Apple’s Iphone Launch: a Case Study in Effective Marketing Essay Example
Apple’s Iphone Launch: a Case Study in Effective Marketing Essay Example

Apple’s Iphone Launch: a Case Study in Effective Marketing Essay Example

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When CEO Steve Jobs announced in January 2007 that Apple would be releasing a revolutionaryiPhone five months hence, consumers waited with bated breath for a phone that would deliver all the features of their iPods as well as a smart phone. Anticipation grew, just as Jobs knew it would, as Juneapproached. The launch would become one of the most heralded technological product splashes Apple,known for its masterful media build-up, had ever planned.

How the iPhone was developed, priced, promoted, and distributed is lesson for marketers around the world. Apple investors were pretty happy withthe outcome as well. One year after Apple Inc. CEO Steve Jobs announced the company’s industry-changing iPhone onJanuary 9, 2007, at the Macworld convention in San Francisco, the share price of Apple’s stock has morethan doubled to a January 9, 2008, value of $1


79. 40 (See Chart 1).

This stock price incorporates all of Apple’s business, but a large part of the rise in value can be attributed to the launch of the cutting-edgeiPhone, of which four million have already been sold through mid-January 2008 (Carew, 2008). Based onthis simple observation of the stock price, the iPhone can so far be declared a success, at least from ashareholder standpoint. This paper will explore both the pre- and post-launch activities surrounding theiPhone to explain why it was such a success for the stockholders and why Apple’s reputation forunparalleled marketing success is deserved.

One blogger (www. blogs. business2. com) was so interested in Apple's iPhone advertising schedule, he conducted a Nexis search for newspaper stories that mentioned the iPhone between June 23and August 18, 2007. During that timeframe, Appl

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had aired nine new TV ads. The week the iPhone waslaunched, 1,547 stories appeared in the media, compared to 206 in mid August. Apple's advertisingschedule appears to reinforce the iPhone's presence in media during times when the buzz or free media hastapered off.

This combination of paid and free media gives consumers the impression that the iPhone is constant presence in the popular media. One of the most influential periodicals dedicated to advertising, Advertising Age, in 2007 selected Apple as a runner-up for the annual Marketer of the Year award. This status was conveyed because of Apple's "rare accomplishment of successfully bringing a new product into an already crowded andcompetitive market. Apple's agreement with cellular telephone service provider AT&T gave it an upperhand in their relationship older cellular telephone firms have yet to acquire" (Bulik and Cuneo, 2007).

While Apple's advertising budget and schedule aren't readily available, Adweek 's AndrewMcMains estimated the Apple global account was worth $250 million in 2006 to agency TBWAWorldwide (2006). Other pundits have guessed that Apple will spend at least $20 million to launch theiPhone in Europe and easily surpassed that figure in the United States during the summer of 2007 alone.

 Apple made some changes in its traditional consumer distribution channels, choosing to eschewthird-party dealers/retailers such as Best Buy and RadioShack Corp. hen planning where to sell theiPhone. AT&T offers the phones in its roughly 1,800 company-owned stores; iPhones are also available inApple stores or through Apple's website (Sharma, 2007). While impossible to predict a possible backlashfor Apple as it continues to market its entire product line, altering established distribution channels canconfuse customers and risk future

distribution plans with those retailers who were cut out of the iPhoneplan. The excitement surrounding the release of the iPhone was not contained solely in the U. S.

Longlines outside stores and enthusiastic countdowns accompanied the iPhone’s release in the U. K. and Franceas well. Apple has chosen to take a marketing and distribution approach in these European countries that issimilar to its U. S. strategy. In France, Apple struck a deal with France Telecom’s mobile subsidiary,Orange, to be the exclusive carrier in that country (Woyke, 2007). In the U. K. , Telefonica’s mobilesubsidiary, O2, was tapped to be the exclusive wireless carrier, and, as AT&T has done, it is requiringminimum two-year contracts from its iPhone customers (Olson and Laurent, 2007).

This strategy in Europe creates many of the same opportunities and problems found in the U. S. butwith a few added complications. As hackers continue to unlock iPhones, the revenue for these exclusivewireless networks is put into jeopardy if customers are able to easily unlock their phones. While this couldboost sales for Apple by allowing customers to access more wireless carriers, Apple will still need toprotect its partners by countering any new hacks, which takes considerable time and resources. Apple alsohas to contend with differing consumer protection laws throughout Europe.

For example, it is illegal to sella locked mobile phone through a single operator more than six months after its initial release (Olson andLaurent, 2007). The allure of Apple’s iPhone has become a double edged sword for the company as its popularityhas created a huge black market for unlocked iPhones. When Apple announced it had sold 3. 7 millioniPhones by the

end of December, and AT&T reported it had less than 2 million account activations in thesame period more than a few analysts took notice. Sales in the U.K., France, and Germany account for partof the variation, but their sales have been sluggish and only account for approximately one-fifth of the 6 difference. That being said, roughly 1. 4 million iPhones are currently unaccounted for. This is a problemfor Apple because the iPhone must be activated on AT&T’s network in order for Apple to receive theadditional revenue. Apple has taken notice and said the number of unlocked iPhones “was significant inthe quarter, but we’re unsure how to reliably estimate the number (Crum, 2008).

If the current trendcontinues it could have a significant effect on Apple’s bottom line for years to come. Research analystToni Sacconaghi has said that if Apple meets their goal of selling 10 million units by the end of 2008 and30 percent of the phones are unlocked it could mean as much as $1 billion in lost revenue to Apple over thenext two years (Crum, 2008). The problems created by unlocked iPhones do not stop with Apple. Instead, every carrier that hassigned an exclusive agreement with the company is being hurt.

For example, AT&T is also losing out onthe monthly evenues from lost iPhones, and they are more likely than Apple to try to stem the flow of unlocked iPhones through legal action. AT&T is more apt to target the companies who are unlocking thedevices and then selling them rather than taking Apple to court. Mark Siegel, who is an AT&T spokesman,has said that the iPhone is ' "meant for use by

the person who buys it,’ and not to be resold for commercialpurposes” (Burrows, 2008). After all, AT&T is hurt more by losing account activations because theirrevenue only comes from one source, monthly fees, where Apple has the profit from iPhone sales to offsetthe losses from unlocked units?

Since the release of Apple’s iPhone on June 29, 2007, it has sold an astounding four million units(Carew, 2008). The hype surrounding its release helped it become the fourth most popular handset in theU. S. , and by the end of the October, Apple reported selling 1. 12 million units. Additionally, it has becomeAT&T’s most popular handset, commanding nearly 13 percent of its overall sales (Appleinsider, 2007). During Apple’s 2008 Macworld keynote address Jobs announced that the iPhone had a 19. 5 percent shareof the smart phone market in the same quarter (Carew, 2008).

Consumer satisfaction with the iPhone hasbeen significantly higher than its competitors, according to a 2008 ChangeWave survey. Additionally, thesurvey shows the iPhone is the top choice among those planning to buy a new phone in the next six months(2008). Despite the fears of a looming consumer-led economic recession, Apple executives still believe thegoal of selling 10 million iPhones by the end of 2008 is attainable. Reaching this goal, however, will depend on future modifications to the iPhone and marketingefforts in the slowing economic conditions.

The normally secretive Jobs let it slip in September thatconsumers can expect a 3G iPhone in 2008 (Miles, 2007). He expects that improvements in technologywill allow for the faster network without affecting the battery life of the device. The recent release of a 16gigabyte iPhone demonstrates Apple’s

continued ability to recreate their products and spur sales as marketconditions change. Additionally, Apple is releasing a software development kit (SDK) which will allowthird parties to market software for the iPhone.

This is an excellent example of the emerging two-partyplatform business model (Eisenman, Parker and Van Alstyne, 2006). Apple created a very strong overall marketing strategy for the iPhone and managed every aspect of the iPhone’s launch very effectively. Like almost all products, the iPhone has some flaws and drawbacks,but Apple was able to develop a unique product for tech-savvy consumers interested in a combinationsmart phone-music player and make those customers aware of the product through well-managedmarketing efforts and strong publicity.

The iPhone exemplifies Apple’s knack for creating excitementabout products among its fiercely loyal customer base, who keep attention focused on the company, andthen justify the hype by delivering a high-quality, desirable product. In addition to satisfying consumerswith a great product, Apple built a powerful partnership with AT&T and also conferred benefits to overseassuppliers of parts and manufacturers. All of these efforts boosted Apple’s stock price considerably andfurther solidified Apple’s image as a leader in consumer electronic gadgetry.

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