ROLE OF BUSINESS STRATEGY AND MARKETING PLANNING IN SUCCESSFUL

LAUNCH OF NEW PRODUCTS; A CASE STUDY OF IPHONE LAUNCH

Abstract
This report attempts to show how companies can use good business strategies and
marketing plans to successfully launch new products in this era of globalization, which has
brought with it an increase in competition. It uses the case study of iPhone to investigate why
some launches are so successful while others fail.

CONTENTS
Abstract
1. Introduction
2. Reasons for iPhones Success in America
2.1. Consumers level.
2.2. Corporate level.
2.3. Environmental Factors
3. Comparing Success of iPhone in America with that of Europe
3.1. Price.
3.2. Carrier Exclusivity
3.3. Lack of 3G capability
3.4. Hidden Costs.
3.5. Software compatibility.
4.

A formulated Strategy and a Marketing Plan for Europe

5. How Apples pricing policy is helping it achieve market share and their strategy of Dropping
the price.
6. Conclusion
References

1. Introduction
In this era of globalization, competition has increased significantly thereby squeezing the
customer base of many companies. This can only mean reduced income. In order to remain in
business many companies have come up with various measures to help increase their revenues.
One such measure is the launching of new products. New products offer increased sales, profits
and competitive strength for most companies (Capatina &Draghescu, 2015). According to
(Cooper, 1994) as quoted by (Capatina &Draghescu, 2015) many successful organizations such
as Apple and JVC owe their fortune to new products that they launched.
Many times though, the launches of new products usually end in failure. Organizations
therefore need to have proper strategies and marketing plans for their new products in order to
succeed. This report will thus seek to find the reasons for the success of new products launched
in already saturated markets, with specific interest in iPhones success in the American market. It
will also investigate the reasons why iPhone could not take the success it recorded in the
American market to the European market. Further, the report will analyze how apples pricing
policy is helping it to achieve market share and will try to help it in formulating a strategy and a
marketing plan for Europe.
The report will be compiled by studying various articles available regarding success of
new products launches, concentrating more on the ones dealing with Apples iPhone. It will
therefore be following a case study methodology (Yin, 2003). The findings could be of great help
to companies planning to launch new products in the market.

2. Reasons for iPhones Success in America

When new products are launched in markets that are already saturated, many analysts
usually predict failure. This was the case when Apple CEO Steve Jobs announced in January
2007 that they would be getting into the mobile phone market, with their revolutionary mobile
phone, iPhone. The mobile phone market was at the time already dominated by big players like,
Samsung Electronics, Nokia Corporation, LG Electronics and many more. It therefore surprised
many how iPhone ended up being so successful despite being late entrants.
The term success has different definitions depending on the situation at hand. How it is
defined greatly influences the reasons for the success of the launch (Hart, 1993). In order to
judge whether iPhone was successful a set of success criteria were developed. These success
criteria are; market size, share and growth rates, average revenue per user (ARPU) and churn
rates and content/services, as well as consumer satisfaction and mobile usage (Laugesen & Yuan,
2010).
a) Market size, share and growth rate. The craze for the iPhone was evident from the fact
that Apples fans formed long queues outside Apples stores to ensure that they got it
immediately after the launch (Faheem, 2008). iPhone achieved a strong market share
since its launch, from a 4% market share in July 2007 to 30% in September 2009
(Laugesen & Yuan, 2010). It also recorded growth in sales between the period of June
2007 and June 2008.
b) ARPU and Churn Rates. They are used as success indicators but mostly in the
telecommunications industry, and when considered in this case, iPhone can be said to be
successful. This is because AT&T recorded an increase in the number of subscribers after
the launch of iPhone.
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c) Mobile usage. In the mobile phone industry, buying alone does not indicate success. They
may be buying it for other uses rather than the primary use, which is for communication.
From the fact that more buyers were using the iPhone for internet surfing and calling
represented a success.
d) Content and Services. What the phone is able to give the consumer determines its
success. Apple gives its customers 1 year warranty for their iPhone.
e) Consumer Satisfaction. Many consumers interviewed expressed their satisfaction with
iPhone because the features were working properly.
After analyzing all these criteria, we can conclude that iPhone launch was successful. But what
factors contributed to this success? These factors can be categorized into three major levels;
consumers level, corporate level and environmental factors.
2.1. Consumers level.
This approach focuses on factors that relate to the customers. They include
demographics, consumer preference and culture.
a) Demographics- Apple tried to target certain groups with its iPhone. According to
different studies, iPhone users are predominantly male of between 25-35 years,
college graduates and have a higher income. In another study, over 50% of iPhone
users are below the age of 30 and are members of entertainment, scientific and
information profession (Rubicon, 2008). Over 70% of iPhone users have also used
other iPhone products before. By reducing the price of iPhone, Apple was also
targeting consumers with slightly low income.
b) Consumer preference- Consumers preferred mobile phones with greater capabilities
(Funk, 2000). Apple did exactly this by providing a phone with both iPod and
smartphone experience, to enable consumers to be entertained, surf the internet and
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still be able to make calls. This greatly contributed to the success of iPhone in the
American market.
c) Culture- iPhone purchase and usage was viewed as a sign of higher social status due
to its sophistication and pricing. Many consumers therefore bought it to identify with
this status giving it huge success.

2.2. Corporate level.

In this level, the focus shifts to the company strategies. The four major decision-making
areas, product, price, place and promotion, are discussed. They are called marketing mix
strategies.
a) Product. A product simply refers to goods and services. Product uniqueness,
offering quality and features that the existing products lacked, and product
advantage helped make iPhone successful. The multi touch screen of 3.5 inches,
lower weight of 135grams, thinner size and the high memory capacity were some
of the features that made iPhone unique. In addition, iPhone had the advantage of
being able to provide the consumer with a range of different activities, like
entertainment, web browsing and video recording that other smartphones could
not provide all at once.
b) Price. It is the monetary value attached to a product. Price is generally assumed to
represent quality, advantages and uniqueness of a product. When iPhone was
launched in June 2007, the 4GB version was priced at US$499 and the 8GB
version at US$599 in addition to entering into a contract with the AT&T making it
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very expensive. In September 2007, Job announced steep price cuts making the
8GB version to sell at US$399 and a new 16GB version to retail at US$499.
Apple used skimming and versioning strategy, pricing high to make high profits
from early buyers then reducing the price later to increase customer base, well to
make iPhone a successful launch.
c) Place. It is the availability of the product to consumers at a convenient place. With
their partners AT&T selling the iPhones in their over 1000 stores and with the
establishment of the Apple stores across the US, Apple ensured that the phone was
available to their growing customers at convenient places. This in turn led to its
success.
d) Promotion. This simply refers to marketing and branding of a product. Apple
created a buzz for its iPhone by slowly releasing the details about the product
mostly through the word of mouth marketing (Faheem, 2008). In Academy
Awards 2007, Apple launched an advertisement with tagline hello. It started
with an old phone ringing with different actor answering. It ends with visual of
the iPhone. It is therefore not a surprise that iPhone got the marketer of the year
award following its launch.

2.3. Environmental Factors

These are mainly regulatory factors. Apple sold their phones locked thereby tying
the consumers to only one carrier, AT&T in the US. Through this regulation Apple is able
to make profits even after sale through the contractual agreement with AT&T.

Therefore, in view of all these factors, we can just conclude that the main reason for
iPhones success in America was down to their superior business strategy and marketing plan.
Apple was able to combine all these factors to their advantage.
3. Comparing Success of iPhone in America with that of Europe
After recording great success in America, iPhone decided to expand their markets and
launch iPhone in Europe. In November 2007, Apple launched iPhone in three major
European markets: France, Germany and the UK. Initial indicators showed some success but
later sales reduced denying it the success it had enjoyed in America. This was due to the
following factors;
3.1. Price.
When iPhone first launched in Europe, it was available at a price of US$566 in
the UK, US$587 in Germany and US$415 in France. Although the high prices did not
deter early customers from buying, it greatly influenced its success. Many people could
not afford. This forced Apple to reduce the price of iPhone by 100 pounds.
3.2. Carrier Exclusivity.
Like in the US with AT&T, Apple chose to collaborate with other carriers in
Europe. They chose T-Mobile in Germany, Orange in France and Telefonica O2 Europe
plc in the UK. This was something uncommon in Europe since they were used to
working with any operator of their choice. Further, the laws in Europe prevented such
arrangements to protect consumers from being forced to use a product they do not like
because they had purchased another one they liked. This proved a challenge to iPhone.

T-Mobile also offered to sell the phone to consumers without any contract in view of the
lawsuit filed by Vodafone Group Plc. In the end they decided to offer the unlocked
version but at a higher price.
3.3. Existence of grey market.
By February 2008, Apple had sold over 3.7 million iPhone while AT&T had only
connected 2 million. This meant that around 1.7 million were unaccounted for. The only
possibility was that the phones were unlocked. This made Apple to lose millions of
dollars in revenue.
3.3. Lack of 3G capability.
Europe mainly used 3G network and because iPhone only used EDGE and Wi-Fi,
it reduced its appeal in the European market. To counter this, Apple launched 3G iPhone
in August 2008.
3.4. Hidden Costs.
Customers could not change the batteries of iPhone themselves and had to send
them back for replacement, which was rather expensive. This was not appealing since it
meant remaining without a mobile phone for a long time and incurring shipping charges
too. Apple tried to solve this by allowing some overseas companies, many of which are
speculated to be Taiwanese, to supply the parts and assemble the iPhone (Mickalowski,
Mickelson & Keltgen, 2010).
3.5. Software compatibility.
4.
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Proposition of How Apple should Formulate Strategy and Marketing Plan for Europe

Strategy and marketing plan are important factors for the success of any company.
In order to be successful in Europe like they have been in America they need to consider
various issues in their strategy and plan. These may include;
a) Competitors. Apples major competitors in Europe are Nokia, HTC, Samsung and
BlackBerry. They need to learn strengths and weaknesses of these competitors to
work to their advantage
b) Target market. Apple needs to clearly identify who their target market in Europe
are and work towards satisfying their needs. From the case study, the target
market is obviously young people of between 25-35 years of age, college
graduates and with high income.
c) Major Goals and Objectives. Apple should set out clear objectives of what they
want to achieve in the European market and work towards attaining them. The
number of phones they need to sell over a certain period and the market share
they want to attain should be known.
d) SWOT analysis. Apple needs to analyze their strengths, weaknesses, opportunities
and threats well. They all involve appraising the status quo as a predicate to
determining planning goals and setting developmental priorities (Hansen, 2008).
e) Strategic Partnerships and Alliances. Apple needs to make key strategic alliances
with important players in telecommunications industry in Europe. This will
reduce costs on certain activities. For example, having partners to assemble
iPhone in Europe or entering into partnerships with carriers.
f) Funding. The company needs to estimate the amount of money they are going to
need in order to undertake various activities in their marketing plan. Further they
need to identify the source of the funding.
g)
5. How Apples pricing policy is helping it achieve market share and their strategy of
Dropping the price.
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Price is a very important variable of marketing mix strategies. It directly affects

the demand of a product and the profitability of a company. In many cases, customers
relate the price of a product to its quality. In real sense though, other equally important
factors affect price. They include, competitors pricing, cost of production, controls where
prices are fixed through statutes and regulations, target market and many more. Proper
care should be taken in formulating a good pricing policy. While pricing a product or
service may seem a simple process, it is not. Good pricing strategies is usually based on
sound assumptions made by marketers (Burnett). One thing that has made Apple so
successful is their pricing policy. In the case of iPhone, they used the skimming and
versioning strategy to determine the price.
a) Skimming and Versioning strategies.
Skimming is high pricing of some products in order to make maximum gains
from the initial buyers. This strategy is often used when a new product is introduced into
the market, and is in great demand (Musonera & Ndagijimana). Versioning is a pricing
strategy that charges customers different prices for the same product or service. During
the launch of iPhone in June 2007, Apple charged their phones highly. The 4GB version
retails at US$499 while the 8GB version retails at US$599. Despite the high prices,
customers make long queues to purchase iPhone. This enables Apple to make maximum
profits from the early buyers.
In September 2007, Jobs announced steep price cuts with the 8GB version
retailing at US$399 and the new 16GB version retailing at US$499. This move made
iPhone more affordable thereby increasing sales and overall income. Dropping the price
was therefore a good strategy since it increased sales.
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6. Conclusion
Launching new products into the market, especially ones with big players already, can
sometimes prove to be very difficult. According to different studies, more than 50% of new
launches fail. With a good strategy and plan, new launches can be successful. From the case
study of iPhone, we see Apple entering the mobile phone industry so late. The mobile phone
market is already filled with big players like Nokia, Samsung, LG, Motorola and many more.
Many analysts did not give them a chance of succeeding. With good business strategy and
marketing plan, iPhone was able to crack the mobile phone market. It grew so fast that within a
few years it is now emerging as one of the leading brands in the mobile phone industry, to the
surprise of many.
Apples ability to study what the consumers needed and providing them in one device
proved to be so successful. iPhone was a combination of smartphone, wireless internet
communication device, iPod and PDA, computer and camera. This differentiated it from the
other smartphones in the market at the time making consumers to identify with it despite the high
price.

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