Borislav Kiprin

iPhone Marketing Strategy

Analysis
Fundamentals of Marl:eting
Management Course Work
Course Leader: Maria Lopez Escorial

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Table of Contents
PRODUCT DESCRIPTION ................................................................................................................................ 3
MARKET AND COMPETITORS ANAL YSIS .......................................................................................................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 inforrnotion provided in this document is reseorched online. Relotive resources ore mentioned whenever
found needed os o footnote. Opinions ore stoted on o sutjective bosis by the outhor ond should not be
token os o pure truth. Should question~ comments ond opinions be roised p/eose contoct me ot
bkiprin .mdmk20 JO@olumno.ie. edu.
Due to spoce limitotion~ some of the findings ore orgonized in tob/e like formots. Those 9rophicol contents
ore either bosed on reseorch or represent my own perception of the events thot occurred.
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IE MDMK09

3
PRODUCT DESCRIPTION

For yeors Apple Inc. was considered as o computer monufoclurer aiming at the "different. hip and
imagina tive" individual as o cust omer. With the retum or St eve Jobs as o CEO or the company in2 1996.
things changed tremendously and Apple Inc. b<ought matters to another level. Fr st the company
introduced o new line or successfully marketed computers and lat er o portable music player that mode the
world go mod - the iPod. And not so long ofter that come iPhone' s time to ravel yet another market - the
mobile phone consumers' . The iPhone combines reohx es like mobile phone. music player. small personal
o rgon~e r and portable computing. on put in o small hondheld with o widescreen display and multi-touch
screen capo bifit y.
The hondheld device was introduced to the
American consumer on January 9. 2007 and was
mode available on June 29 the some year through
the AT&T mobile communications p rovider. Initially it
was only available on signing 1 or 2 year contractual
basis. The some opproo ch is observed everywhere
around the world. where Apple Inc. hos decided to
make the iPhone available.
On the other hand "unlocked" iPhones were illegally
available through crocking the softwa re. Those ore
naturally not counted as official soles in the region
they ore sold via third/fourth pa rties. but ra ther as
soles in the region they were originally purchased
with o signed contract. The leader in this 'Illegally'' sold quantity /over 2 Mn hondhelds in 2007 alone) is
Chino where o deal between Apple Inc. and Chino Mobile is to happen in the 0 4 of year 2009. This will give
Apple official access to the fastest growing and the biggest mobile hondheld market in the wortd. 1
The iPhone is fully compa tible with both Apple computers and softwa re (Moc OS & ITunes). as well as the
online application .Moc (now called Mobile Me) . It is also "one -click-sync" ready for computers using
Microsoft OS through the iTunes Windows version. ITunes' users o re enjoying co lend or. contacts. emoi~
and documents synchronization. and also availability or all sorts or applica tions. music and video content.
In that sense the iPhone is o multitasking communicational device with the abilit y to satisfy many individual
needs in on o II-in-one p rinciple.

+
1

Portable
M usic
Player

Forecast ed at 450 M n subscribers in 2010

(Sotxce : http://www.reseachandmarkets.com/reportinfo.asp?report id=542976 )

Boris av Kpnn IE MDMK09

4
MARKET AND COMPETITORS ANALYSIS
Al the time Apple Computers recognized the need for o hondheld mobile device the morket players were
a few and mainly business users. This explains the strong market share RIM hod. Palm on its hand also was
also somewhat popular but having limitations in terms or usabi6ty and software. deprived the bland from
gaining significant position. Most or the devices p resent at the market in 2005-2007 were more reatu.-ed
towards personal organizing. emailing and computing. rather than web browsing or customized application
usage.

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Apple has clearly taken the marketing challenging strategy attacking the market leaders Blackberry and
Palm. It has launched o full frontal attack right alter the announcement or the iPhone in St eve Job's keynote
speech in 2007's Mocwo~d. 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
!PHONE SWOT

SntENGTHS

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Drstri:bul e ilvnes COOi M i
OPPORTUN1nes

THREATS

htfp:/&ww.appleins.ider.com/atic les/09/08/19/iphone sales precicted to top 80 mlion by 2012.html

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IE MDMK09

6
PRICE STRATEGY
The iPhone was released in lwo different versions - 4GB and 8GB model. In the United States both requi'ed a
lwo-year contract with Cingula r /a unit of AT&T).3As 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
ta pay more tha t the American one. for example. In that sense Apple was going clearly far the
geagra phi cal pricing module.
iPhone Pricing Worldwide al Launch in 2007
4Gb

8Gb

$699

$000

USA

$499

$599

Germany

E399

E499

UK

257

309

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Japan

70000'

80000

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$559

$600
$)0
$200
$0

USA

Gmony

Jopon

UK

s
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 expect ed fou<fold growth
between year 2007 and year 20 11. /See Figu<e 1!) Another
thing tho I the company did is c reate a survey and ask
the customers how much they are willing to pay. Al fi'st
the price was set a t US $299f4GB) and $399f8GB)
"''" "'"
models. Bui Apple Inc. and A T&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 p ricing policy observed
with the computers and music players it offers on the market. There a re basically lwo options selectable
when pu<chasing an iPhone:

..

Contract based - signing up t o an annual or lwo year contract with Apple's exclusive iPhone resell<!( fin
US t h~ is Cingular - an AT&T company). The contract involves monthly plan payments not only including
the phone lease. but also the communica tion service in terms of dat a. texting and voice transfer ra tes.

Unlocked - in the event of having a plan with other than AT&T mobile provider. for example. the
customer is given the option ta pu<chase the iPhone with factory sett ings and use ii fu<ther as he/she
wishes. The p rice of this option naturally is set much high<!(.

l Source: htto://YftCN.macwodd.comlcrficle/54769/2007/01 Ii phone btm

"Source: http : //www. mymapofiapan . com/b loa/i phon~japan launch<:letail s/

' Currency calculanons ae based on 1 USO =115 JPY. 2 USO= 1 GBP. 1.40 USO= 1 EUR
6

Source: htto://www.iphoneworld .ca/news/200 7/Q2/1 7/iphone 299 399 pricing.reseCl'ch-rumors ae-true/

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7
DISTRIBUTION STRATEGY
Disl ribul ion or l he iPhone is set only to exclusive mobile ca rriers in each counlry lhe iPhone was launched. In
lhe Unil ed Stat es lhe iPhone was launched fr st and lhen olher counlries followed unronuna lely much lalet
lhan expecled. This was due mainly la lhe stralegic decision made lo patlnet wilh a mobile
communica lion service provider. The technological lime la sel lhe paramelers or lhe agreement was lhe
main reason for lhe delay. For example lhe iPhone up lo Augusl 2009 is slill not launched in lhe biggest
market for mobile hondhelds - China.

Customer

Apple Inc.

China based
Varioussuppliers
One assembfing
unrt

Retal Distribution
Regional
w a ehousing

Logistic center
Regional logistic
centers

Service Plan

Unlocked iPhone

and storage

Suppo<! Service

Production

Center

Setting

Service Provider

Apple Inc. hos chosen a hybrid distribution channel involving its online store. physical outlets and the retail
points or the exclusive mobile setvice provider.

Apple Store

Apple Online Store

Test driving the iPhone

Selecting the ro te plan
Signing the contract
Picking up the iPhone tight
away

Service Provider Outlet

Creating an apple account

Selecting a rate plan
Purchasing the phone
Having ii delivered t o a
prefleted ad ress

Test driving the iPhane

Selecting the to te pion
Signing the contract
Picking up the iPhone tight
away

Below you will find the main reason lot Apple Inc. to choose Cingula r over Sprint as an exclusive partner in
the United States.
utilizing Cingular's Customer Base

Uptake ro te from
Cingulor customers

-58m

Cingulor
subscribers wi th
iPod - 303

Cingulo r

subscribers wi th
iPod - I 7.4m

Cingvlor iPod
customers in I sl
year -

503fassump lion)

Est. up! oke by

Cingulor iPod
cust omers in I sl

yea r - 8.lm

Source: htto://www.sildeshore.net/rcastanon/iphone for-latam

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8
U NIQUE SELLING PROPOSITION

The unique selling point/proposition or Apple's iPhone was not in the message but rather in the diff<!(ent
functions the hondheld was offering.
As usual Apple was rela ting the message that they offer something cool and different.

Innovation

Connectivity

Storage

Urc: or ver"i or'J_) I

Wi-Fi
GSM

Enough lo gel

l~lJ''O r 'S lr_)~ e

jL.,S ' r_J

'ouc:r
sc:eer

you around for

as long as !he
battery lasts

l n~o r ed

Bluelool h

Innovation - g roundb<eoking new device that allows o larger screen b<owsing and pop up or
novigo tionol icon set up os well os o full QWERTY keyboa rd when necessary.

Customization - iPhone application for virtually any desi'e the customer might hove. this is the Long toil
marketing point Apple introduced os o new concept into mobile phone industry. Cust omers ore
allowed o nd given the code to creole opps tho I will o llow them to execute. follow and stay in touch via
lhi'd party software.

Personalization - Simple and effortless synchronization with the address book. calenda r and email client
through iTunes and .Moc /now MobileMe) applications.

Connectivity - Stoy in touch through almost all know ways for mobile hondhelds.

Music. Photos & Video Storage - Full featured iPod like ability t o store and ploy music up to 4Gb or 8Gb.

As every Apple ptoduct. the main marketing message to the consumer is "something different, something
cool, user friendly and simply Apple". There is ptobobly no other company tha t contemplat es such customer
satisfaction and loyal b<ond Ions. This is mainly due to the everyday maintenance or corporate and b<ond
image os well as creating the means for self-support. should the loller be needed.
Another pinpoint in their unique selling point is the utiliza tion or iTunes to supply music. video and podcosl ing
cont ent as well as customization outlet for iPhone applications. So for none or the competitors hos either
created or offered a simple user ~iendly and all in one online store accessible t o the consumer.

V is.it http://y.cvwapple.com/iphooe/gpp$foriPhooe/
web based personal address book. calendar and email platform .
3G was not considered in the development st age of iPhone. since it was not a widely implemented data Ir ans fer
protocol.

? A
10

Borislav K'pnn

IE MDMK09

9
COMMUNICATION STRATEGY AND PLAN (INCL . DIGITAL MARKETING)

Apple Inc. used bolh lhe pull and lhe push strat egy in its communication with the cust omer. One was the
company advertising. p romoting the product by itself employing the full spectrum or the marketing
communica tion mix channels and the other is relying on the selected exclusive distributor region wise to
advertise the iPhone. In tha t sense the customer was approached from two different sources c rea ting
differentiation from the competitors and delivering the product message with added value service or
application.

PR
Biogs Opinion Leaden 8.Specia i zed
Sttes
Sneak Peaks on R&D info
Buzz&. V i"a l Markell
AppJe.com
Printed Media
TV
Outdoor Media
Socia l Media
Carrier handeld advertisement
Apple.com
Independent review Websites
Paind Onfine listings
Di 101 Cam ai njn

Pre Launch Stralegy

Launch Strategy

Post Launch Strategy

Digital Marketing Strategy Break Up

Email Marketing
A mes.sage sent to

every Apple Customer

few weeks before
launch

Apple.com
Extensive introduction
to the advantages the
use of iPhone gives
Hosting iPhone Apps
pU'chasing center

Display Ads
Banner Ads
Interactive Ads

C rowdsourcing &
Online Communities
WO<dOf-Moufh. Apple
fan c lub websites. Bk>gs

Social Media
Advertisement
Facebook
MySpace

Search Engine

Marketing

PPC
Affii ated Makefing
Other paid list ings

lndusoy Biogs
Forums
Discuss.ion Boads

Opinion leaders
Handing free iPhone for
r eview
Supplying access to
ilunes iPhone apps
section for free

As you one can see Apple has empSoyed almost all digtal channels known in 2007 and making business sense to use for

hosting its communtc:afional message to the consumer and targeted audience.

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10
MAIN MEDIA PLAN
II is difficult to det ermine which media was more important t o Apple for advertising its iPhone. since the
company hos invested in almost every possible channel to b<ing the consumer to the P-0-P (Point or
Purchase). The POP for iPhone was either Apple.com or the exclusive mobile ca rrier website or outlet store.
That said signing o service contract through Apple.com is done the some way as if the consumer hos done
that through the carrier's website.
In 2007 Apples Advertising budget was $467 million" and much or it was allocated specifically to ma rket
the iPhone. This ad budget was allocat e through most or the available media channels enabling integrated
and blended marketing campaign. The Main Media Pion looked like:

. ..
Reaching the primay taget as described on page 5

Purchasing a mix of tradrtional (TV. Radio. Printed &.

O uld00<) media and Digital Space

Geographic Considerations
Advertising in aeas that have high concentrations of the
fagef consumers

Campaigning in the Top 25 US economic centers

Reach and frequency

Reaching the taget within the specified aea ""4th
everyday frequency

Targeting an often on th~go target VYith media buys that

reac h consumers through modes of transportation

Schedule
Cr eating a campaign that reaches the target on a year
round basis

Emphasizing o n a pulsing schedUe v...ith Tradrtionol and

Digtd media channels

Seasonality
Purchasing media that heavy' s up dl.fing hoidayseasons
and other events

Enfassizing on media buy times during product Saunc h to

dive traffic into Point of Purchase

C reative Constraints

11

Pk:fll'ing the iPhone as the number one choice among

sma'f phones

Useing innovative media buys that reach the target in

fhei dcily ife

Using it in a way that most effectively reaches the target

Dato gatherjng, analysis and toking respective actions

upon recognized CPO & CPA

Source: htto://www.techcrunch.com/2008/ 11 /21 /vup opples~ advertisino

budoet is ~biQoer. f hanmicrosoft.vistas/

Borislav K"pnn

IE MDMK09

ll
MAIN RECOMMENDATIONS FOR Success WITH ITS SPECIFIC ACTIONS

Broadening the
Distribution
Channels

Heavier Employ of
Digital Marketing

Promoting the
iPhone

Simuttaneous lauch of the iPhone in USA. UK. Germany.

France. Italy. Spain. Russia &. China
Stock avaiabity in the Apple's North America. European
and Asian logistic centers
Better demand antici pation through reseach

Fostering vi rd campaigning on drtfi'e nt video soc ial

networks (Youfubbe.com and a fike)
Enabling ''Share" button on AppSe.com
Fostering User Generated Content advert~me nt & best
practices

Free MobileMe signup for 1 year with every iPhone

purchased
Speciaized \AJOrkshops for corporate CTO's introducing the
iPhone as a corporate smartphone
Giving for free iPhones to Trend Setters (TV & Movie . Music

and Spa<! slas)

Price Offering

Improving Initial
Technologlcal Offering

Launching the iPhone at a 103 at Seast Sower price for

acqUring bigger share from competition & new comers to
smart phones.
Rebate for ilunesStore . "With the ptxchase of iPhone you

wiN get 50 USD credit for your ifunes account"

Introduc ing the same price rege>naly as a equivatent to
the USO offer in the Unrted States.

3G c apabity
Recording Video capabilrty
Preinsfdl region al GPS map
PDF and Microsoft Officer suit fasfe compatib iity
Buifin e Book reader

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IE MDMK09