Critical Analysis of Marketing Strategy of Apple for the iPhone in India

A proposal submitted in partial fulfillment of the requirements for the Degree of Master's

Rohan Arora

Ms. Adya Sharma

Marketing 20th December 2013

1. TITLE Critical Analysis of Marketing Strategy of Apple for the iPhone in India

2. STATEMENT OF THE PROBLEM This thesis aims at studying the marketing strategy adopted by Apple to create a brand image for the iPhone in India. Apple is synonymous with innovation. One cannot deny that the original iPhone was a revolutionary product, which completely changed the smartphone form and experience factor when it was launched in 2007. Apple, in its strategy, has launched the models A1529 (5C) and A1530 (5s) in India at a very high price point. This was the fastest rollout of an iPhone in India till date. And this time two iPhones. Apple also went further ahead to discontinue the iPhone 5, which was launched just last year. But they are still selling the iPhone 4s, the most successful iPhone for Apple. The Indian smartphone market is price sensitive. Apple has played the 4Ps in an uncanny manner. It is changing the way it sells iPhones in India, where it has a small market share despite the fact the South Asian nation is among the fastest-growing wireless markets in the world. 3. BACKGROUND AND HISTORY The iPhone is a line of smartphones designed and marketed by Apple Inc. It runs Apple's iOS mobile operating system. The first generation iPhone was released on June 29, 2007; the most recent iPhones, the seventh-generation iPhone 5C and iPhone 5S, were introduced on September 10, 2013. The user interface is built around the device's multi-touch screen, including a virtual keyboard. The iPhone has Wi-Fi and cellular connectivity (2G, 3G, 4G, and LTE). An iPhone can shoot video (though this was not a standard feature until the iPhone 3GS), take photos, play music, send and receive email, browse the web, send texts, and receive visual voicemail. Also Apple maintains a huge App ecosystem for the iPhone and as of October 2013, the App Store offered more than one million apps by Apple and third parties.

4. JUSTIFICATION OF THE PROBLEM 5. Apples market share in India in the doldrums, mainly due to the distribution model and the price point. According to research firm IDC Inc., in the April-June quarter of 2012, Apples share of handset sales in India was only 1.2%. During the same period, South Koreas Samsung Electronics Co. Ltd., the market leader, more than doubled its market share to 51%, IDC says. Talking about the India Smartphone market, it grew by 229% YoY in the third quarter of 2013, according to IDC. Apple has a business in India, which is growing, but due to the multi-layer distribution, the profits take a hit. Hence, till now Apple has only focused on the Tier1 cities. Apple has only recently taken to a aggressive marketing mix to push the iPhone sales. Businesses are finally shifting to the iPhone as most find the iPhone now relevant for professional work. The stage cannot be more apt for Apple to foray into India and grab the premium smartphone market from the market leader, Samsung. 6. LITERATURE REVIEW Premium pricing (also called image pricing or prestige pricing) is the practice of keeping the price of a product or service artificially high in order to encourage favorable perceptions among buyers, based solely on the price. The practice is intended to exploit the (not necessarily justifiable) tendency for buyers to assume that expensive items enjoy an exceptional reputation or represent exceptional quality and distinction. A premium pricing strategy involves setting the price of a product higher than similar products. This strategy is sometimes also called skim pricing because it is an attempt to skim the cream off the top of the market. It is 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. Luxury has a psychological association with premium pricing. The implication for marketing is that consumers are willing to pay more for certain goods and not for others. To the marketer, it means creating a brand equity or value for which the consumer is willing to pay extra. Marketers view luxury as the main factor differentiating a brand in a product category. Some brands can continue to charge a premium price because their entire brand image is based around luxury. According to John Quelch, of Harvard Business School, it is very challenging for companies to maintain a premium-priced brand while trading as a public company. Luxury brands, such as Prada, often chose to remain private businesses, so they can stay small and exclusive, and continue to use premium pricing. Unique products usually have the best chance of commanding premium prices. This is one reason why Apple has always priced the iPhone high. It has followed the price skimming strategy with iPhone. But price skimming comes with its own flaws. While the profits are very high, the revenue is low. As in Exhibit 1, Apple is behind the market leader by a good 48% and doesnt even makes it to the top 5 smart phone manufacturers list in terms of Market share.

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Exhibit 1:Market share of smartphone vendors in India

7. THEORETICAL FRAMEWORK The purpose of this study is to determine how the market behaves to Apple newly launched iPhone 5s and 5c. Particularly the 5s, as it is priced above the 50k rupees mark in India. The study would be divided into two parts: 1) A survey would be conducted which would have the following questions, although the list is not exhaustive and changes would be made later on Has Apple been able to sell the idea of a 50k phone to you from its marketing? Has Apple been able to differentiate its products from its competitors, by gaining competitive edge through its marketing?

Does branding allow Apple's customer to easily recognize and recall the company and its products? Does branding allow Apple to charge premium for its products and yet maintain customer loyalty?

2) Critical Analysis of Apples new aggressive distribution strategy to increase the iPhone market share to a respectable position. How well has Apple used STP strategies, 4 Ps of marketing mix and SWOT Analysis, would be churned out from this 8. Bibliography and Appendix

http://timesofindia.indiatimes.com/tech/tech-news/hardware/Apples-profit-shrinks-33-inIndia-sales-up-51/articleshow/25250116.cms http://www.bgr.in/news/apple-india-iphone-5s-iphone-5c-sales-strategy/ http://www.idc.com/getdoc.jsp?containerId=prIN24471213 http://www.patentlyapple.com/patently-apple/2013/10/indian-retailers-preparing-new-shopin-shop-iphone-strategy.html http://appleinsider.com/articles/13/05/30/apples-indian-iphone-sales-reportedly-up-400thanks-to-aggressive-pricing-strategies