I-PhoneApple’s Entry Strategy

The Quotes• The iPod changed everything in 2001. We're going to do it again with the iPhone in

2007.”- Steve Jobs, CEO, Apple Inc., in January 2007.

• "Apple Inc.'s campaign to build excitement about its iPhone may be the most successful marketing effort ever, surpassing the drive to promote Ford Motor Co.'s 1964 Mustang and Microsoft Corp.'s Windows 95.”- The Economic Times, in June 28, 2007.

• "I've never seen the kind of feeding frenzy we've seen in the media, We expect it [iPhone] to be a very successful product -but I don't know how it can possibly live up to the hype.”- Ed Colligan, President & CEO, Palm Inc, in June, 20

Background• In 2002, shortly after the first iPod was released, Jobs started thinking about

developing a phone.

• He saw millions of Americans lugging separate phones, BlackBerrys, and now MP3 players; naturally, consumers would prefer just one device.

• The global sales of mobile phone handsets were estimated to be just below 1 billion in 2006. According to the International Telecommunication Union, there were an estimated 2.2 billion mobile phone users in the world.

Motivation• By 2004 Apple's iPod business had become more important, and more vulnerable,

than ever. The iPod accounted for 16 percent of company revenue, • He also saw a future in which cell phones and mobile email devices would amass

ever more features, eventually challenging the iPod's dominance as a music player.

• With 3G phones gaining popularity, Wi-Fi phones coming soon, the price of storage plummeting, and rival music stores proliferating, its long-term position as the dominant music device seemed at risk

• Then there were the wireless carriers. Jobs knew they dictated what to build and how to build it, and that they treated the hardware as little more than a vehicle to get users onto their networks.

• Jobs, a notorious control freak himself, wasn't about to let a group of suits — whom he would later call "orifices" — tell him how to design his phone.

Obstacles• If the idea was obvious, so were the obstacles. • Data networks were sluggish and not ready for a full-blown handheld Internet

device. • An iPhone would require Apple to create a completely new operating system; the

iPod's OS wasn't sophisticated enough to manage complicated networking or graphics, and even a scaled-down version of OS X would be too much for a cell phone chip to handle.

• Apple would be facing strong competition, too: In 2003, consumers had flocked to the Palm Treo 600, which merged a phone, PDA, and BlackBerry into one slick package.

• That proved there was demand for a so-called convergence device, but it also raised the bar for Apple's engineers.

First Attempt• In an effort to bypass the carriers, he approached Motorola. It seemed like

an easy fix:

• The handset maker had released the wildly popular RAZR

• Jobs' plan assumed that Motorola would produce a successor worthy of the RAZR, but it soon became clear that wasn't going to happen.

• The three companies dickered over pretty much everything – how songs would get into the phone, – how much music could be stored there, – even how each company's name would be displayed.

• when the first prototypes showed up at the end of 2004, The gadget itself was ugly.

ROKR-Won't hold more than 100 songs, even if there's memory left.-iTunes Music Store purchases must be synced from a PC.-Clunky interface is sluggish and hard to navigate.-Design screams, "A committee made me."

Second and Final

• After not being satisfied with the first trial steve jobs gave his everything to bring up something very revolutionary for the next attempt.

• The project was working under the name purple 2 and trying to incorporate the revolutionary touch screen technology and finally succeeded.

• The network provider was zeroed down to AT&T.• The first model was shown to the AT&T boss Stan Sigman in mid December 2006• He was spell bound and told that “I haven’t seen anything like this “

MARKETING PLAN

I PHONE

Market Summary

• The iPhone targets consumers who need to store information and communicate or people who want entertainment on the go.

• Apples target segments consist of professionals, students, corporate users, entrepreneurs, and health care workers.

• Currently, the market for high-end phones like the Apple iPhone is small. Few people want Internet, video, and PDA features in one device because of the high price.

• The smart phone market is still relatively small compared with general phone market. The market will rapidly increase in coming years due to lower prices and greater power.

SWOT Analysis

Strength

Innovative – The iPhone has an innovative touch screen that is patented and unmatched by any other mobile product today. It also has many functions of other mobile products all in one device.

Compatibility –The phone will work with iTunes and with other Mac/Apple products like the new Apple TV, allowing for wireless connectivity to the big screen.

Ease-of-Use – The all-new touch screen interface making operations extremely intuitive. . The Mac OS X application imbedded into the iPhone assures users will easily recognize what they can do

Brand awareness – Apple is well known for cool essential gadgets like the iPods along great technological innovations like the original Macintosh.

Price – At $350, the iPhone would be sold at a reasonable price for its value.

Quality – The iPhone has one of the brightest and most scratch resistant screens in the market. It also has a fine metallic finish that is durable and light. The software suite included is also unsurpassed with their ease of use and resistance to computer viruses.

Weaknesses

• Image – The Apple brand is not targeted towards business people, which most smart phones have targeted. Does not have a reputation as being compatible with the corporate world.

Price – Apple does not yet offer lower priced models for more cost conscious consumers.

User Interface – Touch screen interfaces suffer from the problem of “gorilla arm,” in which long-term use of a flat, solid surface for input becomes uncomfortable.

Opportunities

Increasing demand and expansion to a new target segment – Apple will continue to target the business productivity market who wants an all in one computing solution. But as technology advances and smart phones get cheaper companies also have a great opportunity to target people who want entertainment. Apple will attract these consumers and get iPod users to upgrade to iPhones.

Upgradeable – Since software on the iPhone can be updated, it allows new exciting features to be brought in which take advantage of the touch screen ability. Future versions will also be hardware upgradeable.

Partnerships – Apple can collaborate with many powerful global mobile phone companies to flood the market with iPhones, which reduces costs in marketing and increases revenue through long-term agreement deals.

Threats

• Increased competition – Smart phones are easier to make now more than ever. More companies may enter the market, given that there are few barriers to entry other than patents. Competitors or even Apple contractors can maneuver around patents to create similar devices.

Downward pricing pressure – The iPhone is marketed as a high-end phone, but phone prices are almost certainly going to fall when other companies undercut the price of iPhones.

Difficulty expanding into Asian market – There is less hype and interest in Asia since smart phones are better known and already widely used.

Product Offering

• Multi-touch screen • Phone . • Camera • iPod • Internet communicator • Style • Built-in battery • Headphones Loudspeaker (two-way) • Synchronization with iTunes, iCal, Address Book

Distribution

• AT&T and eventually other major cellular providers like Verizon. Goal is availability with all phone providers.

• Purchasable direct from Apple online, and from major third-party online retailers like Amazon.com.

• Apple stores in U.S., Japan, U.K., Canada, and worldwide.

• All major electronics retailers: Wal-Mart, Best Buy, Circuit City, etc

Financials• First year sales revenue: $2.5 billion avg.

• Wholesale price $500 per unit, variable cost of $250.

• Total volume: 10 million.

• $50 million fixed cost. Break-even is at 200,000 units.

Implementation

Marketing and Communication

• They integrated their message of revolutionary communications and audio/visual experience together in all of their media advertisements.

• Prominently featured to differentiate their product against others is the touch screen functionality.

• They also emphasized their brand prominently and associated the iPhone with the iPod’s groundbreaking lineage.

• Their ads were original but also tasteful at the same time.

• Research about media consumption patterns of their targeted audience will help their advertising agency choose appropriate media and timing to reach prospects before and during product introduction.

Marketing and Communication - 2

• A massive TV campaign was planned for the month of June will feature a soon to be legendary ad that will remind people of Apple’s 1984 Super Bowl ad and be the talk of the country, generating further attention.

• Thereafter, advertising appeared on a regular basis to maintain general public awareness and communicate various differentiation messages to several targeted groups.

• To attract, retain and motivate channel partners to push the product, they sent personnel to inform them on how to market the iPhone along with other Apple products.

The iDay

The Launch of the 'Jesus Phone’

• On June 29, 2007, Apple Inc. (Apple) launched its mobile phone, branded as the 'iPhone,' in the US, marking its entry into the highly competitive mobile phone market.

• The telecom industry had been agog about this new mobile phone, ever since Apple made an announcement in this regard in January 2007.

• Some of Apple's fans who had been waiting for 'iDay,' as the launch date of the iPhone was called, formed queues outside the Apple's stores to buy it immediately after the launch.

• Estimates of the sales of iPhones ranged from 500,000 to 1 million units in the first two days of its launch. Though the actual sales figures were a lot less than that, it was still a very successful launch.

Key Success Factors

Did the media talking

• Instead of the traditional advertising blitz in the months and weeks leading up to a product launch, Apple takes a more subtle and viral approach. They like to slowly leak details about a new product, then give a presentation to ‘wow’ reporters and media people, and finally they put out a simple press release.

• The end result of their careful lead up is that literally every mainstream news outlet (and thousands of smaller ones) starts talking about them. During this period, they don’t spend a dime on advertising for the new product.

Charismatic CEO.

If a company’s head is in the right place, chances are its feet will be too. At least, that’s how a lot of customers see it—and Apple has taken the idea to heart. Having Steve Jobs present every new product Apple releases shows customers that upper-management cares.

Aesthetics• Apple Strongly believed in Design and Aesthetics and hence invested a lot of

money and resources for achieving the best possible and way ahead of any of the other competitors

• They had in minds that they will be designing a revolutionary product which can change the future of the mobile industry.

Simple Communication

•Apple’s been practicing what many authors and marketing gurus have been preaching: keep your marketing message simple. Simple messages are easier to understand, easier to remember, and easier to share.

•it’s Apple’s description of the iPhone: “Revolutionary Phone. Widescreen iPod. Breakthrough Internet Device.”

Exclusivity

Apple created a strong exclusivity among its customers creating its own stores and its own line of cult products.

In short it created a culture which is hip young smart and enthusiastic, And created a notion that being a part of it is a privilege in itself.

Fans did the selling

Apple’s strategy isn’t to tell you how cool their stuff is (since you probably wouldn’t believe them anyhow), their strategy is to show other people using and talking about their products. It’s just more personal, and more believable, when your fans promote for you.

Review

• The enormous amount of hype surrounding the iPhone had led to the initial success of the brand.

• The main question, however, was whether Apple would be able to match the initial hype with bug free performance.

• It was over-hyped or not, Apple deserved kudos for coming up with a product idea like the iPhone and also implementing it successfully.

• The company had made an aggressive entry into the mobile phone market and had managed to attract the attention of the existing competitors.

• The introduction of the iPhone would prompt its competitors to come out with better phones in the future, thus offering wider choice and better products to customers.

Think Different

It is expected that the much-awaited launch of the Apple iPhone in India will take place this September.

The launch will be with telecom operator Vodafone,

The expected price is between Rs 27,200 to 28,000, but again this may change by the time it is actually released..

Apple retail sources have also revealed that it will be the 8 GB version of the touchscreen iPhone

Next in India