Situation analysis and launch strategy for apple phablet

EXECUTIVE SUMMARYSamsung introduced a large screen phone (5.2) back in 2011 and carved a new market for phablets. A phablet is a phone and tablet hybrid, well suited for people who dont want to carry two separate devices. This not only gives freedom to the user but also increases his productivity because of a larger screen, because this not only facilitates data consumption but also data creation. Apple till date only offers phones with 4 screen, while its android competitors have an average screen size of 4.8. Because of this Apple has been missing out on a major share of the market. Apple needs to capitalize the smart phone sales in India which grew almost three-fold to over 44 million in 2013. The phablet market (5 6.99) accounted for about 20% overall market in the 4th quarter of 2013. In this report we have presumed that we are a marketing research agency and have identified a sizeable market for apple in the context of phablets. We have also suggested the launch strategy for the same. This report has been made keeping in mind the Indian context.

Table of ContentsSituation Analysis2Objectives5Segmentation and Target Market5Positioning....7Product8Price9Placement11Promotion12References13Annexure14

SWOT Analysis: Strengths: 1. Brand Reputation- Apple has a reputation of highly innovative, well designed, and well-functioning products and sound business performance. Apple brand is valued at $148 billion and it has surpassed Google to be crowned the worlds most valued brand (http://wallstcheatsheet.com/breaking-news/apples-reputation-is-the-best-among-top-brands.html/) 2. Innovator- Apple has been chosen as the most innovative business in the world for the 5th time in 2013. (http://www.forbes.com/sites/tjmccue/2013/01/10/apple-1-google-2/).Companys core competency of producing innovative products is the strength the company builds upon and is able to bring the most innovative products to the market. Two of Apple's innovations a commercially successful mouse and a graphical user interface for the personal computer are among the most important breakthroughs in broadening access to technology. ( http://info.astd.org/innovation-stories/)3. Financial Credibility- The Company posted record quarterly revenue of $57.6 billion and quarterly net profit of $13.1 billion, or $14.50 per diluted share. These results compare to revenue of $54.5 billion and net profit of $13.1 billion, or $13.81 per diluted share, in the year-ago quarter. Gross margin was 37.9 percent compared to 38.6 percent in the year-ago quarter. International sales accounted for 63 percent of the quarters revenue.( http://www.apple.com/pr/library/2014/01/27Apple-Reports-First-Quarter-Results.html) Weaknesses: 1. High Price Deterrent- One problem facing Apple in new markets like India is price. Many average Indians simply cant afford $600 for the 16GB version (about 40,000 Rupees) or $800 for the 64GB version.2. Brand Switching: Data shows that loyal apple customers are getting disillusioned and switching to Samsung phones with larger screens. Lack of phablets, which are conceived as a wise buying decision (http://www.todaysiphone.com/2014/07/data-shows-disillusioned-iphone-users-switching-samsungs-larger-screens/)3. Retail and Pricing- Apple, in India, has decided to stay away from directly entering the market to retail its products. They instead, choose distributors, who sell them at a rather high margin. This has led to poor positioning of the Apple brand in Indian retail stores, and so called Apple Premium Resellers. Few salesmen know much about the iPhones cool features. Many prospective buyers leave the store ending up buying either an Android or Windows mobile device. Consumers are left considering it a more value for money proposition simply on hardware specs. India is one of the most expensive places to purchase an iPhone. The iPhone 5s is sold at a whopping 53,500 or $873 for the 16GB unlocked model, while the iPhone 5c is sold at 42,500 or nearly $688. The iPhone 4s is sold in a similar price band as Googles latest Nexus 5.Opportunities:1. High demand of iPad mini and iPhone 5s: iPad mini sales will increase Apples market share in the tablet market and, will strengthen firms competitive advantage.2. Growth of tablet and smartphone markets: Growth of tablet and smartphone markets is a good opportunity to expand firms share in these markets.3. Increasing demand for cloud based services. Apple could expand its range of iCloud services and software as the demand for cloud-based services is expanding.Threats:1. Android OS growth: Android OS is the main competitor for iOS in mobile device market. The domination of Android decreases iOS power over influencing consumers to join Apple.2. Rapid technological change: One of the most severe threats Apple and the other tech companies are facing is rapid technological change. Companies are under the pressure to release new products faster and faster. The one that cannot keep up with the competition soon fails.3. Price pressure from Samsung over key components: Samsung has already asked Apple to pay higher price for its application processors. Due to intense competition and no viable substitutes, Apple may be asked to pay even more.PESTEL ANALYSIS: Currently, Indias middle class size is equal to that of US population but Apples sales in India is only 1% of its global sales.Political: Even though Apple has plans to open their own stores in India, they are facing constraints from the Indian governments policies. According to Indias FDI in retail policy, any foreign retailer who wants to open their own store in India should source 30% of components locally. Apple doesnt want to change its manufacturing process just for entering into one country.Economic: By 2013 end, India recorded its slowest economic growth of 4.4% and also currency weakened during this period. This added to the high prices of Apple is a constraint to Apple to market in India.Social factors: One problem facing Apple in new markets like India is price. Many average Indians simply cant afford $600 for the 16GB version (about 40,000 rupees) or $800 for the 64GB version. Theres no subsidy program with wireless carriers in India where Apple can charge $200 for its 16GB iPhone 5 at Verizon Communications in exchange for a two-year contract. In contrast, handset companies like Samsung Electronics and HTC have succeeded in making their products more affordable in India. Roughly 7 in 10 handsets sold in India last year were priced at under $100. The new iPhone 5, on the other hand, was sold for about $800 in India this month. Technological: India has technological problems like low internet and PC penetration because of which activation of Apple products online is not easy compared to that in US. Only a small minority of Indians have iTunes in their PCs. Also Indian users tend to install software packages that come with the product rather than downloading online. And Apple has hardly any retail outlets here.Legal: Mobile payments are a big problem in India because of the legal framework and cyber security. Also virtual currencies like Bit coins are under regulatory scanners in India. Apple uses a global payment gateway on which RBI has no jurisdiction.

ObjectivesCorporate Objective: We are presuming that we are a marketing research organisation which apple has hired. Apple would like to know whether there is an opportunity or a problem in the Indian mobile phone market. Thus the corporate objective in this case could be How can we increase our market share in the Indian mobile phone market?Marketing Objective: The marketing objective in this case would be To identify market segments that are not being serviced by Apple iPhone and to suggest a product/products that can be targeted at this segment to increase market share of AppleIssuesSegmentation and Target MarketApple currently has three offerings In the Indian mobile market, the iPhone 4s which is the cheapest of the lot, the IPhone 5c and the premium IPhone 5s. None of which cater to the current demand of bigger screen phones between 5 6.99. The move of introducing an iPhone with a bigger screen would not be a mindless gamble for apple as the figures show that apple consumers are very brand loyal and brand switching is very low(See Exhibit ). Apple loyalists are delighted despite having to pay higher prices compared to phones by its competitors. The segment identified for this product comprises of consumers who want an all-in-one device, one which provides not only the core benefit of communication to them, but also provides a media powerhouse which stores and makes available a lot of digital information like photos, music and videos. Apple needs to capitalize the smart phone sales in the country which grew almost three-fold to over 44 million in 2013 (http://www.bgr.in/manufacturers/samsung/smartphone-sales-in-india-touch-44-million-in-2013-ss214/ ). The phablet market (5 6.99) accounted for about 20% overall market in the 4th quarter of 2013. The way in which STP process is followed in Apple is shown in Exhibit .The various segmentation strategies used by apple are as follows: Geographic: This segmentation divides the market into different geographical units such as nations, regions, states etc to fit the need of individual regions. In India mainly the urban population is targeted with urban mobile penetration rate more than 160%. Demographic: Apple Iphone segmentation is based on gender and age variables. Around 2/3 of the 2.3 million US Iphone users are men (Nielsen). A recent research done by Solutions Research Group has showed that Apple was successful to attract youngsters as 63% of its customers were under 34 years and average age of its customers is 31 years. Behavioral : 1.User Status : Users and Non-users 2. Benefits : All in one Phone 3. Usage rate : Heavy Internet/Social media app users 4. Occasions : New Launch, Festivals Psychographic: Psychographic segmentation is dividing a market on the basis of social class, life style, and personality characteristics etc. Apple very carefully investigates psychology of consumers trends and their life styles. The lifestyle of a person is linked to his or her preferences. Lifestyle is reflected in activities, interests and opinions. Now different people have different lifestyles. Apple identified this and provided different features for different people in one phone like touch screen, iPod for a trendsetter youngster, or calendar and fast web browsing for a sophisticated businessman Justification for chosen target: As mentioned above the market for phablets in the sub-continent is huge and this category of devices account for 30% of the smartphone sales today, thats close to 13 million units (Measurability). The growth for this category is phenomenal is it grew about 17 folds in the 2nd quarter of 2013. (Substantiality) (http://articles.economictimes.indiatimes.com/2013-09-09/news/41903526_1_phablets-dual-sim-phones-lenovo-india). Due to the ease in Internet access among the growing urban Class population and wide exposure to social media (See Exhibit), effective programs can be designed to attract the segments (both Traditional and Non traditional) and the segments can be effectively reached and served. (Accessibility and actionability)Target market strategy: Our target market in this case is the urban smart phone user who does not want to spend money on two devices, namely, a Smartphone and a tablet. This consumer seeks a device which can double up as a tablet and a primary phone. Therefore we will pursue a concentrated strategy in the case of the phablet launch by apple. PositioningPositioning Statement: For people who need entertainment, take care of business, communicate and manage their information while being mobile, the iPhone is a single multipurpose handheld device with Internet access and a widescreen audio/video player providing a wide variety of applications for every purpose. Unlike the competition, the iPhone provides an unmatched, user-friendly and intuitive user interface. The iPhone provides seamless integration of hardware and software for a hassle-free user experience.Value Proposition: An all-in-one premium media powerhouse.

We recommend that in the future perceptual map for the apple, apple should try to position itself a little closer to being low price. This does not mean apple should reduce the price of the phablet and therefore decrease revenue and likely dilute its brand, but, to remove the psychological barrier of high price, apple can offer buy back and rather than reducing the price, it can offer the 32GB variant as the entry variant, therefore people will feel that they are getting value for money.ProductCore: The core benefit derived in this case is a multi-purpose, communication device and social status.Actual: The actual product in this case will be a 5 screen apple iPhone. We do not recommend exceeding the screen size more than 5 because not everyone needs a phablet and there may be a sizeable amount of users of iPhones who prefer it because it has a smaller screen compared to the competition. Therefore, 5 would be a safe bet for apple. The screen size not even be too large as it would affect ease of use with one hand and may cannibalize the sales of the iPad mini.Augmented: The augmented product in this case is the social currency provided by using an apple product. Apple products fulfil the esteem needs of the consumer who is willing to pay a premium to use apple products over the competition which is generally under-priced compared to apple. Product by Involvement: An apple iPhone qualifies as a specialty product because it has unique characteristics and brand identification because for this buyers are willing to make a special purchase effort. An iphone is an expensive product and is not purchased frequently. Before purchasing this product buyers put in a significant amount of research.Branding: Apples branding strategy should focus on emotions. The initial point should focus on how an Apple product experience makes the consumer feel. The Apple brand personality is about lifestyle; imagination; liberty; innovation; passion; hopes, dreams and aspirations; and power-to-the-people through technology (http://www.marketingminds.com.au/apple_branding_strategy.html) The Apple brand personality is also about simplicity and the removal of complexity from people's lives; people-driven product design; and about being a really humanistic company with a heartfelt connection with its customers. Even in the case of the new phablet, apple should bank heavily on its brand.Packaging: Traditionally the purpose of the package has been to hold the product together safely. But of late, packaging has become a very important aspect of the overall placement of the product. The consumer today judges the product also by its packaging; but at the same time the company should not spend too much money on packaging that the overall cost increases.

PriceIn late 2013, Apple, for the first time, launched 2 iPhone models together, the iPhone 5S and iPhone 5C. The 5S was the expected replacement of the older iPhone 5 while the 5C was supposed to be a cheaper alternative to the 5S, which remains very unaffordable in emerging markets. The 5C was supposed to increase the companys customer base, especially in emerging markets like India. This model was supposed to cater to the middle segment of the smartphone market, if not the lower segment. But, as far as India is concerned, the 5C cost USD 650 (at launch) which was out of the reach and aspirations of the low income smartphone buyers. The 5C eventually turned into a strategic mistake by Apple. As on date, Apple continues to lose market share in the Indian smartphone market because it does not have a product that caters to the low/middle end market, which is the fastest growing in India (http://www.marketexpress.in/2013/12/emerging-markets-apple-iphone-5c-positioning.html).Currently Apple does not have any offering in the Phablet category. If we refer to its major competitor in the smartphone arena, Samsung, we will find a striking dissimilarity between the two. Apple is generally perceived as a technological leader and innovator which make the best products in the industry. While Samsung has been labeled a mimic of Apple and is alleged to have copied some of its smartphone ideas from Apple it revolutionized the industry when it introduced the Galaxy Note series of smartphones back in 2011. With the Note, Samsung introduced the first ever Phablet to the world. This was a groundbreaking product which carved out a niche for itself. The mobile phones market in India is under monopolistic competition where the markets consist of many buyers and sellers who trade over a range of prices differentiating their offers to the buyers in terms of quality, features and style for physical products or accompanying services. Value-Based pricing: In the Indian market, Apple Inc. should follow a value-based pricing for the iPhone by using buyers perceptions of value like the brand, innovations, mobile apps, not the sellers cost. It is important to remember that good value is not the same as low price. In Value-Based pricing Apple Inc. follows valued-added pricing strategies to increase the pricing power by providing value-added features and services to differentiate their offers. Apple Inc. ensures that the iphones are superior in quality, technology and features. It doesnt compromise with the production cost of iphones instead it sells with higher price when compared to the other competitors but still the demand for iphones are high. Price elasticity of Demand: When Apple Inc. goes with high pricing strategy there can be a change in demand. Price elasticity of demand shows the change in demand due to change in price. Normally when price increases demand decreases but when the product is unique or superior in quality, prestige or exclusiveness then the demand is less sensitive to change in demand. Since Apple iphones are superior in quality, even if the price is increased the demand is less sensitive.Market- Skimming pricing: Pricing strategies usually change as the product passes through its life cycle. New product faces the challenge of setting prices for the first time. Apple Inc. follows the market- skimming pricing strategies. It sets high price at the launch and when the year passes it reduces the price to attract new buyers and maximize revenue from various segments of the market. This strategy is used only under 2 conditions: The products quality and image must support its higher price and people should be willing to buy at that price. The costs of producing a smaller volume cannot be so high that they cancel the advantage of charging more Since Apple is a well established brand for its quality and innovation in mobile phone markets and it has created its own segment of buyers who are ready to buy at high price, market-skimming pricing is well suited for it. Apple also sells it old iphones like 4, 4S in the market at less price and still these products attract new buyers. After thorough research, primary and secondary, and formulating the current and future perceptual maps we have come to a conclusion that apple can price this new phone between the category of 40,000 and above. At this price point it is close to the price of iphone 5s but the phablet serves a completely different need. Creative component: But, to be on the safer side, rather than launching a 16 GB version, apple should introduce a 32GB version so that it can tackle the issue of it being perceived as a very pricey brand. This would not only allow apple to capture a broader market but also ensure that its brand does not get diluted. Tactics for fine-tuning: To cut the price barrier even further and attract even more customers, apple can introduce a buy-back offer when the product reaches the maturity stage. Under this offer consumers can replace their old phone and get a discount on the phablet. Also, apple can tie-up with major banks and offer cash-backs when the phablet is purchased with the credit card of these banks. Alternatively, apple can also introduce promotional offer during festival seasons when Indians go on buying sprees.

PlacementType of Marketing Channel & Distribution Intensity- Apple Inc. uses multiple distribution channels for reaching out to its customers.The first is the direct distribution in which Apple establishes the retail stores where it displays the product and provides the information and support to the end-user directly. In Indirect distribution, Apple used the intermediary organization for fragmenting bulk supplies of inventory, provides the financial services to retailers and increase ease of customer purchase and minimize the transport costs by monitoring and operating a warehouse close to the intermediaries. Apple controls the distribution of its products through a vertical marketing channel. The various advantages related to a vertical marketing channel are consistency of messaging as they have their own sales force to pass the apple message straight on the customers, removing the competition from the point of sale, ease of up selling, reinforcing the apple community and finally controlling of prices. The reason why Apple has such a low market share in India (1.2% compared to Samsungs 51%) is because it doesnt like how it must do business in India, where it has to tie up with national, regional and local distributors to get its products to consumers. Apple hasn't been able to open its trademark stores because of requirements that foreign retailers purchase 30% of the value of India sales from domestic suppliersunmanageable in a country with virtually no electronics manufacturing.According to Tim Cook, Apples Chief Executive the sort of the multilayer distribution really adds to the cost of getting products to market. Apples distribution policy is changing since it tied up with Reddington and Ingram Micro previous year in an attempt to achieve higher market penetration, especially Indians who live in thousands of smaller towns. Apple sells in India through roughly 2,000 mom-and-pop stores and 65 franchisee-owned "Apple shops" in malls and other high-end spots.The companys decision to go through distributors perhaps shows the company is looking for higher market share by sacrifice its margins if required .In India, Apple should follow a exclusive distribution. By providing exclusive distribution, Apple can gain stronger dealer support and more control over dealer prices, promotion and services. It will also enhance its brand image and allow for higher mark-ups. It should also follow a multi-channel distribution system in India, judging by the success of Motorola and other brands in tie up with Flipkart and other major retailers, Apple can also tie up with online retailers by providing them higher margins. This, combined with the usual discounting by e-commerce sites and the broad customer base of e-retail businesses can help Apple counter competition from Samsung and Sony who are fighting to ensure parity between online prices and brick and mortar shops. In support to the channel partners, Apple could also provide demonstration products, detailed specific handouts, full color photos and display featuring the product. The distribution can be investigated through cell phone outlets and there will be special payment terms for retailers that place volume orders.PromotionPromotional objectives of Apple Phablet:Make consumers recognize their need: Through external stimulus, making consumers recognise their need to purchase an Apple Phablet. Consumers should realize that they need a device that can avoid the inconvenience of carrying both a tablet and a phone. A phablet will be more convenient to read e books when compared to a phone.To provide information and awareness to the consumer: At a stage where consumers are slowly interested to buy a Phablet, by promotion of Phablet, Apple can help consumers in their external information search.Provide a comparison with competitive products: At a stage where the consumers would be evaluating their alternatives other than Apple Phablets, the promotional strategies employed would emphasis on the advantages of Apple Phablets over others. This would create clarity in customers minds on Apple Phablets advantages over others.Message: The problem of carrying both a tablet and a phone can be avoided by the Apple Phablet.Promotional mix: Advertising: Advertisements range from the ones released in 1984 to introduce the original Macintosh ,the 1990 s think different advertisement which linked Apple to famous social figures like John Lennon and Mahatma Gandhi, the 2000s ipod people , Get a Mac campaign which ran from 2006-2009 to the most recent ipad-Air released in 2013.Also they employ Buzz marketing where celebrities endorse the products ,for example Popular singer-songwriter and actress Zooey Deschanel advertised the Siri feature on the new iPhone through Apples commercial. Phablet can be extensively advertised in the same way.Personal selling: Apple uses extensive personal selling. The sales representatives in any Apple store are young, enthusiastic and abreast with latest technological developments. They are thoroughly trained in customer service and product information. Phablet promotion can be done the same way. But in India since Apple doesnt have any company owned stores, they cant employ this technique here.Short term incentives: In most of the Apple stores, consumers are given a hands-on experience of the product by allowing them to listen music on IPod and to experience the IPhone and its features. Consumers can be given a hands-on experience on the phablet as well and this will make them understand the advantages of having a phablet before they actually purchase it.Public relations: Apple identifies the unique feature in their upcoming product and then uses its relation with the media to create a buzz among the target customers. They have relationships with selected journalists and bloggers and provide them a hands-on experience of the product before the launch, and through them they increase the buzz further. This strength of Apple to use PR effectively should be utilized for Phablet promotion.Promotional campaigns: One of their more popular promotional campaigns has been the "Buy a Mac for college and get a free iPod touch" campaign, which usually runs from late May until mid-September. Apple can promise similar free products with the purchase of Phablets.Direct marketing: Apple uses emails marketing extensively .They provide information about their products and encourage customers to visit their website and find out more about their products. Online marketing: Their official website itself is a marketing tool, through which they provide information about their latest products and video tutorials on how to use Apples gadgets. So Apple carefully blends the mix of promotion tools and implements the Integrated marketing Communications effectively.(See Exhibit)Pushpull strategy: Apple understands the needs of the customers .They get a clear understanding of their customers expectations. They research and find out the consumers perspective and then relate product attributes to customer values. Thus they employ a market pull strategy. At the same time they continuously innovate their existing products and release in the market and thus employ a technology push strategy .Apple Phablet is one such innovation which was developed keeping in mind the customers need to have a phone and a tablet in a single device .Referenceshttp://wallstcheatsheet.com/breaking-news/apples-reputation-is-the-best-among-top-brands.html/http://www.forbes.com/sites/tjmccue/2013/01/10/apple-1-google-2/ http://info.astd.org/innovation-stories/ http://www.apple.com/pr/library/2014/01/27Apple-Reports-First-Quarter-Results.htmlhttp://www.todaysiphone.com/2014/07/data-shows-disillusioned-iphone-users-switching-samsungs-larger-screens/http://www.bgr.in/manufacturers/samsung/smartphone-sales-in-india-touch-44-million-in-2013-ss214/ http://articles.economictimes.indiatimes.com/2013-09-09/news/41903526_1_phablets-dual-sim-phones-lenovo-indiahttp://www.marketingminds.com.au/apple_branding_strategy.htmlhttp://www.marketexpress.in/2013/12/emerging-markets-apple-iphone-5c-positioning.htmlANNEXURE

Core benefit Premium multipurpose communication deviceActual Product a 5 Apple iPhoneAugmented Product Social status1