The Marketing Strategy of Apple Inc. and Its Contribution to the Company's Success

The Marketing Strategy of Apple Inc. and Its Contribution to the Company’s Success
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Table of Contents TOC \o "1-3" \h \z \u 1.0 Introduction PAGEREF _Toc506786909 \h 32.0 Marketing Strategy PAGEREF _Toc506786910 \h 42.1 Overview of Marketing Strategy in Relation to Apple iPhone PAGEREF _Toc506786911 \h 42.2 Hunger Marketing PAGEREF _Toc506786912 \h 62.3 Experiential Marketing PAGEREF _Toc506786913 \h 83.0 Apple Inc.’s 4Ps Marketing Strategy PAGEREF _Toc506786914 \h 143.1 Product PAGEREF _Toc506786915 \h 143.2 Price PAGEREF _Toc506786916 \h 163.3 Promotion PAGEREF _Toc506786917 \h 163.4 Place/Distribution PAGEREF _Toc506786918 \h 174.0 Conclusion PAGEREF _Toc506786919 \h 175.0 Bibliography PAGEREF _Toc506786920 \h 206.0 Appendix PAGEREF _Toc506786921 \h 236.1 Mind Map PAGEREF _Toc506786922 \h 236.2 Research Log PAGEREF _Toc506786923 \h 24
The Marketing Strategy of Apple Inc. and Its Contribution to the Company’s Success
1.0 Introduction
Apple Inc. is a U.S.-based company operating in IT industry. The company has gained widespread prominence mainly due to its innovative digital mobile devices. Steve Jobs together with Steve Wazniak (Razak & Zawawi, 2017, p. 48) established the company in 1976. Some of its innovative electronics products include Mac computers, iPad, and iPhone. The company has also been successful in the production of various software applications, including iOS, iTunes, iLife, and iWork. In 2010, the company surpassed its major competitor, Microsoft, and is currently the leading technology company with the largest market share in the industry (Razak & Zawawi, 2017, p. 48). The company has revolutionized both the smartphone industry and the music industry with its innovative iPhone models and iPod respectively. It has also been in the forefront in revolutionizing the media and entertainment industries with the introduction of the iPad.
It is noteworthy that the mobile phone market is subdivided into two major segments: smartphones and feature phones. Smartphones refer to mobile phone devices that transcend the functionality of traditional cell phones. In addition to the conventional mobile handset functionality, smartphone run on advanced operating systems that enables them to handle computer processes. For instance, the Apple smartphone models, iPhones, run on the iPhone operating system, commonly known as iOS. On the other hand, Samsung smartphones are based on the Android operating system. This paper examines Apple Company’s marketing strategies and how it has gained a competitive advantage over its rivals.
2.0 Marketing Strategy
2.1 Overview of Marketing Strategy in Relation to Apple iPhone
The concept of marketing strategy constitutes two distinct yet related terms: “marketing” and “strategy.” Scholars have developed various definitions of both terms. As such, it is important to explore some of the definitions and try to figure out some of the common themes among such definitions. According to Iyamabo and Otubanjo (2013, p. 17), marketing literature consists of over 30 themes, including stakeholder value, profitable customer relationship, human need, profitable relationship enhancement, human need, and management decision. Other themes include customer equity, culture (benefits and values), marketing mix, management activity, customer retention, pervasive societal activity, management activity, and customer equity. Such themes are grouped into 6 major categories based on their generic similarity. These categories are profit maximization, competitive strategy, promotion, strategic management process, value creation, and relationship marketing (Iyamabo & Otubanjo, 2013, p. 19). Overall, the American Marketing Association (2007, cited in Iyamabo & Otubanjo, 2013, p. 19) defines marketing as the processes, set of institutions, and activity for developing, exchanging, delivering, and communicating offerings that create value for partners, clients, customers, and the wider society.
Upon examining the definition of the marketing concept, it is important to examine some of the definitions of strategy. The various themes emerging in the strategy literature include resource allocation, future projection, corporate objectives, leaders’ vision, needs awareness, value exchange, environmental analysis, performance, and competitive advantage (Iyamabo & Otubanjo, 2013, p. 21). With regard to environmental analysis, Apple often conducts a comprehensive analysis of its micro and macro environments in order to align its strategic plans and objectives to the existing market forces. The dominant themes regarding strategy include rational thinking, policy planning and formulation process, resource allocation, environmental analysis, and competitive advantage. Isoraite (2009, p. 114) defines marketing strategy as a philosophy that results in the process through which individuals, groups, and organizations obtain their needs and wants by not only identifying value but also delivering and communicating it to others.
Typically, marketing strategies fall under various broad categories, including main marketing strategy, general competitive strategy, and competing strategies. The main marketing strategies include deep penetration strategy, market expansion strategy, trade creation strategy, and diversification strategy. Deep penetration strategy is more effective in unsaturated markets, and is achieved through reducing product prices and production costs. It focuses on the existing markets rather than new ones. Market penetration strategy focuses on increasing the sales of the existing products in the new market segments. The trade creation strategy focuses on the development of new products on the existing market segments. Apple Inc. has adopted market expansion strategies in an attempt to expand its market share to the emerging economies including India and China. Similarly, the company has also adopted trade creation strategy by developing innovative products that have revolutionized the smartphone industry for over a decade. Particularly, its innovative iPhone models have given it a competitive advantage over its main competitor in the smartphone industry, Samsung.
On the other hand, general competitive strategies include differentiation strategy, concentration strategy, and expenditure leadership strategy. Application of differentiation strategy entails focusing on the uniqueness of products and/or services. It is aimed at effectively differentiating a firm from its key rivals in the industry. As a profit entity, differentiation strategy creates unique and superior products that create more value to customers than its competitors’ products. With regard to this strategy, Apple Inc. has been leading the smartphone industry in terms of innovation. Through innovation, Apple has come up with a unique smartphone, the iPhone, which is distinct from Samsung’s smartphone, Samsung Galaxy. In addition to its stylish and compact designs, iPhones run on iOS, which is more user-friendly than Android. Additionally, iOS is less vulnerable to various malware than Android since the former applicable only on Apple smartphones.
With regard to competing strategies, Apple applies market leader strategy since it is the market leader in the smartphone industry. As Isoraite (2009, p. 177) posits, market leader strategy is effective to the company with the largest market share. Apple is the market leader in North American market segments and other global markets. As a result, it has more options to enhance its market share than Samsung. The company often encourages the existing customers to purchase more of its innovative products while attracting new ones. Overall, marketing strategy is mainly aimed at achieving a competitive advantage (Kumar, Rahman, Kazmi & Goyal, 2012, p. 483). Thus, any marketing strategy focuses on providing the firm with a competitive edge in the industry.
2.2 Hunger Marketing
The concept of hunger marketing refers to a marketing strategy that was introduced by Apple Inc. The strategy is specifically focused on human beings’ emotions. As a psychological strategy, hunger marketing focuses on the consumers’ desires by making them hungry. Through hunger marketing, Apple stimulates the consumer psychology by creating scarcity of its products in order to evoke rational decision-making on the part of the consumers. In addition to boosting the customers’ interest, the strategy attracts more customers through the word-of-mouth. Shih-Chiao, Shui-Lien and Mioa-Jin (2017, p. 20) defines hunger marketing as a strategy involving deliberate restriction of the supply of products in order to create excess demand for the products. Apple Inc. deliberately limits the supply of its smartphones in order to create an artificial scarcity, and hence stimulating the demand for such smartphones. Once it has created the scarcity of its smartphones, users become eager to purchase them as they continue getting positive reviews from those who have already bought the products.
Hunger marketing creates a scarcity of products in terms of quantity and time. Consequently, the company draws the attention of the customers towards purchasing the products. Clearly, hunger marketing operates through the mechanisms demand and supply. By limiting the supply of its new and innovative smartphones, Apple Inc. interferes with the forces of demand and supply in the marketing, by creating excess demand for the seemingly scarce smartphones. The review by Shih-Chiao, Shui-Lien and Mioa-Jin (2017, p. 20) found a positive correlation between hunger marketing strategy and knowledge exchange opportunities. Consistent with this argument, Apple Inc.’s hunger marketing strategy creates a platform for consumers to exchange knowledge regarding its “scarce” products through positive customer reviews and mouth-of-mouth. Gruen, Osmonbekov and Czaplewski (2006, cited in Shih-Chiao, Shui-Lien and Mioa-Jin, 2017, p. 20) defined opportunities as the extent with which a given situation favors the attainment of the desired results. From the perspective of this definition, Apple Inc.’s main aim of using hunger-marketing strategy is to create a situation that favors more sales of its smartphones.
With the use of hunger marketing strategy, Apple is able to create a demand “illusion” in order to maintain high profit margin and premium prices for its products. Tian and Chen (2016) assert that hunger-marketing strategy is based on the western economics’ utility theory, which holds that “the items of utility is not equal to its value. Utility is a mental state with a certain correlation with consumer goods’ value. Utility’s use value is closely related to the specific environment and time. With the use of hunger marketing strategy, Apple’s innovative iPhones have revolutionized the smartphone industry. The strategy increases the level of consumer satisfaction, as consumers need to purchase more of the products to satisfy their needs.
However, the strategy comes with a fair share of its setbacks. Particularly, hunger marketing is time-consuming, as it requires the decision makers to grasp the existing opportunities and determine the customers’ “hunger sense” between the launch of the products and their official listing (Tian & Chen, 2016). The company has to use proper timing for the strategy to achieve its desired objects. Nonetheless, Apple has been using proper timing for the release of its smartphones. Additionally, successful use of the strategy has enabled the company to gain credibility and good reputation.
2.3 Experiential Marketing
The term experiential marketing is often used interchangeably with other terms such as event marketing and live marketing. It denotes a marketing strategy that utilizes brand experiences in engaging consumers. While there are many experiential marketing approaches, all approaches share a common underlying principle: immersing the consumers of a given product in a memorable experience through live events. According to Zena and Hadisumarto (2012, p. 37), the experiential marketing approach provides companies with a platform to combine both entertainment elements and experience into a given service or product. It is not enough to define marketing based on benefit delivery, problem solution or need satisfaction without including customer experiences (Indrawati & Fathrani, 2016). Instead, the underlying goal of marketing is to provide consumers with valuable and memorable experiences. While marketing focuses on customer satisfaction, it is mainly aimed at providing consumers with a valuable or holistic experience. With experiential marketing, businesses are able to integrate entertainment and experience elements into their services or products. This marketing approach is important given that customers often judge products or services not only based on benefits, functionality and quality but based on experience. They wand services or products, marketing activities and communications that appeal to their senses.
Apple Company has developed various intriguing new brands and products including iPad, iPhone, and iPod among others. Such products not only have innovative designs, but also promise superior functionality. Apple markets such innovative and creative products by appealing to their self-image, curiosity, intellect, feelings, and senses rather than to the more utilitarian, rational concepts of value (Schmitt, 2011, p. 55). In general, the company has been predominantly utilizing experiential attributes in its communications, product environments and designs for a number of years. Initially, Apple’s logo featured the various colors of a rainbow. Currently, it has a brighter monochrome logo. Particularly, its Macintosh computer featured a smiley face that popped up on the monitor whenever the computers were powered up.
Nowadays, the company employs translucent colors in differentiating its products from those of its key competitors in the industry such as Samsung. Similarly, the screen savers of its smartphones have become more aesthetically appealing and colorful. The company has also integrated the shapes, colors, and logos of the design of its smartphones with the design of its Apple Stores and websites (Schmitt, 2011, p. 75). It has also used a similar approach that focuses on shapes, colors, as well as various other local and global brands in all product categories. Overall, experiential marketing consists of various module elements, as depicted in figure 1 below.
Figure SEQ Figure \* ARABIC 1: Experiential marketing module elements. Source: Schmitt (2011, p. 38)
Experiential marketing contrasts the traditional marketing approach in various aspects. Notably, the traditional marketing approach focused on fulfilling the customers’ needs while experiential marketing views consumers as emotional and rational beings (Machado & Cant, 2014, p. 956; Ozturk, 2015, p. 2818). With traditional marketing approach, companies can employ various functional characteristics in the communication and design on their products in appealing to the rational customer (Tolety, 2017, p. 184; Huang & JItphrasong, 2017, p. 635). This marketing approach perceives consumers as rational beings whose needs can be satisfied solely by the products features. Unlike traditional marketing, experiential marketing integrates various aspects of the product, including features (usage, quality), appearance, and the product’s promised benefits to provide positive consumer experience (Machado & Cant, 2014, p. 956).
It is noteworthy that experiential marketing may not necessarily work for some products. As Machado and Cant (2014, p. 956) noted; only companies with a strong brand identity can effectively create positive customer experiences with their products through experiential marketing. In other words, experiential marketing is more effective for products with well-known brands. To this end, it is obvious that Apple Inc. has a strong brand identity, which is prominent globally. By allowing its customers to experience its brand, Apple Inc. is able to charge premium prices for its iPhones, and consequently increase its revenues. The company provides consumers with a unique experience, which in turn facilitates them to pay higher prices for the smartphones. The premium price does not only cater to the product itself, but also the experience. Since the current consumer value experience, they are ready to pay premium prices as long as the experience appeals to their emotion.
The consumer’s experience with Apple’s iPhone does not begin when the consumers purchase the products. Instead, it begins before they even purchase the product. For instance, the consumers’ experience with the product begins once the company depicts certain actions on billboards, televisions, and advertisements (Machado & Cant, 2014, p. 956). More specifically, the company placed a sticker on its iPhones that read; “Designed in California, Made in China” (Machado & Cant, 2014, p. 956). The message on the sticker clearly informs the company’s consumers of the fact that the company has not sacrificed ownership of its products, but rather it focuses on quality by producing its products in its Chinese subsidiary. It also demystifies the consumers’ notion that products that are made in China are inferior in terms of quality and functionality.
A number of themes have emerged as to why the companies adopt experiential marketing approaches, Apple included. One of these themes is customer satisfaction. According to Alkilani, Ling and Abzakh (2013), customer satisfaction “an emotional response to the experiences provided by and associated with particular products or services purchased.” This definition underscores the importance of consumer experiences as an integral part of customer satisfaction. Customer satisfaction is an outcome that follows the purchase and use of a given product, resulting from the consumer’s comparison the costs and benefits of the product in relation to the possible consequences (Felix, 2017, p. 3; Suchanek, Richter & Kralova, 2014). It is also deemed as a cognitive judgment or conscious evaluation of the product’s performance and suitability for its intended purpose (Ling & Abzakh, 2014, p. 956). There is a positive correlation between experiential marketing and customer satisfaction.
With experiential marketing, Apple Inc. is able to achieve greater customer satisfaction levels that other companies such as Samsung. It achieves this by designing innovative products that appeal to the sense experience, feel, experience, think, experience, act experience, and relate experiences, as depicted in figure 1 above. With regard to sense experience, Schmitt (1999, cited in Alkilani, Ling & Abzakh, 2013, p. 263) clams that sense marketing often appeals to the consumer senses with an ultimate motive of creating posit...