For this coursework assignment I will demonstrate that I required a good knowledge and understanding of the concepts and process of marketing by carrying out the task given. This will be showed with examples of theory applicable to a company of my choosing.
For this task examples will be related to Apple Inc. organization.
Incorporated in January 1977 as Apple Computer, Inc. todays Apple Inc. designs, produces and markets media and mobile communication devices, personal computers, portable media players and sells a variety of related software. Apple’s products and services include the iPad tablet computer, iPhone handset, Mac computer and iPod music mp3 player, the iOS and OS X operating systems.
The company also sells and delivers music, movies, books and applications using the iTunes Store and Mac App Store. The company headquarters are located in Cupertino, California, USA. Worldwide there are 390 Apple retail stores with reported revenue in 2012 of $36.0 billion.
Marketing wise the company is been voted many times as the winner of CMO Survey Award for Marketing Excellence. Apple’s three points marketing philosophy namely Empathy, Focus and Impute have made it possible for the company to become one of the world’s most valuable brands.
According to the American Marketing Association (October 2007) marketing is defined as “ the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
The CMA – Canadian Marketing Association defines marketing as “ a set of
business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships.”
The Chartered Institute of Marketing defines marketing as “ the management process responsible for identifying, anticipating and satisfying customer requirements profitably”
“Broadly defined, marketing is asocial and managerial process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return” (Hasell, 2012)
These definitions show the importance of management in marketing and how important is for a business to know the consumers needs and wants. These definitions also show the importance of communicating a message to create the awareness that would create monetary value in return.
The management process of identifying, anticipating and satisfying the consumers’ needs and wants it’s called a marketing process. This process is made of four steps: 1. Analyze the company situation
2. Develop a marketing strategy
3. Make decisions in terms of marketing mix
4. And how to implement and control the marketing strategy.
Examples of Apple Inc. marketing process:
-Apple is using SWOT and PEST models to analyze the company situation. -Apple is targeting more the middle upper income professionals. -Apple builds up anticipation before launching a product.
-Apple included a customer service phone number in the iPhone phone book for customer direct contact with Apple in case of technical problems.
There are a few marketing concepts that an organizations can adapt. Each one of these concepts has advantages and disadvantages. These marketing concepts are: Product related – is when a company could focus on perfecting a product and its quality. The disadvantage for being product orientated is that a company can lose site of what consumer may want and need when focusing on creating one perfect product. Production related – a company could focus on the mass production of a product.
The advantage for being production-orientated is that a production line in place could bring more profit because of the low cost on producing the same product. Although low costs are possible because customers have different needs, changing the line for a different product it’s costly. Sales related – a company could try to focus on selling what it produces. The disadvantage is that the company does not know what the customers’ needs are.
Market related – a company could focus on customer needs before developing a product. The disadvantage is that information could be obtained from customers who do not know what they need. With so much interest on what the customer needs, the product development can be overlooked. Societal related – a company could focus on the natural and social environment and the customer needs The disadvantage of being societal orientated is that it is rarely possible to satisfy all customers’ needs and stakeholders.
The first three marketing concepts, product, production and sales, are focusing on the product. The last two concepts, market and sales, focus on the consumer. Although they all are focus differentiated, all five concepts have one single goal in common and that is to make profit.
Market orientation is about collecting and dissemination of information from customers. Apple Inc. has adopted the market concept together with product orientation. Having adopted both orientation with emphasis on quality and future customers needs it allowed the organization to anticipate the need for a new product, set higher prices and make more profit. But being marketing orientated it is costly. A company has to invest in the development of the product, market research, in surveys, databases, analysts and product changes.
Although it is costly to be marketing orientated there are benefits for adopting this concept. For example: – The Apple’s iPhone is at his fifth generation. Introduced in 2007, it was a product of innovation and market research. The development of the product took three years and with the collaboration between Apple and Cingular Wireless is estimated to have cost $150 millions.
According to Forbes magazine (08/2012) “…something that didn’t exist five years ago, has higher sales than everything Microsoft has to offer. More than Windows, Office, Xbox, Bing, Windows Phone, and every other product that Microsoft has created since 1975. In the quarter ended March 31, 2012, iPhone had sales of $22.7 billion; Microsoft Corporation, $17.4 billion.”
A business organization marketing decisions are influenced by macro and the micro environmental factors. Businesses can cover the inside factors with a SWOT model analysis and the external factors can be assessed by doing a PEST model analysis. The advantage of doing these analyses is the identification of opportunities and knowing where the organization is at that moment.
Apple Inc. 2013 SWOT analysis:
– Strengths: brand reputation and own retail stores. Combined with a strong financial performance and innovative capabilities Apple can be first on the market satisfying new customer’s needs. – Weaknesses. Apple products have higher prices. Conscious people my find them to expensive and competitors can take advantage of this factor. Recent changes in management could lead to misunderstandings between Apple In. departments and could slow down the process of making marketing mix decisions for the 4 Ps (product, price, place and promotion). – Opportunities.
High demand for the iPhone 5 and the iPad products and the growth of tablet and smartphone markets. Competition mistakes like the Microsoft introduction of Vista software. Apple took full advantages of how bad was the Vista program having PC users downgrading back to XP and migrating to Apple. This can best be seen in the “I am a Mac I am a PC” ads (2006-2008). – Threats. New competitors like the Huawei in the UK phone market. Strong dollar will affect exports.
Apple Inc. macro environment is analyzed using the PEST model (political, economical, social and technological). These are factors that the organization has little or no control over them and can either support or hinder Apple’s marketing decisions. For example, in the case of the political factors a tax increase usually means a price increase.
This will reduce the purchasing power of the consumer and subsequently reduce profits. Recession is an economical factor. The consumer buying confidence is usually low and high priced Apple products are seen more as a commodity than a necessity.
Satisfying customers by treating them alike is rarely possible because they have different needs. Segmentation is about understanding and satisfying these needs by separating consumers in groups with the same needs. One of the advantages of segmentation is that the organization can position the product better within a chosen segment. Poorly done segmentation can group customers in the wrong segment.
The bases for segmentation are demographic, geographic, psychographic, behavioristic and geo-demographic. Some of the characteristics for demographic segmentation are sex, age, income, and education. Geographic segmentation is based on the location of potential customers. Psychographic is based on customers’ personality and lifestyles. Behavioral segmentation is based on the consumers’ actions. Geo-demographic is a combination of the geographical and demographical segments.
There are three types of targeting methods and these are:
Undifferentiated – for all publics
Concentrated – focus on a specific group
Differentiated – for different group types
To recommend segmentation criteria and targeting methods for two different products I chose Apple’s iPod and the iPhone. For both products Apple Inc. should pursue the demographic and psychographic segmentation criteria. This will allow the organization to separate and target consumers based on the amount of money they have to spend and on what they would like to spend. – For the iPod (mp3 music player) Apple should pursue the concentrated method.
This will allow them to focus on those customers who like to listen to music on the go, organize songs and ultimately buy music for the iPod with the help of additional music platform like the iTunes. – For the iPhone, Apple should pursue the undifferentiated method. With so many different features the iPhone can be used by anyone for personal and business use.
Buyer behavior affects how organizations market their products. Cultural, Social, Personal and Psychological are the four major factors influencing buyers’ behavior. To appeal consumers’ preferences, marketing mix strategies are developed by the organizations for the target market. Positioning is a strategy with what an organization can influence the buyer behavior. The strategy could include product use, product user, price, quality, product features, product class, competitors, benefits and cultural symbol.
Apple Inc. products are perceived as high priced products with some buyers’ perception of them as over priced products. To counteract this perception Apple should reposition the iPod and the iPhone products using a strategy emphasizing products use, quality, performance and features.
To have sustainable competitive advantages Apple Inc. products development start with generating ideas. For example, the development of the iPhone product started with the idea of interacting with a computer without a keyboard. Usually a company can have many ideas for a product and screening them is necessary. Apple Inc. screens them through evaluations on the bases like the market needs, costs and resources. Apple market research concluded that the iPhone will have no competition for its features and the benefit will out way the cost of development.
The next step of the product development was the physical transformation of the concept. Testing of the Apple products is done within the company using the employees. Normally companies test their new products with consumers but Apple prefers this type of testing because of the need of keeping the product features a secret from the competitors. After the evaluation of new ideas from the employees the
iPhone was produced for the market.
To make products available to the consumers Apple Inc. has three choices of distributions: 1) Selling directly to consumers. This channel of distribution is advantageous and a preference for Apple In. for the opportunities arising from interacting directly with the customer. Apple has their own retail stores with knowledgeable sales people who can make it very convenient for a customer to buy Apple products. Another way is selling directly through their website. Both options can be advantageously used for market research for better anticipation of new customer needs. 2) The second channel of distribution is selling the products through retailers.
The advantage this channel provides is the promotion getting through retail advertisements. Many retail stores will place Apple products separately from the competitors in plain view for a customer to see it first and also use Apple products more for store advertisements. 3) This channel is selling through the wholesalers and retailers and is the least advantageous. For the last two channels (2 and 3) the disadvantage for Apple is that in both cases if the chain is disrupted, Apple products will not reach the customers.
One of the most important elements of the marketing mix is Pricing. Pricing generates turnover for the organizations. The other 3P’s elements in the marketing mix are costs for the organizations. A number of pricing strategies can be adopted by an organization. For this task I have chosen to discuss three of them for their advantages and disadvantages. 1. Cost based price strategy is when a company sets prices based on the cost of the other 3P’s. The advantage of choosing this strategy is that because it’s the most realistic and the mark up its easier to set before the final pricing decision..
The disadvantage is that in a volatile industry where costs are always changing no set price can be set and the mark up is the final pricing decision. 2. Competition based price strategy is where a company can set a lower, the same or a higher price in comparison with competitors. The advantage is that a competitive lower price can be set to attract potential customers.
This strategy disadvantage is that it is unknown the production cost of the competitors and the company may operate at a loss. 3. Customer based pricing strategy is used when a company determines the price based on what is believed consumers are prepared to pay. The advantage of this strategy is that the price satisfies the customer price preference. The disadvantages with this strategy are that customers might give false impressions and the cost of production is knot known by them hence the company might run at a loss.
Customer based pricing strategies are: Penetration Pricing – launching a low price product to increase market share Price Skimming – charging a higher price to maximize profits Loss leaders – a price set low to attract and encourage customers purchasing other products Predatory Pricing – setting a low price deliberately to restrict or prevent competition (in UK this type of price setting is illegal) Psychological Pricing – making the product believed to be cheaper than it really is. (Instead of £1.00 it set at £0.99)
Apple Inc. uses the price skimming strategy. This strategy works for them because the company segments and target customers more effectively. The advantages with price skimming are that it creates the impression of prestige around Apple products and also in case of setting the price to high it could be lower easily. It also offers an insight on what the customers are willing to pay. Although this strategy has its advantages, in the computing and smartphone industry Apple has many competitors now and price skimming might be risky with the next product introduction.
Consumers have many choices now and price preference is lower. Because of changes in consumers price preferences Apple Inc. should pursue the use of penetration pricing strategy in to attract new customers and increase the market share. Although the market share will increase the risk is that it is possible to still make lower profits.
Promotion is one of the 4P’s and comprises of sales promotions, advertising, direct marketing, personal selling and public relations. These five elements make the promotion mix and are also known as the marketing communication elements. The usage of all five elements at one time is known as Integrated
Marketing Communication (IMC).
To achieve and maintain long-term customer relationships Apple uses components from the IMC and the AIDA (attention, interest, desire, action) concepts. Advertisements and promotions are used to capture the consumer attention, his interest and desire to own an Apple product. Public relation is used to deal directly with customers about product issues. Apple uses direct marketing by emailing marketing messages on Valentines Day or Christmas to registered customers.
Personal selling is used in Apple retail stores. Personnel can also inform customers about the products they inquiring about. One of the Apple sales promotions is “ Buy a Mac and get a free iPod Touch”.
Apple Inc. interest is to maximize the company impact on the consumer for maximum profits and the IMC concept is a very important tool in the company marketing strategy.
Known as the Four P’s, the traditional marketing mix basic elements are Product, Price, Place and Promotion. The mix of these four elements done right will result in meeting its marketing objectives for a company and satisfy its customers. Factors like marketing is far more customers orientated now and in developed countries the service sector dominates the economic activity have contributed to the addition of new Ps to the traditional marketing mix. The additional three Ps are Physical Evidence, Process and People and together with the four basic elements make the 7Ps of the Extended Marketing Mix.
To understand the relevance of the extended marketing mix to service marketing first one must understand the characteristics of service. There are five characteristics of service marketing and these are: 1. Intangibility – services cannot be seen, taste and feel before they are bought. 2. Inseparability – a service is produced and consumed at the same time. 3. Perishability – a product can be stored for future use whereas a service cannot. 4. Variability – service standard will vary because of people. 5. Ownership – in comparison with a product a service can only be used and not owned.
In service marketing the service is the Product and is intangible. Marketing Price, like product is also invisible. Place is where the service is consumed and unlike a product where it is found in retail stores, a service is found in accommodation places such as the hotels, restaurants, airplanes. Service Promotions can be an extension of the original service. For example a hotel may offer an extra night stay, discount prices for other services found within the hotel or outside but the original price offer is still the same. What is seen during the consumption of service is referred to as the Physical Evidence.
Consumers expect a good standard and presentation of the environment where the service is consumed and businesses will focus on the quality layout presentation. How the service is carried out or delivered is the Process. In many cases process is associated with customer service. In the transport industry often carriers do lack on the quality of it because of delays that may or may not have to do with the employees. The employees are the People and final element in the extended marketing mix and are the ones delivering the service.
The extended marketing mix its relevant to all businesses that give priority in meeting the needs of customers and its more particular relevant to the service industry.
The seven marketing mix variables are highlighted above. The traditional 4Ps are for product marketing and all 7Ps are for service marketing. Two segments of interest for this task are the hotels in hospitality industry for their lodging services and the airlines in the industry of transport for their transport services.
In the hotel industry, in terms of process and physical evidence, a regular room is provided for customer accommodation and the customer may have to pay extra for other services like a massage or a drink at the hotel bar. In terms of process apart from regular room cleaning sheets and towels and concierge services a customer will not get much else for his money. In comparison the business customer will
experience something totally different.
A Business may reserve the entire hotel or the best room with the best view, 24-hour room service, free access to the spa and other things considered luxurious. Although the product sold is the same for both C and B, because of additional services and a differentiated process, it differs and the price is usually the first one to tell which one is which. In the airline industry, businesses provide transportation in the economy class and the business class. In the economy class in terms of physical layout, after the journey some customers wished they left their legs at home and kids never existed.
Whereas in the business class, a customer can park his car, watch his favorite movie while drinking champagne. Again the product has not changed because customers in the economy and business class are moved from point A to point B with the same airplane in the same amount of time. The understanding is that businesses can afford to pay more when it comes to buying services and airlines will charge more for extra.
Globalization and Unions between different countries around the world have made it possible for national businesses to enter international markets. When entering the international markets businesses could find many opportunities but the challenges are different and on a higher scale than the ones faced in a domestic market. Domestic marketing is the production, promotion, distribution and sale of goods and services nationally while international marketing is the same but for customers needs in a global market. In the last quarter of 2012, domestically, Apple Inc. revenue accounted for 40 per cent with 60 per cent revenue from the international markets (Niu, 2013). 40 per cent revenue for Apple means that it dominates in the domestic market.
This is possible for Apple because the company has to deal with only one set of customers on which it can concentrate more effectively. Other factors contributing to this positive revenue are that Apple uses of the same policies and strategies and requires lesser financial resources. The other sixty per cent revenue for Apple, thinking in term of global it is small revenue for the company. This has to do with the fact that international marketing is more complex and more risky.
It requires more financial resources than domestic marketing. Internationally, Apple Inc. has to deal with different markets, different languages and different types of consumers with different tastes. In countries with laws and regulations of their own, for Apple it is more challenging and requires more commitment from the company in applying the marketing principles.
In this coursework assignment I tried to my best abilities to demonstrate that I acquired a good knowledge and understanding of marketing principles by applying the theory to Apple Inc. by carrying out the tasks given for the assignment.
Overall my understanding now is that marketing is with us every day, next to us and even in us people. Consciously or subconsciously we are marketing ourselves as individuals every day to others. Marketing has an impact on everything and it cannot be avoided. For businesses, marketing is a strategic war plan for getting peoples attention to maximize profits.
In this war business tend to aim at peoples emotions. Marketing is a discipline and is defined by social participation. But the most important thing learned I believe is that consumers’ needs and wants are always changing and marketing needs to change accordingly.
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