Apple Marketing Report

MKTG361, Section 002

October 22, 2018

Team 75
Skyler Cooper
Brian Crawford
Melissa Kennedy
Kaitlyn Ng
Amber Washington
Introduction
Apple Inc. continues to experience impressive growth within its primary industry as consumer
ownership of personal technology keeps rising. As discussed in the last report, Apple is in a
prime position to release new products into the market. Further research has revealed that Apple
can only take advantage of this position if the company addresses some problematic marketing
issues. This report will provide a comprehensible overview of Apple and the main industry it
competes in, a detailed SWOTT analysis, and a breakdown of the company’s top three target
market segments. All of this information will then lead into an identification of Apple’s three
most worrisome marketing issues and potential solutions.

Apple’s Product Portfolio

Company Description:
Apple Inc. has asserted itself as the leader in the Electronic Computer Manufacturing Industry
(NAICS Code 334111). Apple has been setting records with sales across the globe in its major
segments: North America, Europe, China, Japan and the rest of the Asian Pacific. Apple is
clearly in the growth stage of its life cycle as proven by the company crossing the never-before-
reached 1 trillion-dollar market cap threshold just a couple months ago. This growth is further
displayed by Apple’s stock experiencing a steady 29-percent increase over the past five years,
which can be reasonably explained given the company’s diverse product offerings.

Apple’s diverse product line-up includes, but certainly is not limited to, the iPhone, MacBook,
Apple Watch, iPad, and Apple TV. In addition to this myriad of products, Apple offers many
benefits concerning privacy and security features. Through rigorous security testing and strict
privacy guidelines, consumers view Apple as a brand that genuinely cares about the safety of
their data. This is further backed by Apple’s Developer Program License Agreement containing
explicit and in-depth measures to assure the proper care of user information. It is efforts like this
that also enables Apple to provide more reliable and trustworthy service, especially when being
compared to a competitor like Android that is struggling with “apps loaded with malware”
(Gunn, 2011). As a result, nearly eight out of ten companies now support the iPad over other
competitors, which a clear sign that Apple’s efforts are working quite well.

Unique Selling Proposition:

Apple is a rare company in the sense that their unique selling proposition (USP) is simply their
brand name and the experience of owning an Apple product. Consumers purchase Apple
products less because of the differences from competitors’ product, but more so to own the
exclusivity and status that comes with the brand’s name. Taking major competitor Hewlett-
Packard (HP) for example, their USP is creating products with durable and sturdy forms, which
unlike Apple, can be mirrored by many other competitors. Even though HP has a large and loyal
consumer base, Apple’s exclusivity in its USP can make all the difference in a general
consumer’s mind. Furthermore, Apple’s USP sets the company apart from the competition as it
serves in creating superb brand loyalty. Products such as the iPhone, Apple Watch, and Apple
TV can be used in consumers’ daily lives whereas MacBooks and iPads appear frequently in the
business world, which shows that Apple’s USP is effective when speaking to every aspect of a
consumer’s life.
Industry Description:
The life cycle of the main industry that Apple competes in, Electronic Computer Manufacturing,
is a fairly simple one. The industry is currently in the growth stage of the business life cycle,
meaning firms within the 334111 NAICS code are experiencing steep increases in cash flow and
profits. This industry is expected to remain in this particular life cycle stage for a prolonged
period of time as there continues to be upgrades in software, hardware, and add-on features for
computers. In addition, the companies in the industry are currently facing a similar
environmental trend: planned obsolescence. To elaborate, manufacturers are increasingly
designing a product to have it fail intentionally a certain amount of years later. The goal of
planned obsolescence is to ensure that consumers will purchase the latest product when their old
one fails, which works towards increasing a company’s overall profits.

Moving into Apple’s particular seasonal trends, the company experiences consistency in this
regard. The profits Apple sees in the first half of the year are generally not as impressive as the
latter half. In the third and fourth fiscal quarters (Q3 and Q4, respectively), Apple repeatedly
brings in its highest earnings. Q3 sales are usually the highest because Apple always releases its
newest iPhones, iPads, Macs in September of each year. Following this, sales in Q4 are also very
high due to the effect that the holiday shopping season has in both the tech and retail industries.

Competitive Environment
Even though Apple is ahead of the curve with a trillion-dollar market cap, the company still
faces sizable competition. The top three competitors that Apple contends with in terms of market
share are Intel, Oracle, and HP. These companies each have a market cap value of $211 million,
$181 million, and $37 million, respectively (Apple, Inc., 2018). The values of these three
competing companies combined do not even amount to half of Apple’s market cap, which
further proves how dominant Apple is in the industry right now. This, coupled with Apple’s
consistently high stock price, serves to further prove how in demand the company is for both
investors and consumers. Yet, this is not to say that the company will not lose its dominance if
their competitive environment is not continuously analyzed. In essence, Apple cannot utilize
effective competitive positioning strategies without properly understanding the competitive
landscape that they operate in. To efficiently discuss Apple’s competitive landscape, three
distinct aspects must be analyzed: the industry, the industry’s competitiveness, and the
competition itself.

Industry Analysis:
To start off, it is important to first look at the major trends that impact the growth of the industry.
Within the last few years, the Electronic Computer Manufacturing industry has been growing
due to several trends, namely the rise of cloud computing and the Industrial Internet of Things.
More specifically, the growth of cloud computing translates to a rising demand for servers to
handle the expansion of other industries’ cloud-related technological developments (Miller,
2018). It is this intensifying demand in cloud-computing technology that will lead to companies
investing in substantial equipment such as data centers and server computers, which will in turn
give way for industry growth. However, the most impactful trend that is industry is facing is the
increased consumer use of tablets and smartphones. This is not much of a concern for companies
with a diverse product offering like Apple, but for the industry as a whole, the rise of these
particular products diverts consumer attention away from standard computers. This trend in
particular could lead to stagnating industrial growth; yet, the industry is still predicted to grow,
but a bit slower than average as the predicted annual growth rate is 0.3%, leading to a near $12
billion dollar increase in industry revenue within the next five years (Miller, 2018).

Industry Competitiveness:
To best analyze the competitiveness of the industry Apple operates in, a Porter’s Five Forces
model can be used. The five forces are as follows: availability of substitutes, potential market
entrants, bargaining power of suppliers, bargaining power of buyers, and industrial rivalries.
Please refer to Figure 5 of the attachments as this analysis is further explained. The substitutes
force, which focuses on possible products that could be substituted for a company’s product, is
considerably weak as there is no clear substitution for computers in general. Yet, for Apple in
particularly, the landline telephone could be substituted for an iPhone, but its restricted
capabilities in comparison to the iPhone draw consumers away from that potential switch,
especially as the digital era continues to advance. Furthermore, the potential entrants force is
weak as well due to the high costs emerging companies would need to spend on research and
development, creating a product portfolio, establishing brand recognition, and not to mention just
competing with the industry’s already well-established major players. In addition, the bargaining
power of suppliers is another weak force as the industry has a plethora of potential suppliers to
work with. For Apple in particular, the company wields a lot of power when selecting suppliers
as their switching cost is relatively low and Apple is considered a major consumer that suppliers
would not want to risk losing.

Moreover, the bargaining power of buyers and industrial rivalries are the two forces that are
significant. The buyers force is strong when referring to collective bargaining power, since a
mass migration of consumers from one competitor to another can greatly impact a company
within the industry. Apple currently does a fine job of mitigating this force by continuously
crafting fresh and unique products to build secure and unwavering brand loyalty. Additionally,
the industrial rivalries force is also strong due to major players in the industry spending
comparable amounts of capital on research and development to keep up with one another’s
product offerings. This force is also strengthened by the low switching cost consumers face when
it comes to dropping one brand’s product in favor of another brand’s similar offering. To
attenuate industrial rivalry, Apple is again focusing on developing novel products.

Competitors Analysis:
Within the Electronic Computer Manufacturing industry, Apple is up against a sizable number of
key competitors. For the purpose of this report, only 4 key competitors will be evaluated; Dell,
Intel, HP, and Oracle. Figure 6 within the attachments section of this report serves as breakdown
of these competitors’ market size, strengths, and weaknesses. After analyzing these aspects of the
mentioned competitors, it is clear to see that Apple is handling the competition well. However,
some of these competitors are employing marketing strategies that can prove to be impactful on
Apple’s consumer base. For example, Dell is positioning themselves as the people’s choice of
PCs, which can potentially draw away newer Apple consumers with limited product knowledge.
Additionally, Oracle brands itself as a one-stop shop for informational technology at the
enterprise level of consumers, which could diminish Apple’s appeal to these consumers with a
desire for ease and simplicity in their computing activities. Intel and HP both position themselves
as reliable and consumer-centric brands, which can also appeal Apple consumers that are
growing weary of the company’s planned obsolescence tactics.

This competition analysis can be further broken down to the micro- and macro-levels. It is clear
that Apple “competes in many highly competitive product categories, such as smartphones,
tablets, mobile payments, laptops, smartwatches, enterprise software and application software”
(Jurevicius, 2017). After taking all products and competitors into account, Samsung actually
becomes a prominent competitor. Samsung not only competes with Apple for smartphones, but
for tablets, personal computers, and smartwatches as well. Ultimately, the main criteria for
determining micro and macro competitors is whether or not the company in question
aggressively competes with multiple products and services that impact sales and customers. In
essence, companies need to be able to accommodate for various products to satisfy customers
since Apple is such a large corporation and can sell products to consumers of all kinds. The listed
competitors for these categories can be found in Figure 3 in the attachments.

Apple’s SWOTT Analysis

The dominant strengths for Apple are continuous technological advancements and customer
loyalty. According to a Morgan Stanley survey, “92% of iPhone owners who plan to get a new
phone in the next 12 months say they're somewhat or extremely likely to stick with Apple”
(Dunn, 2017). This will help to keep the trend of the iPhone being the top-selling product and
smartphone in its market. While there are trends and strengths that help to make Apple one of the
top companies in its industry, there are internal weaknesses and external threats that harm the
company's potential success. For a detailed list of strengths, weaknesses, opportunities, threats,
and trends, see Figure 1 in the attachments. By taking an in-depth look at these aspects of
Apple’s current position, an explicit understanding of Apple’s perpetual market growth is
brought forth.

Top Three Target Markets

Primary Market:
The primary market for Apple consists of Asian male Millennials ages 25 to 38 with a college
degree whose household income is around $70,000 a year. For more details on the target markets
and their breakdowns, please refer to Figure 2 in the attachments. The Millennial population is
currently one of the largest user of technology as it has been noted that “97% of Millennials in
the United States own a computer, 94% own a cell phone, and 34% rely on websites as their
primary source of news” (Marketing Breakthroughs Inc., 2008). This target market usually buys
MacBooks, iPhones, and Apple TVs. Alongside this, this market is the most likely to use Apple
services such as iCloud, iTunes, Apple Pay, and the App store. They are also the most likely to
be influenced by social media and digital marketing. Evidence has shown that Millennials are
mostly influenced by their peers and digital marketing strategies such as social media and
internet advertising (iPerceptions, 2006).

Secondary Market:
Apple’s secondary market consists of Caucasian female Generations Z’s age 18 to 23 pursuing a
college degree whose family makes a household income of $100,000 a year or more. In the more
specialized computer industry, the major markets are ages 18 to 34 (Miller, 2017), which shows
the importance of the primary and secondary markets for Apple. The Generation Z market is
more dependent on technology then other generations since they grew up with the rise of
technology in their daily life. According to IBISWorld, this age group is also the largest cohort in
purchasing alternate technology such as tablets and smartphones (2017). Generation Z is highly
fashion aware and are known for having buying behaviors that consist of high-end luxury goods
(Jain, V., Vatsa, R., & Jagani, K., 2014). This target markets buys mostly MacBooks, iPhones,
and higher-end and more expensive products.

Tertiary Market:
The tertiary market consists of Caucasian males Generation X’s age 39 to 53 with a degree, are
married with no kids, and have a household income of $125,000 per year or higher. This target
market buys mostly iPads, Apple TVs, and Apple Watches. Consumers in this market have
reached the point in their lives where there is more money to spend on goods that are wants.
Therefore, they are able to buy the more expensive products that Apple is producing such as
Apple Watches and Apple TVs. The Generation X market’s buying habits tend to be spending
more than other generations and online spending tends to be dominated by this market
(Bainbridge, 2013). Generation Z is also known for being the most brand loyal generation
(Lamb, 2011).

Identification of 3 Key Marketing Problems

The main three marketing problems are as follows; planned obsolescence, low social media
engagement, and insufficient consumer education of products. These problems have diminished
the company’s goal of high-quality performance and maintaining customer loyalty. To better
map out these issues, Figure 4 in the attachments section houses a breakdown chart that pairs
each problem with a few potential solutions. Essentially, planned obsolescence beginning to turn
consumers onto other brand products with a higher perceived longevity, which chips away at our
brand loyalty. Low social media engagement also impacts the company as consumers begin to
relate less to Apple’s brand compared to more engaging competitors. Finally, insufficient
consumer education on Apple products most directly impacts the company as more and more
consumers seek out alternatives from competitors once they deem a product is too complicated to
use. Extensive research has fortunately led to possible solutions to each of these problems, which
can again be further viewed in Figure 4.

Summary
In conclusion, this report overviews Apple and its main industry, Electronic Computer
Manufacturing. It then goes into extensive detail over Apple’s products and competition, the
company’s SWOTT analysis, target markets, marketing problems and potential solutions. To
remedy the problems that Apple is currently facing, potential solutions have been provided to
succeed in repositioning planned obsolescence, expanding social media engagement, and
improving consumer education of products. In essence, the solutions contain methods such as
repairing/upgrading old devices more in favor of requiring consumer to buy new ones, creating a
social media team to better use various communication platforms, and implementing weekly
training videos to show consumers how to properly use their new products. The recommended
solutions, as again outlined in Figure 4, will be further discussed in Phase III. If you have any
further questions or concerns, please contact our team leader at
skylerjcooper@email.arizona.edu.
 Attachments

FIGURE 1: Apple SWOTT Analysis Chart

STRENGTHS
 Strong brand awareness and customer loyalty.
 29% increase in stock in the past 5 years and continuing to increase.
 First US company to reach trillion-dollar market cap.
 Distribution: 505 retail stores across 24 countries.
 Wide distribution in both the United States and worldwide.
 Apple Partnerships: Qualcomm, Samsung, and Texas Instruments.
WEAKNESSES
 Matching customer expectations and maintaining quality of products.
 Incompatibility with other software and accessories.
 Dependency of few products compared to competitors.
 High prices causing smaller target markets and high volatility.

OPPORTUNITIES
 Growth in smartphone and tablet markets.
 Apple cars supposed to be launched in 2020.
 Technological advancements as the tech industry expands.
 Growing market and rising GDP of developing countries.
 Outlook for mobile advertisement platform.
 Growing popularity of iWatch and Apple TV (iWatch is leading the
market share by 41%).
THREATS
 Risk of international operations and rising tariffs.
 Higher costs in product promotion and development in international
markets.
 Risk of rising hacks and privacy issues in the tech industry.
 Market penetration by other brands in the smartphone market.
 Laptop competition such as Dell, HP and Sony.

TRENDS
 iPhone is a top-selling product
 Increasing revenue from Chinese market by 21%
 Growing demand in Apple services such as App Store and iCloud storage (has grown over 50% year-over-year).
 Continual development in iOS systems that benefit users
 Wireless charging growing in popularity (ex: charging phone cases).

FIGURE 2: Target Market Breakdown Chart

PRIMARY TARGET MARKET SECONDARY TARGET MARKET TERTIARY TARGET MARKET

Caucasian Females age 18-23 pursuing a Caucasian Males age 39-53 with a
Asian Males age 25-38 with a
TARGET college degree whose family make a degree, are married with no kids, and
college degree whose household
DESCRIPTION household income of $100,000 a year or have a household income of $125,000
income is around $70,000 a year.
more. per year or higher.

INITIAL (N) 73 million Millennials in the US 30.6 million Gen Z in the US 82 million Gen X in the US

SEGMENT BASIS 1 About 5.8 million Asian About 15.7 million Caucasian Gen Z in the About 50 million Caucasian Gen X in
(ETHNICITY/RACE) Millennials in the US US the US

SEGMENT BASIS 2 About 3.5 million Asian About 5.5 million are pursuing a college About 17.5 million have a college
(COLLEGE DEGREE) Millennials are college graduates degree degree
SEGMENT BASIS 3
About 1.8 million are male About 2.75 million are female About 8.75 are male
(GENDER)
SEGMENT BASIS 4 About 288,000 make more than About 220,000 have families that make more About 437,500 make more than $125,00
(INCOME) $70,000 a year than $100,000 a year a year
SEGMENT BASIS 5
---- ----- About 188,100 have no kids
(NO KIDS)
FINAL TARGET
About 288,000 About 220,000 About 188,100
MARKET SIZE

FIGURE 3: Key Micro and Macro Competitors Chart

COMPETITORS

Macro-level: Micro-level:
- Samsung - Amazon
- Dell - Google
- HP - Microsoft
- Huawei Technologies - Sony
 FIGURE 4: Identification and Solutions of Marketing Problems
RECOMMENDED
PROBLEMS SOLUTION 1 SOLUTION 2 SOLUTION 3
SOLUTION

Make sure quality of first

Lower price of products so customer Repair/upgrade old devices
version of products is
Planned obsolescence expense isn’t expensive to the point where more than requiring consumer Solution 2
fully developed before
they can’t keep buying new products. to buy new ones.
release.

Increase activity and

Advertise products on multiple outlets. Create a social media team to
Low social media interactions with
Especially directed towards top target better use various Solution 1
engagement consumers on social
markets/demographics. communication platforms.
media platforms

Keep devices simple and

Insufficient consumer easy to navigate so Implement weekly videos training Provide feedback on frequent
Solution 2
education of products consumer isn’t confused consumers how to properly use products. customer complaints.
or overwhelmed.

FIGURE 5: Porter’s Five Forces Model

SUBSTITUTE
PRODUCTS

RIVALRY
POWER OF AMONG POWER OF
SUPPLIERS COMPETITORS BUYERS

POTENTIAL
ENTRANTS

FIGURE 6: Competitor Breakdown Chart

COMPANY CURRENT
STRENGTHS WEAKNESSES
NAME MARKET CAP
 Excellent reliability and consumer service
 Lack of brick-and-mortar Dell stores
 Dell’s Direct Model Approach = strong
Dell $18.7 Million can be troublesome for consumers
consumer interaction
 Competition = slow market growth
 Impressive Product Customization
 Immense spending for research and
 Limited to the PC market segment
development
Intel $202.8 Million  Currently behind in mobile/portable
 Strong presence in global markets
computing market segments
 Considered a market leader
 Mass production inhibits product
 Quality global distribution network
customization for consumers
HP $37.7 Million  Has a lower cost for innovation
 Competition = slow market growth as
 Strong presence in the PC market
well
 Strong research and development sector
 Numerous lawsuits have impacted the
 Strong global marketplace presence
Oracle $180.27 Million company’s brand image
 Strategic acquisitions have led to higher-
 Competition is slowing market growth
quality product offerings
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