most notably those using Adobe Flash. About 40% of iPhone users said the browser has trouble displaying some web pages they want to visit. Apple and Adobe are feuding in public over whether and how Flash can be made available on the iPhone. The dispute punishes users and is damaging to both companies. It's also an opportunity for Apple's competitors. Until and unless Flash becomes available on the iPhone, another mobile company might be able to steal away iPhone customers by creating a better browsing device. Apple needs to

continue improving the iPhone browser, and that means settling its dispute with Adobe. For other mobile companies, we think there will be intense pressure to ship more PC-like browsers, especially in devices that have larger screens. Although many very smart observers of the industry have pointed out that the mobile web would work better if it were reformulated for small screens that process will take years, and in the meantime a lot of mobile users appear to be willing to pay extra for mobile access to the PC web, even if it's a little awkward. Smartphone companies that fail to deliver good browsing risk being ignored by mobile operators and users.

Bibliography www.appleinsider.com www.pragmaticmarketing.com www.iPhonemarketing.com www.msnbc.msn.com www.entrepreneurshipinabox.com www.slideshare.net