Introduction
Established in 1976, Apple Inc. has grown to become among the world’s most respected brands (Huimin & Hernandez 2013). The company designs, manufactures and sells consumer electronics. Some of its most successful products include the iPad, iPhone, and iPod.
The company’s success has baffled many people because Apple has decreased the market dominance of many successful brands in the consumer electronics market (Huimin & Hernandez 2013). Consequently, the company has gained unrivaled market dominance in some electronic consumer market segments (Gould 2009, p. 96).
For example, the company enjoys a strong brand loyalty for its iPad and iPod products in America and Europe. Based on such successes, in 2008, Fortune magazine said Apple was the most admirable company in the United States (US) (Canals 2010).
Later (in 2008, 2009, and 2010), the same organisation named the company the most respected brands, globally (Canals 2010). This worldwide success has contributed to the company’s high profitability, since the launch of its flagship brand – iPhone (the company makes profits of about $8.24 billion, annually) (Huimin & Hernandez 2013).
A key success factor for Apple Inc. has been its marketing mix strategy. According to Kotler & Armstrong (2009), a marketing mix strategy explains how a company articulates its product, price, place, and promotion strategies. After evaluating these four components of the marketing plan, this paper argues that price is the most important part of Apple’s marketing mix.
Based on its usefulness, the California-based company has developed an effective price skimming strategy that supports the strong brand loyalty it enjoys in North America and other global markets.
Besides extracting huge profits from each market layer, this paper shows that Apple’s marketing mix strategy affects customers’ buying decisions by creating the impression that purchasing an Apple product gives consumers access to an “Apple membership club.”
This strategy makes the customers feel special and obligated to purchase many company products (brand loyalty). This paper explains this view by highlighting how different aspects of the marketing mix strategy integrate to influence customer-buying decisions this way.
Product Strategy
The product strategy is important for the success of a company’s marketing mix strategy. Kotler & Armstrong (2009) define it as, “Anything that can be offered to a market for the attention, acquisition or consumption that may satisfy a want or need” (p. 1).
In line with Apple’s product strategy, Chazin (2007) says the company’s products are similar to other products in the market, but because of its “genius” marketing strategy, many consumers believe Apple is superior to other brands in the market. For example, Apple’s iPod does not make the music sound better. Similarly, these products do not have a longer battery life than ordinary mp3 players do.
Therefore, they are similar to other products, but look superior to its rivals. Chazin (2007) believes Apple’s product strategy thrives on improving existing products, as opposed to inventing them. Although some observers say the company succeeded because of its innovation, the company has never invented anything. For example, it did not invent smart phones, computers, or music-playing devices.
Based on this understanding, Huimin & Hernandez (2013) explain Apple’s success by saying, “The Mac, iPod, iTunes and iPhone are all successful because they were late to market and improved on existing designs and functionality” (p. 4). Therefore, the success of the company’s pioneer products stemmed from its ability to simplify complex things and make them more elegant than they are.
For example, Apple’s iPod was successful because it simplified the process of buying music. In detail, Apple did not “invent the wheel;” instead, it used its experience and technology to make simple mp3 players look sophisticated and elegant (including improved functionalities). For example, simply plugging the iPod in its cradle transfers music and charges the device.
Besides iPod’s success, Apple has cleverly integrated its products’ usability features. For example, the company uses the iPod ecosystem to support iPhone’s functionality by making it easier for consumers who have bought the phone to use iTunes and iPods. Therefore, the iPod supports iPhone’s success by enabling the latter to plug into the company’s virtual music market.
This integration strategy has made the California-based company a market leader. Relative to Apple’s product success, Chazin (2007) says the company has never forgotten the cardinal rule of marketing – giving customers the solutions they need before another person does. These strategies have made many people believe Apple is a creative market leader.
Place Strategy
Although Apple is an American company, it has a wide global presence. For example, the company has more than 390 retail stores around the world, which stock the company’s products (Huimin & Hernandez 2013). These stores are in lucrative markets around the world, where people know the company’s products. Apple’s place strategy first explores lucrative markets before venturing into the less lucrative ones.
For example, the company marketed its iPad product using this strategy (it used three market segments – North America, Europe, and Asia). North America was the most lucrative market, followed by Europe, in that order. The company used three criteria to come up with this segmentation plan.
It used age and income as the main criteria for this strategy. For example, the iPad product mainly appealed to young and middle-aged people. Using the income criteria, the company understood that the product would appeal to middle-income and high-income groups.
Apple’s place strategy involves availing the company’s products in markets that have a strong brand following. At the same locations, the company requires all its vendors to hire knowledgeable employees that give customers expert knowledge about the company’s products (Huimin & Hernandez 2013).
The same strategy has seen the company partner with leading stores around the world, such as David Jones in Australia (Lamido 2011). Similarly, the US-based company has collaborated with some of its peers, such HP, to distribute its products (in line with this agreement, the latter has installed some of Apple’s products in its laptops). Such partnerships have increased the company’s market of online products.
Apple’s managers have widely deployed technology to integrate its global businesses. For example, they require their retailers to sign a contract with the company to stock Apple products, for about two years (Lamido 2011). This strategy makes the company’s products widely available in the global market.
For example, during the launch of the iPod, the company availed its products to more than 18 million customers (out of 60 million global customers who have the product today) this way (Lamido 2011). Moreover, the company did not spend many resources to do so. It also collaborated with established telecommunication companies to distribute its products.
For example, in Europe, Apple collaborated with established telecommunication brands, such as O2, Vodafone, Orange, and T-mobile (UK telecommunications companies) to avail its products in the European market (Lamido 2011).
Apple’s place strategy highlights the tenets of the internalisation process theory, which explains how firms grow internally by using knowledge about international operations and processes in foreign markets (Jones 2009, p. 73). The theory says “the main state aspects are resource commitment to the foreign markets, market knowledge about foreign markets and their operations.
Therefore, the change aspects are decisions to commit resources and performance of current business activities” (Lamido 2011, p. 8). Jones (2009, p. 73) supports this assertion by saying increased knowledge about foreign market activities increase a company’s commitment to its foreign markets (similar to how Apple has increased its market presence in Europe, North America, and Asia based on its vast knowledge about these markets).
Such innovative marketing strategies have provided Apple’s customers with an opportunity to experience the company’s products in a supportive environment.
Overall, the company’s place strategy has helped it to reach a wider global market. Particularly, alliances with other prestigious and well-established technological brands make the customers believe that they could gain access to a premium network of technological brands by buying Apple products.
Promotion Strategy
Kotler & Armstrong (2009) say the promotion strategy “is concerned with telling the target market and other players in the channel of distribution about the right product” (p. 5). Apple has an aggressive promotion strategy that hinges on marketing its products across different marketing platforms. The company uses public relations, television adverts, and online marketing strategies to promote its products.
For example, the tech giant used television adverts (4TV adverts) to market the iPhone. The former CEO (Steve Jobs) also used public relations to market other company products, such as the iPad. He also collaborated with many media firms to serve the same purpose (Lamido 2011). Although the company uses multiple strategies to promote its products, most of its promotional strategies are simple. To affirm this view, Lamido (2011) says,
“The Company uses simple and positive ways of promoting its products by displaying all their products to the general customers to know and experience the products at the same time, which is the lower purchase price and rebates, this allowed the customers to be free and comfortable with the products” (p. 13).
This promotion strategy has helped to create Apple’s brand loyalty and call on consumers to support the company, at the right time. Therefore, Apple’s customers feel more in-touch with the company.
Price Strategy
Apple’s price strategy is the most important part of its marketing mix strategy. Using an elaborate plan, the company uses a price-skimming plan to maximise its sales. Riley (2013, p. 104) defines price skimming as an attempt by marketers to set premium prices for their products, during the first product launch, and later reducing the prices as the product stays on the shelf, longer.
Experts say companies that pursue this strategy often use it to minimise their “sunk” costs (quickly) before the competition produces rival products that could erode their profitability. Similarly, Gitman & McDaniel (2008) say exploiting the “consumer surplus” (what people are willing to pay above the normal prices) is the main goal of such companies. However, Riley (2013) says, it is difficult for companies to maximise this surplus.
Huimin & Hernandez (2013) say the success of Apple’s pricing strategy depends on the demand inelasticity of its products in certain sections of the market. In other words, the company reaps a lot of profit from customers who are willing to pay a premium for Apple products when the company releases them (Huimin & Hernandez 2013). The diagram below shows how the company maximises its profits when its products have an inelastic demand.
Figure One: Apple’s price strategy (Source: Huimin & Hernandez 2013)
Since high profitability attracts more entrants to the market, the company’s profitability decreases through increased competition (Huimin & Hernandez 2013). The company has used this strategy to manipulate its customers to pay more for Apple products. For example, there was a huge market for the iPad when the company first launched the product.
As mentioned in this paper, the product’s price was inelastic as customers were more concerned with brand empathy, loyalty and other non-monetary factors, as opposed to pricing. The company exploited this potential by charging a premium for its products.
Apple’s price skimming strategy posed several advantages to the company, including the generation of high returns on set-up costs (Huimin & Hernandez 2013). Similarly, by adopting a premium branding strategy, many customers believed the product was of high quality.
This way, the company easily built a “high-quality” brand image. As opposed to charging “fair” prices for Apple’s products during their launch, the premium pricing strategy allowed the company to decrease its products’ prices, progressively.
If the company adopted the reverse strategy and set low prices for their products during their release, it would have been difficult to justify price increases without decreasing sales (Huimin & Hernandez 2013). The flexible price strategy also allowed Apple to segment the market and set different prices for every target group.
This strategy allowed Apple to maximise its profits in every market segment. Overall, this pricing strategy created a brand perception that appeals to a prestige-conscious market, as opposed to a price-conscious market. This marketing mix strategy has largely contributed to the company’s global success.
Conclusion
This paper shows an overview of Apple’s marketing mix strategy by demonstrating how the company uses price, place, product, and promotion strategies to influence consumer buying decisions. Based on the company’s successes (from this marketing mix strategy), Apple has successfully influenced customers’ buying decisions by making them own the brand.
Again, the price strategy plays an instrumental role in this regard because it makes the customers think that buying an Apple product allows them access to a premium member group. Using the same marketing mix component, the company has significantly increased its profits through the price skimming strategy.
This strategy aligns with the company’s focus on selling “Apple membership,” as opposed to Apple products, because it creates a special group of customers who are more brand-conscious, as opposed to price-conscious. Apple has used this brand culture to influence its customers to buy the company’s products at a high price.
This strategy has also waded off competition, at least during the first few months of product launches (because high prices do not attract a lot of competition).
Still, using the price skimming strategy, the company has created an impression that the company’s products are high quality (premium brands). Therefore, people who purchase the company’s products believe they are buying a prestigious product. These insights show how Apple’s marketing mix strategy affects customers’ buying decisions.
References
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