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Strategy and Positioning Analysis Part 2

Sherry Lira, Antton Mattern, Heidi Meadows

MKT/421

MARCH 22, 2016

JOE MICHAEL

Strategy and Positioning Analysis Part 2

With the introduction of Apple's new touchscreen MacBook there are many things that need to be considered for the marketing of the new product. The product lifecycle will need to be evaluated, the packaging and pricing as well as distribution.

Product Lifecycle

The product lifecycle starts with the introduction of the product to the market. Typically this can be the most expensive stage for most companies, because sales are low. With the current Apple customer base this stage will be short as the product moves into the growth stage. The growth stage for this product will quickly reach its peak where the pricing will remain constant as the product is in its maturity stage. The product will then move into the decline stage where it will remain until it is obsolete. The decline stage can be a result of new technology being introduced and demand for the product declining. When the product reaches this stage the consumer will see a drop in the price point.

Packaging

MacBook's packaging is a great representation of how Apple adds value to its product. The process of opening a newly packaged Apple product is a highly anticipated event for Apple product junkies. The box houses the computer, cable, and charger which is held in space created for each individual shape. This eliminates the need for packaging products like bubble wrap or popcorn. According to McElhearn “Every element of the packaging is carefully conceived not only to protect the product and accessories, but also to display the same esthetic that Apple applies to its hardware” (2015). Apple provides a Quick Start Guide and warranty information in booklet for within the packaging. Consumers may not read the Quick Start Guide, but the folder also contains “a couple of Apple stickers (something that the company has provided with its products since the days of the Apple II)” according to McElhearn (2015).

Pricing

Apple attempts to differentiate from other products in the marketplace by making their products different from the rest. Apple strives to make their products attractive and representative of the company's creator in innovative standards, like Steve Jobs intended.  Despite the competition, Apple creates demand for its products and empowers the company to separate themselves from the rest of their peers by setting prices indicative of their innovative products and branding.  According to Nielsen (2014), “Apple's advertising, brand loyalty, and hype around the launch of new products” puts Apple ahead of the competition (Nielsen, 2014). “By focusing on customers willing to pay more and maintaining a premium price at the cost of unit volume, Apple also set up an artificial entry barrier to competitors” according to Nielsen (2014). Apple not only sells its own products, but it sells third-party products directly to consumers   through its retail locations and direct sales sources. The company also utilizes other indirect distribution channels, like wholesalers, cellular network carriers and retailers (Nielsen, 2014).

According to Nielsen (2014), “Apple uses a retail strategy called minimum advertised price (or MAP). Minimum advertised pricing policies prohibit resellers or dealers from advertising a manufacturer's products below a certain minimum price. MAP is usually enforced through marketing subsidies offered by a manufacturer to its resellers”.

Apple's popularity is maintained by allowing specific retailers like Wal-Mart and Best Buy to receive a marginal wholesale discount. Unfortunately, this discount is not large enough of a profit margin for retailers to extend discounts on to consumers.  On the flip side, Apple does not like these retailers to extend the discounts onto their customers, so they usually provide   monetary incentives to sell the products with the same fixed pricing offered by Apple (Nielsen, 2014). This price strategy helps prevent retailers from competing directly with Apple on their own products and retail stores (Nielsen, 2014).

Premium prices

Steve Jobs' vision for Apple was to create a premier product with premium pricing. Apple's lower end products are usually priced in the middle range as compared to their other higher end products, but Apple strives to “ensure a high-quality user experience with their features. The hardware and user interface are designed to provide a lot of value for the price, which keeps profits high. However, a company can charge a premium price as long as it has a competitive advantage, and analysts believe the brand is on the way to losing its aspirational status,” according to Nielsen (2014).

Distribution

Apple has selling opportunities with its distribution methods. The company plans to utilize the same selling points and distribution tactics that were previously successful for the MacBook Pro Touch. This will include Apple's own stores as the main distributor of the product.

“During the company's last earnings call, CFO Peter Oppenheimer said Apple's 372 stores collectively generated $4.1 billion in revenue. That's a vast sum, and one that might lead you to believe that Apple sells most of its gear through its own stores.” (Paczkowski, 2012, para. 2). External third party retail sales are always successful revenue generators for the company. Since most third party stores are paid in advance the in-store inventory is the property of the seller, this gives Apple the opportunity to utilize the retail store as another source for distribution of its products without more liability to its own bottom line. This will be the most utilized venue for customers who want to gain information about usage, and ask product specific questions. Returning customers may choose the brick and mortar store, or, they may take advantage of the convenience of online shopping.

“In the U.S., Apple's retail stores, along with the company's online storefront, sold 47 percent of the Macs and 40 percent of the iPads purchased by the survey sample during December 2011 and August 2012.” (Paczkowski, 2012, para. 3). The Apple store is one of the most frequently shopped stores for consumers who are looking to purchase a new laptop. This has a direct impact on the amount of product that is distributed to each individual Apple store and every store has its own demands for things like product sales volume and stock. The company plans to make the Apple store the main source for consumers to purchase a new MacBook and their stores will have the first round of distribution for the computer while some third-party stores may have the MacBook in stock soon after. Apple plans to be the first and only store to offer their newest item on the day of its release. Since pre-ordering is available for more tech savvy consumers directly on the Internet Apple will need to place a set amount of product aside for expected sales of the new MacBook based on previous years sales as well as previous movement of past models.

Internet sales are expected to be the largest point of sale for this new laptop. Since most customers enjoy the convenience of home or office delivery, Internet sales always gives the customer the chance to have the product before it is available in stores and without having to wait in a long line. The ability to preorder gives the customer a chance to get in and have an item on order before it is even available to purchase at a retail store. This can also give Apple a chance to see how many people are truly serious about buying their next product ensuring production can follow directly from the amounts that are being demanded from paying customers. Although this may seem like a flawless business plan already, Apple is careful to only produce a limited amount of product to increase demand. This gives the brand a chance to give a taste, but not enough to last.

Third party stores, such as Best Buy or Wal-Mart, have become an important distributor and sales generator for Apple. This is something that needs to be taken into consideration when looking at point of sales for the new MacBook Pro. The large box stores can handle volume more easily than a smaller mom and pop shop. This means Apple will be more likely to offer a bulk amount to larger corporations, than to its smaller competitor counter parts. The larger the order that will be placed by these big stores, the more likely Apple will be to provide plenty of stock for them to sell. “They're simple, even austere, with minimal signage and crystal clear messaging. The pervasive feeling is that lots of folks are there to help you and nobody is there to sell you anything. Apple products are positioned as unique categories. To the extent that it's feasible, Apple likes resellers to sell its products as unique categories, as opposed to side-by-side next to competitors, either on storefront shelves or online.” (Tjosep, personal communication, May 16, 2015)

Conclusion

In conclusion, apple uses internal and external sales tactics to maximize profits. By utilizing many methods of selling, they reach the most customers. By having the product available from many sources, the highest number of customers will have access to products, service, and support, which will keep Apple on the forefront of customer's minds if they need a new Apple product. The packing and design simplicity ensures that both the novice as well as the discerning customers will find something they like in the new MacBook Pro.

References:

McElhearn, K. (2015). Wrapping it right: In praise of Apple's packaging. Retrieved from http://www.macworld.com/article/2973339/tech-events-dupe/wrapping-it-right-in-praise-of-apple-s-packaging.html

Nielsen, S. (2014). http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/. Retrieved from http://marketrealist.com/2014/02/apples-premium-pricing-strategy-product-differentiation/

Paczkowski, J. (2012, October 3). Breaking Down Apple's Retail Distribution Strategy. Wallstreet Journal. Retrieved from http://allthingsd.com/20121003/apple-stores-get-the-glory-but-retail-partners-shoulder-load/

Tjosep (personal communication, May 16, 2015)

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