Posted in Marketing & Strategy Articles, Total Reads: 3962
, Published on 01 December 2013
“If you don’t have an iPhone… well… you don’t have an iPhone”
Back in the days, at the beginning of September, 2012, my colleague Mr. Amarpreet Singh (name changed) seemed very impatient. He was an avid ‘Apple’ fan. He owned a MacBook and an iPhone 4S. He never stopped talking about his iPhone and was no doubt very proud of his gadgets. In fact, he had always upgraded his iPhone to its newer versions right from the time he owned his first one, the ‘iPhone 3G’. But off late he seemed to be complaining a lot about his iPhone which had delighted him for the past one year. All of a sudden the screen size of his current gadget seemed too small. This was about the time he came to know that the new iPhone 5, which was to be released on the third week of September, was going to have a bigger screen and a host of other new features.
All through the history of iPhone, Apple has been successful not only in retaining its old customers but also in creating a new customer base. Every single time they manage to keep the audience waiting for the launch of the new product and every single time they launch the iPhone with much fanfare. Since the release of the first version back in June 29, 2007, Apple has sold about 387.27 million and counting units of iPhones till date.Millions of tech-enthusiasts all over the world patiently wait for the release of the newer version of the gadget every year. Apple has released seven generations of iPhones till date, one each year, and each one more advanced than the preceding one.
When the CEO of Apple Inc. Steve Jobs and his team decided on the creation of iPhone, they violated one major step of the ‘new product launch’. They did not go ahead with ‘Scanning the market environment, Forecasting Demand or conducting market research’. On being questioned about it, this is what Mr. Jobs had to say "We do no market research. We don't hire consultants. The only consultants I've ever hired in my 10 years is one firm to analyze Gateway's retail strategy so I would not make some of the same mistakes they made [when launching Apple's retail stores]. But we never hire consultants, per se. We just want to make great products. " Mr. Jobs believed in a great quote by Henry Ford, who said,”If I'd have asked my customers what they wanted, they would have told me ‘A faster horse’".
Even when Apple launched iPhone way back in 2007 at a price tag of more than $599, long lines of shoppers were eager to buy them. It was referred to as “perhaps the most hyped gadget in history”. It soon became a status symbol. An innovation in technology coupled with the premium price and a signature of status projected the sales of iPhone to unmatched heights. Michael Porter, a marketing strategy guru suggests that a company can adopt one of the three strategies to gain a competitive edge: Differentiation, Low-cost leadership or Focus. Apple chose to adopt the Differentiation Strategy. It would not only target the premium segment customers with a high price, but also maintain its exclusivity by having a seamless connectivity only with other iPhones or through iTunes.
With the current advent of high-end smartphones running on Google’s Android OS and Microsoft’s Windows OS, Apple has been facing the heat, as the competition has increased and capturing of mobile market is getting tougher. Apple has, since last few years, been quite serious about targeting India and China as they hold about one-third of world’s population and are the emerging mobile markets but the question is ‘Are they doing a good job with the premium pricing in these markets?’ Apple has traditionally focused on ‘Product Line Pricing Mechanism’ where they have different set of price for different products with different storage capabilities, namely 8GB model, 16 GB model, 32GB model or 64GB model. But this year they decided to do something different. They released models based on, not just storage capabilities, but much more than that. Following are the key differences between their latest Product Line iPhone 5C and iPhone 5S:
16, 32 GB
16, 32, 64 GB
Dual (True Tone)
4.90 x 2.33 x 0.35
4.87 x 2.31 x 0.30
4.65 oz. (132 g)
3.95 oz. (112 g)
While iPhone 5S priced at $649, $749, $849 for 16GB, 32GB and 64GB models respectively, iPhone 5C is priced at $549 and $649 respectively for 16GB and 32GB models. Here we see that the iPhone 5C is about $100 cheaper than the iPhone 5S. While the iPhone 5S is targeted at the existing customer base, iPhone 5C is all set to capture the new cost conscious customers especially in China and India which rank 1st and 2nd respectively as far as the mobile phone market is concerned, competing head to head with the like of Huawei and Samsung in China and India respectively. But will the company benefit as a whole? Line extension of iPhone to a wider extent does look exciting as far as the capturing of market is concerned. A wider market could help reverse a 29% fall in company’s share price since it hit a record $702.10 last year. The sell-off was perhaps due to the fear of slow growth and the perception that Apple’s ability to innovate had been dwindling post ‘Steve Jobs era’. But then again, the experts do warn that this move could potentially tarnish the image of a premium brand and dilute the profit margin.
It was high time that India was ignored by Apple. The CEO, Tim Cook, had been quoted saying that the distribution costs in India were ‘too high and the market complex’. But soon Apple realized that India was the biggest market besides China. With the appointment of Sanjay Kaul as the Head(Telecom Business) of Apple India and Maneesh Dhir as Country sales manager of Apple, plus choosing of Redington and Ingram Micro as the key retail distributors which brought 10,000 major retail points for the brand, tables just turned around. Extensive advertising and the marketing campaign, coupled with the EMI payment options had increased the sale of iPhones by 400% YoY from April-June quarter of 2012 to 2013 as acknowledged by Apple CEO, Tim Cook himself.
The new iPhones were launched on 12th September 2013 but as far as the Indian market is concerned, although some online retailers like ebay.com and iBhejo.com are already offering the new iPhones, it might take a while before the phones are launched officially in India. All we can do now, is wait for the quarterly results at the beginning of January 2014 to know the stats regarding the sale of the iPhones in India and China. Only then we will be able to know if the strategic move of Apple was indeed a success or a failure.
This article has been authored by Roshan Nepal, T.A.Pai Management Institute, Manipal.