Marketing Strategy for Apple iMac - Case Study Example

 Marketing Strategy for Apple iMac Introduction In the history of business, few industries have seen the drama, romance and emotion at the level of the computer industry. From the earliest government sponsored projects to produce computers based on vacuum tubes to today’s multi-core systems, the saga of computer technology has seen major players ousted and minor players become leaders. While many companies have come and gone over the past 40 years, Apple Computer comes across as one of the companies which has stood the test of time and has managed to turn out convincing products that have given it an image of innovation and being a radical organization (Elliott, 1998). About the Company Apple is an international company with operations than span the globe in terms of productions, development and delivery. It is one of the front runners amongst global computer hardware, software and allied equipment manufacturers. The company prides itself on creating innovative products for the consumer electronics and technology sectors (PC Magazine, 2006). In 2005, it posted global sales of nearly 14 Billion dollars and had more than fourteen thousand people working for it around the world. The company is based out of Cupertino in California where the main offices of the company are situated. The central products of the company are personal computers, portable media devices, software and associated hardware (Apple.com, 2007). However, no mention of Apple can be complete without discussing the cult of personality which revolves around its founder and current CEO, Steve Jobs (Forbes, 2006). Jobs has had a tumultuous relationship with the company he founded since he was removed from service and called back by the board after many years of absence (Beckman & Hirsch, 2001). Writing for The Guardian, Smith says that: “To technology freaks and geeks, he is a 'demigod', whose product launches are adulatory affairs regularly likened to religious revivalist meetings. The Jobs life story - humble birth, rise and fall, then miraculous comeback - has even been likened by Apple fanatics to the heroic myths of Odysseus, Jason, Krishna and Christ (Smith, 2006, Pg. 1).” Therefore it is difficult to separate the man from the company since Jobs is often taken to be the driving force behind the innovations and technologies created by Apple (Smith, 2006). Even in terms of marketing, the company takes direction from Steve in many different ways and an analysis of marketing done by Apple in the past shows some radically innovative ideas. Marketing for Apple As a company, Apple frequently blurs the line between advertising and art. It has been creating breakthrough advertisements in print, such as the ‘Think Different’ campaign, as well as video formats such as the ‘1984 commercial’. In fact, the first commercial which caused many art critics to sit up and take note of advertising as a medium for art was the 1984 big brother commercial which is still considered to be one of the best in terms of art direction and creative application of technology concepts. The Big Brother Commercial Scott (1991) explains the persuasive power of the 1984 commercial as well as the artistic merits of the ad by taking a literary criticism approach to the video. The commercial itself can be described as a young female being chased by masked storm trooper like soldiers as she rushes past trudging workers wearing grey overalls with shaved heads. She approaches a massive screen where a big brother like figure is making a speech and she hurls a sledge hammer into the screen which causes a huge blast. A calm and smooth voice then announces that 1984 will not be like 1984 because of the Macintosh (Scott, 1991). This advertisement simply smashed every advertising convention known at the time since it only carried a minimal corporate identity, no message about the technical prowess of the computer, no mention of direct benefits to the individual, not even the price point of the item being offered. Simply put, as it was known in 1984, this ad could not even be considered advertising. However, if art is meant to motivate people then this approach certainly worked because when the Macintosh computer became available in the market three days after the airing of the ad, more than two hundred thousand people were waiting in lines to put their money down to buy one (Scott, 1991). A critical analysis of the advertisement sounds eerily similar to a critical review which might be given to a film noir or to any other art film which has been highly acclaimed at the Sundance festival. Scott (1991) says that: “The theme of the commercial is one of individual action to prevent homogenizing tyranny and its form is a mirror of its theme. The spot communicates through an artful arrangement of images that has its own internal logic. The spot keeps the audience unbalanced and curious throughout the viewing, and thus open to affective experience through which it persuades (Scott, 1991, pg. 67).” The review goes on to use words like “rich symbolic imagery (Scott, 1991, pg. 67)” and further says that the commercial created an experience which was participatory in nature for the viewers and the experience altered dynamically from the starting scenes to the explosive finish. Certainly, these positive remarks would make any marketing team proud of their creation and the acceptance of this advertisement as art is nothing more than a forgone conclusion. While the artistic value of the advertisement can not be denied, the business value must also be appreciated since it aired only once during the prime time viewing slot while making news headlines the very same night and was repeat broadcast by several channels free of cost to Apple. The long lines which formed to buy the computer are also a testament to the ability of the artwork to motivate and move people as good art has often done for the past hundreds of years. Think Different The second campaign by Apple Computer which deserves to be discusses in the context of their marketing abilities is the ‘Think Different’ campaign which was launched in 1997 soon after the return of Steve Jobs to the position of CEO at the company. Surprisingly, the product itself was mass produced, compatible with almost every other computer and is not very different from other computers which were made by Apple in the past yet the image given to the product was one of individuality and uniqueness. The video campaign for ‘Think Different’ won an Emmy but it is the print campaign which made a significant impact for sales and also won several awards for the advertising firm of TBWA\Chiat\Day. The advertisements which are shown in Appendix A form part of a set of pictures of famous personalities. The people used for the campaign are some of the most admired achievers in the world and come from all sorts of fields like government, business, sports, performing arts and human rights activism. Examples that are reproduced by Elliot (1998) and include in Appendix A present individuals such as Jim Henson, Maria Callas, Thomas Edison and Jackie Robinson. Again, there is little product identification and only the logo of the company is presented to the viewer. The focus of the image remains on the person being revered. The campaign has featured more than 40 such individuals and the list includes names like Bob Dylan, Einstein, Ted Turner, Picasso, John Lennon and Yoko Ono, Muhammad Ali, Alfred Hitchcock, Miles Davis, Martin Luther King Jr., Amelia Earhart, Jim Henson, Rosa Parks, Frank Lloyd Wright and Gandhi. If winning an Emmy for this campaign gave the advertisements acceptance as art by the critics, the increased sales which Apple computer enjoyed after these ads were presented to the public show their acceptance of the idea. Present Day Marketing At the present moment Apple has invested heavily in marketing their iTunes music store, the iPod music player and their operating system which includes marketing for all Apple made computers (MacBook, MacBook Pro, iMac and PowerMac). However, the general trend of all the campaigns has to do with reliability and quality since that has always been there in Apple’s offerings which is evident from the robustness and technical superiority of Apple products (PC Magazine, 2006). However in the larger scheme of things it is Apple’s consumer orientation that makes it better than its competitors. In everything it does, ease of use is central to Apple's strategy. From the development of the iMac with its revolutionary operating system to today’s most popular music players, effective design and making things simpler for the end user has been Apple’s core competency. Normally, one would expect such an ability to be easily replicated, and consequently not a sustainable source of competitive advantage. At the same time, Apple has been able to tackle this challenge by establishing a superior brand identity for the iMac (Deutschman, 2000). This puts Apple marketing for the iMac squarely in the Differentiation zone since Apple touts quality and image much like BMW or Mercedes would as opposed to value and price efficiency that a lesser car manufacturer would. Apple is not a price leader since similarly equipped computers can be bought at cheaper rates elsewhere (Lee, 2007). Apple is not focusing on differentiation alone since it sells a lot more than just computers and its audio visual equipment (possibly future telephonic equipment) is also a recognized segment of the business. At the same time, the premiums charged by Apple are not significantly high as to turn away buyers since the competition within the market is fierce and Apple can not charge an excessive amount for its products. In such as situation, when Apple brings its prices close to the competition, their products become more enticing for users (PC Magazine, 2006). In effect, Apple has a unique, special and highly protected individual position within the computer as well as the music industry which is strongly supported by a relatively closed value chain. This positioning strategy is excellent for mature markets and Apple is therefore ideally placed with its value proposition. Value Proposition Apple is different from the competitors in very significant ways because it has remained focused on the consumer rather than move towards the enterprise market which companies like Dell and HP have done in the past (Olenick, 2006). Additionally, Apple provides the use of technology to the customer as a means and not as an end in itself. For example, the computer industry is flooded with All in one computers such as the iMac from various manufacturers and producers but the success of Apple is in the way it has integrated the operating system to the computer which makes it a digital hub for the modern user. It goes without saying that Apple has a very strong brand. For a certain period of time the Apple brand had been diminished and was looked at just as an alternate to the Windows-based systems. Today however, the outlook for Apple is different (Deutschman, 2000). As a challenger against much larger companies such as IBM and Microsoft, Apple has now its own distinct place in the market. Apple’s offerings are in their own way, unique. Not necessarily revolutionary in terms of technology but revolutionary in terms of the application of existing technology. Its diversified operations and the ability to deliver higher quality products have given it a highly positive position in consumers’ minds. Although many believe that the price-performance ratio makes the product, it must be recognized that Apple’s image is a strong factor for its growth. It is this strong brand that poses a challenge to competitors, especially in the music/media industry, where large players still have time to establish a position in the consumers’ minds. In times like these branding is crucial for Apple since a recognizable brand can help protect from competitors even if their product is copied to its exact specifications. The consumers might prefer the lack of fear, uncertainty, and doubt associated with the Apple brand as compared to other computer manufacturers and Apple is certainly pushing this point. It is also pushing the idea of Integration since each product supports the overall vision of the company to make things easier. Apple is one organization which makes sure that it stays focused and each product supports the vision of the company which is continually guided by their CEO, i.e. Steve Jobs. Apple is special in the sense that that it does not develop technology just for the sake of technology. It is evident from the operating system and the iMac itself that the user experience is thought of first, and only then is the technology designed. In this sense, the marketing and development teams clearly work closely together at Apple to make an unbeatable combination. This recognition, that each member of Apple is working towards the same goal makes Apple a much more market-oriented and flexile organization than the competition where the operating system may be produced by one company and the actual hardware by another. The Mac Followers Additionally, it gives Apple the great ability to create products that people can not help but tell their friends about. Viral marketing is a large part of Apple’s marketing success. Their customer base is so loyal that they often will defend Apple products against any criticism that they may face. In order to create a “buzz” about an upcoming product introduction, small pieces of information may be leaked ahead of time which in many cases creates media frenzy. Whether Apple intentionally lets out certain pieces of information or not, the net result is the same. There are several advantages to making pre-announcements to create “buzz” since it stimulates demand, creates an impression of being the “leader” or “innovator”, prepares customers for the upcoming release, etc. However, there are some disadvantages as well because it may give competitors extra time to prepare, any delays or differences may damage consumers’ willingness to purchase, and might confuse customers. The result of all of this is that Apple customers are always waiting for the “next big thing” to come out of Apple’s doors but they are often very tight lipped about it. Keeping things under a tight lid is one of the hallmarks of Apple computers since no one can ever be sure of what Apple is about to release on to the market. Rumours and speculation begins weeks before any company event and before the return of Jobs, a lot of information was often leaked to the press. As reported by Deutschman (2000) the situation changed in a matter of weeks: “Before Steve's takeover, Apple people loved to leak. They did so partly because the company really did have lacklustre marketing. If you were proud of your work, the only way to let other people in the industry know about it was to leak it yourself. Steve insisted on his old “loose lips sink ships” policy. At first the employees were incensed. Before long, though, they began to trust Steve to do Apple's marketing for them (Deutschman, 2000, Pg. 3).” It is precisely this marketing skill of Steve Jobs, backed with excellent products such as the iMac which allow him to use product launches and announcements as global events for the cult of Macintosh lovers. Contact Points In terms of contact points apple utilizes several distribution channels for its products. The sale of music is exclusively by direct sale through the iTunes online music store. The iTunes software itself is a free download from Apple's web site. Other products, such as the iMac, are available through 4 distinct distribution channels. The first are Apple direct dealers, which are primarily high volume Apple Authorized Resellers who purchase product direct from Apple. The second are Apple DSD (Distributor Supported Dealers) which are essentially lower-volume Apple Authorized Resellers or Apple Authorized iMac Resellers, which are dealers who do not sell other Apple products (Apple.com, 2007). The third is the Apple Store (online) which sells to the end-users directly over the internet or the phone. The fourth customer contact point added by Apple is “The Apple Store” which works as a retail outlet. Apple has over 100 retail stores worldwide (most of which are in the USA) and it has been operating an online store for several years (Apple.com, 2007). There is perhaps some conflict between the various options available in online store and the retail stores but the extent of it cannot be determined since in Apple’s case most of its products (even though commoditized) are sold using the bricks and mortar strategy. The retail store idea is perhaps the most interesting concept since such stores are located in high end shopping centres as primary contact points for individuals who are new to the brand. Apple shines in terms of outbound logistics since unlike Dell’s experience with having real world shops in malls and other outlet locations, Apple’s own experiment became a huge success (Lee, 2007). Things such as the Genius bar where Apple users can get help for their computers and the layout of the stores has certainly resulted in getting an improved image for Apple along with the benefit of increased sales (Apple.com, 2007). Recommendations While it is difficult to suggest ways for a highly successful company to improve their marketing efforts, there can be identifications made for some trends and issues that will be of importance in the future and since it is the nature of technology markets to be unpredictable, only time will tell how valuable the recommendations have been. However, given the present situation the company is in, Apple might not be able to continue to bank on their name alone and price point changes may be required if the growth of the company is to continue. As Apple moves closer and closer to value-based pricing (versus their traditional premium-pricing model) they may threaten their “niche” status which is one of the reasons they are so successful in the first place. There are several strengths of the firm and they can consistently improve upon them. Apple needs to continue re-enforcing its market-oriented strategy for the iMac which was the primary reason why they became the dominant competitor for All-in-one computers. The next few years will be crucial for the computer retail industry and Apple should not only excel in price-performance and value comparisons but should try to further strengthen its brand. Strategy The best strategy for marketing the iMac in the future would be to work with the positive image of the iPod and other Apple products which have won wide acceptance. They should focus the development and marketing directions for the iMac by keeping it as a slightly premium brand for discerning consumers much as BMW or Mercedes are doing (Edwards, 2005). However, based on the analysis of the external environment Apple also needs solutions for the mass market needs. The five forces model shows that Apple has a significantly weak position in the market for personal computers. Though the marketing for many of Apple’s products has been nothing less than stellar, it often helps to create the brand identity more than the product value (Scott, 1991). In the desktop computer market, Apple has a very strong brand identity and a massive advantage in terms of switching costs over its rivals but it also has a proprietary product in the shape of the iMac which has very basic abilities to run windows and that creates strong barriers to entry for them towards the mass market (Beckman and Hirsch, 2001). The threat of substitutes to the iMac is very high since quite a few computers can perform better functions at the same price point than the iMac. However, the threat is somewhat mitigated by the fact that the iMac is more desirable in terms of style and image. On the other hand, when it comes to buyers in the home entertainment market, the buyers have a very good position since they can get their products from other suppliers such as Sony, Panasonic and Toshiba who also produce all in one PCs as well as notebooks and have solid links with the music industry as well as an established history of performance and quality. The iMac buyers have to be offered a very good deal by Apple in order to lure them away from alternatives. The image that is created with marketing has to overcome the idea of competitive rivalry which is intense since many companies want a significant market share position. Apple has frequently attacked Microsoft and the Windows operating system but the attacks appear not to work since Windows dominates the enterprise market which heavily influences the home markets. Clearly, by offering a price advantage with the benefits of marketing the image, Apple would like to be a mainstream competitor in all fields of technology (PC Magazine, 2006). Apple lost the war in terms of market share for the computers business, however, they got the first prize when it comes to the portable media market and it remains to be seen if they can do the same in the All in one computer segment. For this purpose, the most important asset with Apple is the quality human resources that they have and the individuals who design and develop their products (Smith, 2006). They also have a mythic industry figure like Steve Jobs who has continually given Apple top notch products for many years and taken apple from a failing company to a success story (Edwards, 2005). Essentially, it is the products and the product design which stands out for Apple amongst others and this point should be continued to put across to the users. Apple certainly has a high street image with a culture of being cool since their retail outlets are nothing less than designer boutiques but as long as Apple is not able to offer their products to the enterprise buyers it is unlikely that the iMac could become a mainstream machine. If Apple has completely ignored the enterprise market, it is actually for a very good reason since Apple has become a very important brand for the youth culture and the iPod is more of a fashion icon than a productivity tool as other portable computer devices can be (Marks, 2005). If Apple can do the same with the iMac, i.e. make it a requirement for media lovers, it can certainly penetrate the market and sell many more iMacs. This means that a culturally positive image must remain associated with the iMac. Technologically, Apple must remain on the lookout for additional supportive technology which can help the company retain its advantages and deny any advantages to the competitors. In terms of marketing, it can get additional synergies from mergers and acquisitions within the industry even though such things would require a significant investment. The iMac would certainly become more acceptable and marketable if it were combined with another brand such as Bose given that it has already created some synergies with brands such as Harmon/Kardon and Bose in the past. However, given that the trends of the industry as a whole point towards just a few giant manufacturers remaining as strong players in the field, while Apple may remain in the computer industry as a manufacturer of iMacs for many more years to come, it will probably remain a secondary player in the market while the dominance of other manufacturers continues unchallenged. On the other hand, the iMac’s dominance of the home entertainment market must be proven beyond doubt before such a future can be seen by the shareholders. Word Count: 4,114 Appendix A Works Cited Apple. 2007, ‘Apple’, Apple.com, [Online] Available at: http://www.apple.com/investor/ Beckman, D. and Hirsch, D. 2001, ‘Mac Is Back in Town’, ABA Journal, vol. 87, no. 8, pp. 70-72. Deutschman, A. 2000, ‘The once and future Steve Jobs’, Salon.com, [Online] Available at: http://archive.salon.com/tech/books/2000/10/11/jobs_excerpt/index.html Edwards, C. 2005, ‘Rewards for innovative thinking’, Electronics Systems & Software, vol. 3, no. 2, pp. 2-3. Elliott, S. 1998, ‘Behind “Think Different”’, New York Times, [Online] Available at: http://www.electric-escape.net/node/565 Forbes. 2006, ‘Steven Jobs’ Forbes.com, [Online] Available at: http://www.forbes.com/lists/2006/10/HEDB.html Lee, L. 2007, ‘Dell’s New Lineup May Not Be Enough’, Business Week, vol. 4014, no. 1, p. 13-14. Marks, P. 2005. ‘Fashion industry covets iPod factor’. New Scientist; vol. 186, no. 2502, pp26-26 Olenick, D. 2006, ‘Hewlett-Packard Outsells Dell In Notebooks’, This Week in Consumer Electronics, vol. 21, no. 27, p. 106-107. PC Magazine. 2006, ‘Low-Cost Apple laptop is very enticing’, PC Magazine, vol. 25, no. 13, pp. 31-32. Scott, L. 1991, ‘For the Rest of Us: A Reader-Oriented Interpretation of Apple's “1984” Commercial’, Journal of Popular Culture, vol. 25, no. 1, pp 67-81. Smith, D. 2006, ‘The non-stop revolutionary’, The Guardian, [Online] Available at: http://technology.guardian.co.uk/opinion/story/0,,1697348,00.html Read More