1.4. The Apple Health Watch will not only be a device for everyday use but a system designed to perform as a personal assistant, guiding users to a healthier lifestyle. It will focus on tracking most aspects of a person's health and life by giving out carefully designed suggestions, according to a number of criteria. Nowadays, people are becoming more and more concerned about their health, which gives an opportunity for Apple to develop a device, which helps out people, who do not want to spend time or too many resources in achieving a better lifestyle. The Apple Health Watch will focus on mainly tracking movements, heart rate, and daily steps. The first step, which the consumer needs to take when purchasing the Health Watch will be to provide personal information, such as height, weight, type of lifestyle they are currently living (such as sedentary, active, very active), diet preferences (vegan, vegetarian, meat eater, gluten-free), workout habits, occupancy (student, full-time worker, unemployed etc.) and workout preferences (yoga, weight-training, pilates, bodybuilding, home workouts with or without equipment etc.). After the information is set up, the device will track the movements for a week and will give a full report of how the consumer can improve their current lifestyle. This report will be sent to the customer's email, where he can find a number of propositions, which will be according to the preferences that the user input during the information gathering. The report will include a workout plan, meal plan, and multiple podcasts, which could be played during a workout, acting as a guide through it. The Apple Health Watch will not only be a well-designed watch with apps available but a personal assistant, which will provide you with all the necessary information the user might need to save time and resources.
2. Segmentation & Targeting
2.1. Segmentation means dividing a certain population into groups according to a set of characteristics. The Apple Health Watch focuses on mainly Psychographic, Demographic and Behavior bases. A psychographic segmentation is focused on linking psychology and demographics to understand consumers. In psychographic segmentation, consumers are often grouped on the basis of personality characteristics or traits, such as personality characteristics, lifestyle, values, and social class. The demographic segment groups people into categories, such as income, age, occupation and family life cycle. It is often associated with consumer needs and wants, so it is considered widely popular among marketers. The behavioral segment groups people on the basis of attitude and knowledge of a certain product, such as the degree of loyalty, benefits sought, personality and user status. (Kotler & Keller, 2016, p. 271-283).
2.2. Apple, Inc. is a multinational technological company, which positions itself as a brand specializing in the making of products and services with functions and capabilities, which can be considered widely advanced. Apple, Inc. used a mono-segment type of positioning, also called single-segment concentration (Dudovskiy,2018). Through this type of segmentation, Apple, Inc. manages to gain a wide knowledge of its customer's needs and wants and maintain a strong presence in the market (Kotler & Keller, 2016, p.288). A targeting strategy implies the choice of specific groups, which are identified during the process of segmentation, to sell products to. A very common set of characteristics that Apple users share include quality, the simplicity of design, high performance of products and services. (Dudovskiy, 2018).
2.3. The Apple Health Watch will be using the same targeting strategy as the company itself, as it is proven to be effective and efficient. The targeting strategy can be considered relevant for the Apple Health Watch, as it will be targeted towards people who are well off financially, and appreciate a simple, efficient and well-made product.
2.4. According to the demographic segmenting, the Apple Health Watch is made for people who are in the ages between 18-45, which consists of people who are in University, couples, newly married, full nest etc. They will be high earners and have an average, above average income. They might be young professionals, managers, fitness instructors or people who enjoy pursuing a healthy lifestyle. According to the behavioral segmentation, they will be "hardcore" loyal users of Apple, Inc. or "switchers". They might be regular buyers or potential users, who are ambitious and determined in their everyday life. According to the psychographic segmentation, potential users of the Apple Health Watch will be people of upper-class status, who are aspirers and explorers in general (Dudovskiy, 2018).
Team assignment 3 â€“ Branding & Positioning and Distribution of Apple
Branding and Positioning
1.1. To bring the Apple Health Watch on the market we will use the existing Apple (iWatch) brand and focus on pure brand extension. Because Apple already has a product line in which they sell smartwatches it would be a logical choice to keep close to this product line and add all the new product features we wanted to add to the original Apple Smartwatch. In that way, we will improve the existing smartwatch with the concepts that people value. (These concepts are the results out of our survey from last week.) So, it will be a hybrid to a line extension and a brand extension. We would like the customers to perceive the Apple Health Watch as a really innovative new device, but the design will be close to the existing smartwatch. Our survey from last week showed a lot of respondents valued the Apple brand partly for their design. Results out of our survey also showed a lot of respondents own Apple products other than an Apple smartwatch. Due to this, some brand loyalty may be involved in decision making when buying this product. It will also build further on brand equity of the Apple smartwatch category. The product will also be a combination of a symbolic value to customers as well as a functional value. This is because we want customers to buy in to the new Apple product, which some people buy because of the above-mentioned symbolic value. But we would also like to reach and attract new customers by adding real functional value to this product. So, advantages for the new product will be that consumer perceptions are already made. Most people are familiar with the Apple brand (Survey health watch marketing research, 2018). So, customers already have some associations in their mind with the quality, design etc. of the product and this can be an advantage because Apple customers are satisfied with the products Apple has delivered before. For example, the iPhone X has a 97% customers satisfaction rate (Survey of Creative strategies, 2018). So, Apple is a brand people will trust with inventing new products so promoting the new brand will also be easier. For the parent brand, in this case Apple Inc. there will be feedback effects. Our survey showed that some people would like to see that Apple will become more innovative instead of just line extensions and just small features, something really new. So, introducing the Apple Health Watch could be a good step for them because it is something different than what they have been doing before. They could also get more market coverage because the Apple Health Watch will also target a different segment in the market which they did not really serve before.
1.2. In this paragraph we will look into the way our new product, the Apple Health Watch, will be positioned. As discussed in the previous paragraph this new product will focus on brand extension. This product will be an extension to Apple's product line of smartwatches, and therefore will be designed in a similar way. Our new product will be positioned in a similar way because Apple has already positioned their brand name in a strongly manner. Apple has labored to cultivate a strong brand personality based on the ideas of nonconformity, innovation, and creativity. Advertising and marketing strategy have highlighted these associated characteristics with advertisements like the "Think Different" campaign (Fitzsimons, Chartrand & Fitzsimons, 2008). From the survey of our previous assignment we have discovered that consumers value Apple's design as an important feature for a new Apple product. This can be thought of as one of Apple's core associations and is desirable for the consumer. Other core associations consumers immediately think of when they think of Apple are listed in a graph below:
Apple Core Associations (Ansett, 2010)
At this point we will look into some of these core associations to determine if they are strong, favorable and unique. With this information we then determine if these associations are either points of parity or points of difference. The associations to be looked into are: design, expensiveness, creativity. First of all, the association design. Design is a strong association according to the graph, it is something that comes up to consumers when they think of the brand Apple. This association can differ per person but in general this association is positively related to Apple (Survey health watch marketing research, 2018). Apple's design is something that is unique to its brand. Consumers recognize an Apple product by it because it distinguishes from competitors. Thus, we can categorize design as a point of difference. The Apple watch will therefore look similar to previous designs because it is a point of difference for Apple.
Expensiveness is an association that is strong under consumers when regarding whether to buy an Apple product (Ansett, 2010). This association can be regarded as unfavorable. It can motivate consumers to purchase a product from the competitor. This association, not something that makes Apple unique. Competitor Samsung, for example, sells products with comparable prices (Leswing, 2017). Expensiveness can thus be regarded as a point of parity. In previous assignments, there has been discussed that the Apple Health Watch should reach new consumers. To improve these unfavorable associations the new products price should be considered.
Creativity is a strong association that comes up when consumers think of Apple. Consumers regard Apple as an innovative brand. This is a favorable association. Our Apple Health Watch will be a creative and new product. In this age of consumer-generated contentâ€”when product personalization is an all-time highâ€”creativity is becoming more central to many consumption behaviors (Fitzsimons, Chartrand & Fitzsimons, 2008). The personalization is what makes our product unique. It will set us apart from competitors. It will give the product a point of difference and will set us apart from competitors.
1.3. The original Apple Inc. brand architecture can be described as being "endorsed", which means that the company relies mainly on customer loyalty and because of that, their target audience does not care much about product features, as much as they care about the brand promise. Apple's products have always been simple in design, universal and with strong marketing presence in the market (Lischer, 2017). Due to this fact, we have chosen to extend the current existing brand without expanding further, because Apple's branding strategy has been proven to work seamlessly. Apple's sub-brands, such as the iMac, iPhone, iTunes, iWatch benefit from each other and this is why our Apple Health Watch will be absolutely related to the current portfolio of Apple. Our new product will be designed in the same way, with the universal apple logo on the back of it. The design of the interface will also be the same, because we want to provide customers with brand consistency. If Apple would change their classical look, people would not be satisfied completely, since they rely on the brand promise, which is simplicity, creativity and elegant designs. The main reason why we would keep the new products within Apple's original brand strategy is because of the established brand image that the brand has created over the years, and since our product is a modified version of the iWatch, it did not make much sense to separate it from the rest of Apple's products.
1.4. As mentioned before, with the introduction of our Apple Health Watch we will be using the existing Apple (iWatch) brand and thus be applying pure brand extension. In order to identify and differentiate the Apple-brand we must make use of helpful tools, called brand elements (Kotler and Keller, 2016, p. 331). Due to the brand extension, we will be making use of the relatively self-evident brand name â€˜Apple Health Watch'. With the use of this name we create familiarity with our customers because it resonates with the iWatch. The brand name also highlights the main purpose of our new product; health. According to the brand element criteria (Kotler and Keller, 2016, p.331), this element is very meaningful because it strongly suggests the according category and the type of person that might use this brand. Besides that, the brand name is also transferable since the name can also be used when introducing new products in the same category, for example â€˜Apple Health Earplugs'. Unfortunately, it does not protect the brand against certain challenges. For instance, it is difficult to legally protect the brand element since the name contains two generic words: health and watch. This shortcoming of this specific brand element may cause the Apple brand issues that they might not want to encounter again. According to Page (2015), for example, Apple was sued by the official owner of the â€˜iWatch' trademark for using the term on online search engines to enhance their Apple Watch results, hoping to reach more potential customers. Our chosen brand logo is the second brand element. We use the renowned apple, missing a bite, in different colors to emphasize both the health aspect as well as the personalization our product offers. Customers are free to choose the watch in the color to their liking to enhance the personalization. The colors we chose are green, red blue and purple. This element is both memorable and transferable. The memorability is determined due to the fact that color has been proven to increase the chances of encoding, storing and successfully retrieving information (Dzulkifli and Mustafar, 2013). The transferability is demonstrated in the fact that the element can introduce new products in the same or even in different categories. The logo can, for example, introduce additional colors that the customer can choose from. This simultaneously meets the criteria of adaptability because of the possibility to update the logo.
In the appendix, we have included prototypes of the logo; the bitten apple in the colors green, red, blue and purple. Beneath the apple, the word â€˜iHealth' to communicate the product category we are referring to, which is the Apple Health Watch.
1.5. Secondary brand associations are used to create brand equity by linking the brand to other sources of information that are already existent in the memory of the targeted consumers. The graphic of Kotler and Keller (2016) shows that a brand can make use of geographical regions, things, other brands and people to create these associations. According to the editors of Biography.com, Steve Jobs, co-founder, and CEO of Apple Inc. passed away in the year 2011 as a result of his pancreatic cancer. One secondary brand association that we want to use for our new product is the collaboration/association with the American Cancer Society. After the Health Watch is introduced, for a short period of time, Apple Inc. shall donate a percentage of the Health Watch proceeds to the UCS as to create a homage to Steve Jobs and simultaneously create a positive secondary association to the new product. This is one way for us to build equity by linking the brand to another entity. The second source of secondary knowledge that we would like to use in leveraging associations, is the use of brand endorsers. Brand endorsers would use the Apple Health Watch in their daily life and thereafter promote the product to their own fanbase. Since endorsement is used to create secondary associations, we must further examine the right people for this task since we want the associations to be in the favor of our new product. Results do suggest that there is a positive effect on consumer pre-purchase attitudes (Dean, 2013), hence our choice to use other people as a secondary source of knowledge.
2. Distribution/channel strategy
2.1.-2.2. Regarding the number of channel levels on which Apple Health Watch should be distributed, we decided that the zero-level and one-level channels are the most suitable for our product. Apple already has its own Apple stores where they sell all of their products, which is a direct marketing (zero-level) channel (Keller and Kotler, 2016, p. 523). So, it is an easy and handy way to distribute our new smartwatch among the consumers. Also, by the use of selective intermediaries, we can use a one-level channel too. The bigger electronic stores do not require close partnerships with the manufacturer (Keller and Kotler, 2016, p. 529) and they are not too exclusive to sell only certain types of products, thus they may attract bigger crowds of potential consumers. Furthermore, stores that distribute electronic products usually have the basic professional knowledge of these kinds of devices, which is important if the customers have questions about the use of the product or if they are not sure whether the device is suitable for them or not. There are already some stores selling electronics and some phone providers that also sell Apple products, for example, Media Markt, Euronics, Vodafone, etc. so this kind of distribution channel can also be beneficial for our smartwatch.
When choosing a promotional strategy, we decided on combining the two. Pull strategy can be applied in our case because it requires brand awareness and loyalty (Kotler and Keller, 2016, p. 516). As it turned out of our research, 98.1% of the people filling in the questionnaire knew about the brand Apple, so the company possesses a great brand awareness. Also, in part 1.3. of the assignment it was already mentioned that Apple has brand loyalty. Push strategy works when the customer has to make the decision of buying a certain product on the spot (Magloff, 2018). Thus, by creating new products (e.g. our new smartwatch) and selling them in different stores through our zero-and one-level channels, customer demand can be pushed. Furthermore, we would also apply advertising and promotions in order to pull the consumers, so the effective combination of the two strategies can be reached.
Team Assignment 4 â€“ Pricing & Marketing Communications for Apple
1.1. According to Apple's pricing strategy, their four main pillars for pricing are offering just a small number of products, prioritizing profits rather than market shares, mainly targeting the high end and creating an effect so people would seek for Apple products (Nielson, 2014). Apple also focuses a lot on product differentiation which resulted in high customer loyalty and demand for their new products (Nielson, 2014). Furthermore, the company has a strategy in which retailers are not allowed to advertise the manufacturer's products price below a certain minimum price (Nielson, 2014). Lastly, Apple usually sets premium prices for their new products, the cheapest products' prices are still set in the mid-range (Nielson, 2014). From this, we decided that for our Apple Health Watch, the most beneficial pricing objectives would be the maximum current profit and maximum market skimming. Although maximum current profit may seem difficult, as it assumes that the company is able to estimate its demand and cost functions, maximizing profits rather than shares is one of Apple's pillar strategy at the moment (Keller and Kotler, 2016). Based on that this strategy for Apple has worked for years, as the company is still in the Top 100 global brands (according to Brandz), it seems reasonable to continue this with our product. Maximum market skimming focuses on setting the price of new technology high and gradually lowering it over time (Keller and Kotler, 2016). Although this strategy can also be risky, our product might have some of the conditions needed for this strategy to work. Apple is famous for the great hypes they can create for their new products by advertisements and introducing new products on grand conferences which can elevate demand even more with the customer loyalty that already exists for the company. So, by sticking to hyping up our product, demand can become higher. Also, as Apple is mainly known for its premium prices, but still is very popular due to its design, innovations and the brand itself - as it turned out of our survey â€“ the higher price of our product has the ability to convey the portrait of a superior product which is important for maximum market skimming (Keller and Kotler, 2016).
1.2. Regarding the factors contributing to price sensitivity, in our market, it can be said that price sensitivity is medium. Although not all points that make customers less price sensitive can be shown for the Apple Health Watch, but considering the fact that last year when Apple introduced the iPhone X and the iPhone 8 Plus with the starting prices of $1,000 and $800, which was $80-$100 more for a phone than before, still gained one of their biggest profits ever (Sullivan, 2018). This shows that the basic elasticity for Apple products is high, which may indicate that the average Apple customer is less price sensitive. According to Keller and Kotler (2016), there are several situations that make people less price sensitive from which two are working in case of our product, which is: if there are no or not many substitutes or competitors and if the customers think that the high price is reasonable. The market for smartwatches is still growing and is mainly driven by big tech companies, such as Samsung, Apple, Fitbit, etc (Allied Market Research, n.d.). So, there are not too many competitors in the market and as our product has more features than a simple smartwatch, the number of substitutes is even less. As the Apple Health Watch can be three things in one because it also includes the possibility of having a personal trainer and a personal nutritionist people can be made to think that the price is justified.
1.3. The business process of producing the Apple Health Watch will include a number of fixed and variable costs, which need to be taken into account when deciding on the final price of the product. The first cost to think about would be Electronics costs (which can be considered variable, since it will change with the number of products required to be produced). This type of cost can be considered the most expensive one, as this is the stage where a prototype is made and tested until most major bugs in the device are eliminated. Then we consider the Retail package development cost as next, as the retail package can be considered just as important as the product. Then we have fixed costs, such as certification costs, which are mandatory for all electrical products that will be sold in the United States. The manufacturing setup costs come next since after prototyping the product it will need to be mass developed and manufactured. Of course, the marketing and advertising costs are considered as well, as well as the cost of selling, administrative costs and last but not least, support costs.
1.4. Our two main competitors are the Samsung Galaxy Gear and the Fitbit Ionic 3. Samsung is and has always been, considered as Apple's top competitor on the market. Samsung is a major tech corporation, specializing in the making of computers, smartphones, smart watches etc. Their rivalry has gone as far as a lawsuit, where Samsung sued Apple over patents that Apple used in their products (Samsung Inc. v. Apple Limited Patent Act, 2015). Samsung's products are very similar to those of Apple, including the smartwatches that both companies came up with. Although Samsung has a good smartwatch, the features that will be provided on the Apple Health Watch are much more and they are also very personalized, something that Samsung definitely does not have. Samsung's current smartwatch has a retail price of $348.42, which is around, or a bit lower than the price point of a standard iWatch. The next competitor Fitbit, which is a company specifically specialized in making fitness trackers and smartwatches. We consider Fitbit a bigger competitor with regards to the Apple Health Watch since Fitbit is highly recognized for its fitness and health-oriented electronics (Fitbit, 2018). Although the price tag of the Fitbit Ionic 3 is only $299.00 and falls almost $100 less than a standard iWatch, we firmly believe that Apple's loyal customers will choose not only the design features of our new smart watch but also its functionality and innovation. The price for our new product will remain in the higher price spectrum since Apple's customers are not regarded as price-sensitive and Apple is trying to achieve maximum gross margin, which is between 35% and 47% (Gilbert, 2015).
1.5. We have chosen to use the perceived-value pricing method for the Apple Health Watch. Apple's customers are strongly influenced by the brand's image; therefore it would make sense if the price is based on the perceived image of the product, its performance, warranty quality, customer support etc. (Kotler and Keller, 2016). Although there are other more affordable smartwatches on the market, Apple's innovative, simple and stylish designs have been an ultimate favorite amongst consumers. (Hartsmans, 2018). The reason for a higher price would be the low-price sensitivity of Apple's customers, as well as the premium features, design and brand image. Our Apple Health Watch will be retailing for $400, which is approximately $50 more than the Samsung smartwatch and $100 more than the Fitbit. Although the price point is relatively high, we believe that the outstanding features that will be provided, as well as the sleek and modern design, will compensate for the higher price.
2.1. In our ad, we will make our brand Apple Health Watch relevant to its target. So, therefore, we need to create salience. It needs to be clear who we are. We will do this by emphasizing that the product is a new innovative product by apple with the current Apple design. This because the Apple brand is already known so it creates positive associations and the original Apple design needs to be highlighted because our survey showed that that's one of the major points Apple's customers' value. We also want to communicate brand performance and brand imagery. This can be done by answering the question what are we? We want to communicate that this is new to the market product of Apple. We need to show off all the amazing features the new health smartwatch will have. It will be so much more than just a smartwatch. It will their personal trainer, nutritionist and a convenience to the customer. And most important it will be modified to their personal preferences and wishes so the smartwatch when fully installed will fit them like a glove. In our ad, we want to communicate the great features our smartwatch has. So, we will not be focusing on points of parity with competitors. This because we want to differentiate from our competitors. We do want to focus only on the only point of parity with Apple itself namely the design and that the information the product needs and creates can be transferred via all other Apple devices. We can also bring the points of differences up in the add without naming one of the competitors. The focus needs to lay on the fact that the features are new to the market, so the customers need to indirectly understand that Apple is the only one with this kind of product. The brand and product associations we want to establish will be: â€˜Innovative', â€˜Unique' â€˜High end', â€˜High quality', â€˜Living up to expectations', â€˜Worth it', â€˜Design', â€˜User friendly', â€˜Convenience', â€˜Lifestyle', â€˜Accessories' and â€˜Accessible'. The ad also needs to be in the same style Apple already uses. Flashing images focusing on the product as well as showing catching words. But this time we would also like to add a third dimension more like a real video with someone using the Health Watch and hearing the Health Watch giving tips.
2.2. The hierarchy of effects model states that a buyer passes through cognitive, affective and behavioral stages (Kotler and Keller, 2016). These stages go from awareness and liking to finally a purchase. As discussed in the previous paragraph, Apple is a well-known brand, consequently, consumers have knowledge of our brand. As seen in the previous assignment consumers have developed different associations with Apple like its logo and design. The Apple Health Watch is a new product that needs to raise awareness for our target audience. We can thus categorize the communication objective to establish a need for category because this is a new-to-the-world product (Kotler and Keller, 2016). Furthermore, we need to decide on an advertising objective as well. Because we are introducing a new product we will make use of informative advertising that will focus on key product benefits. The advertisement will in that way appeal to the consumers' feelings and actual behavior to motivate and persuade them to buy the Apple Health Watch. It will show them what benefits our new product will bring them. As discussed in the previous paragraph the advertisement will, for example, show a person using the smartwatch which will show the product benefits and get in touch with consumers feelings and behaviors.
2.3. In our advertisement, we would like to use both informational and transitional appeals. The informational appeal is suitable for us, as our advertisement includes flashing words to the audience that characterizes the product and shows elaborates on the use of it and demonstrates the watch (Kotler and Keller, 2016, p. 588). An example of it is that the ad rationally introduces a person using the watch while showing some keywords. With the transitional appeal, we would like to influence the audience's emotions by elaborating on the image of the Apple Health Watch (Kotler and Keller, 2016, o. 588). In our advertisement, a healthy, sporty looking person could be the user of a watch, showing the desired image of the future users and with an upbeat, electronic music in the background uplifted, or hyped emotions could be created. This these appeals, firstly the engaged Apple users could be targeted who are loyal to the brand, get informed about the new products quickly and show a high level of involvement. Secondly, based on our survey that was mainly done by people around 20, the younger generation is more up-to-date with technology and trends (e.g. healthy lifestyle) so they would also be a great target of these appeals. From the answers to our survey, these people already have strong associations with the brand Apple, so they also have a high level of involvement (Kotler and Keller, 2016, p. 202).
2.4. In this paragraph, we will discuss which medium we will use to communicate our ad. For our advertisement, we will be making use of a television ad. A television ad allows us to combine sight, sound and motion this will consequently appeal to the senses of consumers (Kotler and Keller, 2016). As mentioned before, our product is new and needs to raise awareness for the consumer. A television ad allows us to vividly demonstrate product attributes and persuasively explain their corresponding consumer benefits. This allows us to get in touch with consumers feelings and behaviors.
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