Smart Phone Industry – APPLE

Introduction

             Nowadays, the mobile phone manufacturers have made a lot of effort to deal with the problems of production, pricing, and distribution. Let alone the fact that the whole market suffered from a weak economy. The industry undergoes a process of integrating resources, talents and supply chain. Those manufacturers who failed to make a breakthrough in distribution, promotion, technology accumulation and business model will be knocked out. This is a crossroad for industry revolution that next generation of smartphone is on the way. All around the world, wireless internet era has arrived with a more and more popular trend of smartphones. Customers' need varies not only lying in phones’ appearance and basic functions. To make a better marketing strategy, companies should understand the consumer affect and cognition, the behavior of consumers and the consumer environment.

             This essay will focus on the smartphone industry and do a specific marketing survey targeted on Apple. After the first part, which provides an overview of the smart phone industry, second part discusses the main marketing strategy of Apple. Part Three presents the result of a small-scale market survey in details. Part Four discusses the recommendations of the manufacturer based on the interview.

Overview of Smart Phone Industry

Current Environment

      Up to 2016, the United States enjoy the reputation of having the highest smartphone penetration rate among the top three markets which are China, U.S., and India. According to the industry group CTIA-The Wireless Association, from approximately 69% at the end of December 2005, the wireless penetration rate rose to 104.3% at year-end 2013 and broke 115.7% by the end of December 2015.(Penetration measures the subscriber base as a percentage of the total population.) The details, please refer to Figure 1.

      Although the total number of U.S. smartphones user have achieved 1,495.36 million people by the end of 2016, the increase rate of users is growing but still solid(The trend can get a clear vision of Figure 2). The global smartphone shipments have reached around 1,470.6 million, and the revenue from smartphones is near $428.9 billion in 2016. 

Figure 2: Global Smart Phone Users to End from 2009 to 2012

      The mobile communications industry has developed rapidly in recent years with a nearly saturated customers market. The iPhone-like appearance with larger and larger memory can not satisfy customers’ different demand on their independent operating system.

Industry Profile

      With independent computing system and connectivity with the internet, smartphone appeared on the consumer market in the late 90s. Not until Apple's iPhone came into customers' perspective in 2007 and brought a brand new definition of a smartphone, did smart phone become mainstream in the wireless communication industry. By 2017, nearly 63.5% percent of the U.S. population is predicted to use a smartphone. This is a significant figure compared with the user number in 2014 from Figure 2. The iPhone just revolutionized the market by gave up the keyboard with a touch screen instead and operated with a wholly different system, iOS, from the ordinary Android system. That’s why iPhone is more user-friendly since it has a smoother and stable system.

      Three main smartphone manufacturers, Samsung, Apple, and Huawei, occupied the market share. According to the survey conducted by the International Data Corporation (IDC), the worldwide smartphone market grew 1.1% year over year in 2016Q3, with 363.2 million shipments. Although IDC prediction held a pessimistic tone toward smartphone shipments in 2016, shipments grew 5.2% units, compared to the 345.5 million units in the second quarter of 2016. While China has slowly developed a more mature growth pattern, OPPO, Jin, and Cool, some new brands have ushered in a new round of spring. Android dominated the market with 86.8% share in 2016Q3. Samsung continued its global leadership despite the Galaxy Note 7 recall.(International Data Corporation, 2016)

Figure 5: Global Market Shares trend from 2013Q3 to 2016Q3

      While in America, Apple accounted for 43% of all smartphone brands in the country compared with 30% of Samsung in market share. The iPhone users in U.S. was at around 75 million which is fairly large enough compared with the global figure.

How Industry Operates

      With electronic components and circuit industry being upstream firms, smartphone industry connected with customers directly. The manufacturer's design, manufacture and market mobile communication, media devices and portable smartphones. Co-operated with wireless communication companies in America, which are A T&T, T-Mobile and Sprint Nextel; they also sell a bunch of related software, accessories and third-party digital content and application. There are two main ways to sell the products worldwide, retail stores and online shopping. Recently, the second method has gradually taken the retail stores instead.

      Targeted to different customers group, the pricing and promotion strategies vary. Since smartphones become an extension of the users' personalities, the manufacturers began to create the specific targeting phones to meet the demand for personalization, like embedding the high-quality camera and developing the social networking. The appearance of smart phone change regarding colors from time to time and the same case applies to the ring tones and the themes of the system. To be more user-friendly, manufacturers spend more investment on Research and Development department to increase the interaction with the interface via the use of the screen, which needs a more high-tech hardware to support. New phones that are introduced are packed with features and are sold at a premium price. Going through the live circle of a smartphone, the price will fall from a premium price to a comparatively lower price to be available at a wider market. The prices of the smartphones are decided by their functions, qualities and targeting customer groups. Also, the after-sale services are connected with the pricing. Smartphone handset manufacturers take the effort of some strategies to promote their products. Working with the movie stars or the celebrities are the most popular method. Advertisements about smartphones often demonstrate the idea of how the smartphone change people's lives and how they fit the users' lifestyle and personalities. Using Apple as an example, the advertisements are around the companies' live ideas, using their iPhones to change the life, to live much easier and popular. Through the little screen in front of you, they can present a whole world to you. Once purchased, they have more than a thousand apps that suit users' specific needs to enjoy their interests. Apple will be particularly discussed in the next part.

How Apple Operates its Business

      According to the IDC statistics, rather than competed with another new brand in sight, it is increasingly clear that Apple is still on top of the smartphone industry like no other. The most characteristic different from others lies in their product line and design standards.

      First to discuss is its target market, according to Apple's annual report, the company's customers are primarily in the consumer, small and mid-sized business, education, enterprise and government markets. It's a little ambiguous that in fact most of the customers of Apple, nearly 60%, are teenagers and college students, who have demanded in social networking, fashion appearance, and gaming apps. This customer group is the most willing group to spend large money on smartphones. Due to efficient and convenient, Apple products appeal to business people to deal with the business more effectively. These devices are used to finish work and to communicate with clients more easily.(BrandonGaille, 2015)

      The iPhone is Apple's line of smartphones based on its iOS operating system. To achieve its' goal to fulfill each need, iPhone includes Siri; a voice-activated intelligent assistant, and Apple Pay and Touch ID on qualifying devices. To have better services for musical function, the new generation of iPhone features immersive stereo speaker and water and dust resistance. To mention, it adapts new camera systems to become a more professional photographing device. The company is committed to bringing the best user experience to its customers through its innovative hardware, software, and services. Based on its customer group, Apple continues to expand its platform for the discovery and delivery of different contents and applications through the APP store and internet services. Whatever the customers want, likes to study astrology or practice the piano techniques, they can download the digital content through iPhone and enjoy it. That's Apple positioning strategy, to become a multi-functional platform that combines different ideas and products together.

      Apple believes that sales of its innovative and differentiated products are enhanced by knowledgeable salespersons that can convey the value of the hardware and software integration and demonstrate the unique solutions that are available on its products. Nevertheless, Apple prefers to have a direct contact with it target customers and demonstrated the benefits of having an iPhone, compared with other competitive products. Having a high-quality pre-purchase and after-purchase services are vital to attracting new and retaining existing customers (Apple annual report of 2016,2016) The critical key to promoting its products is to make the iPhone become the phone. Apple has no interest in being the top of the sales but having their market, which makes people think about iPhone at once they talk about smartphones, and the same case applies to other Apple products, like iPad when people are talking about tablets. Apple communicates with their customers in the languages of their audience. The advertisements of iPhone are specific to discuss the product specifications that customers truly care about. Apple provides the customers a live style by using their smartphone. With aesthetically attractive appearance and the edge that other products simply do not have, it is easier to garner customer loyalty and to build trust (Market Mind)

Small-scale Survey toward iPhone users in recent six months

      To make better marketing strategies, I conducted a small-scale survey targeted at the people around me who have used iPhone in recent six months. The survey concludes two parts of questions: the first one is "The reason why choosing iPhone as your smartphone," the other is the customers' satisfaction among using and purchasing iPhone.

            The first part is about to understand the customers' affect and cognition toward brands. I questioned about the different factors of smartphones, like appearance, quality, functions, services and pricing, to see how customers come to the final conclusions. The users' age lies in 19-25 the most, followed by 13-18. Most interviewers answered that they chose iPhone because of the solid hardware which ensures the convenient usage of the system. The female users prefer the appearance of iPhone with a simple and elegant design. The 6s generation of iPhone is much easier for female users to use and put into a purse. The quality is the vital, successful factor that iPhone competes with the other manufacturers that nearly 90% interviewers did not use the after sale services since their smart phones did not break up in one to two years of usage. More to mention, the iCloud services and the App store are the second factors that interviewers mentioned. The services that Apple provides for users to download the digital contents from the platform conveniently attracts a lot of teenagers and business people. I attach the details of part one under this.

Figure 6: The results of answering why you chose iPhone to become your smart phone

      Most of the interviewers satisfied about the pre-purchase services. I think the money Apple invested in its salesperson make the effect that most of its salespeople know its products and business strategies well enough to introduce to its customers. So does the purchase progress. Nearly 100% satisfaction toward the first two processes since Apple has sufficient retails shops to fulfill the need of customers.

      When it comes to usage, the interviewers discussed the internal memory of iPhone. The old generations of iPhone still have the product model of 16G and 32G which are much smaller for the user to have a better usage experience. Nearly 80% of these two models users decided to change their phones recently. Moreover, the smartphone shell is too sliding for users to hold. Around 20% interviewers have experience of breaking the screens of iPhones or drop into the water since the phone's slide out of hands.

      Speaking of after sale services, although iPhones are not easy to have troubled themselves, like system errors, once the customers have to replace their iPhones' screens or fixing charge hole, they have to buy the fixing insurance first. The after sale service staffs are not as good as pre-purchase salesmen with a severe cold face and bad temper, as one interviewer said. Not to mention that the customers have to go to the specific maintenance stores, which are very rare, to fix rather than the retail stores everywhere.

The recommendations based on survey results

      There is no further recommendation toward Apple’s targeting group and positioning strategy. Since Apple used positioning by attribute strategy to base its products on customer feature. Apple selected the young people with more budgets on buying a smart phone and chasing the fashion trends to be its customers. That is quite fitting iPhones' design and characteristics, modern and multi-functional.

      The design of Apple products is the key to maintaining its status in smartphones industry. Based on the information provided from the survey, most of the customers chose iPhone because of it’s' quality and design. To ensure the high-quality of innovative purchasing experience, Apple should continue to build and improve its design and platform. Not just stay in recent status. Just like one of the interviewers presents, the new generations of iPhone are no longer presenting surprise, and the innovation like iPhone 4 did and had no particular differences from iPhone 6. That's why the sales of iPhone in recent two years have dropped, and Samsung took the competitive position in a global scope. Ongoing investment in research and development (“R&D”), marketing and advertising is critical to the development and sale of innovative products and technologies.(Apple annual report of 2016,2016)

      It is actually that Apple continues to build and improve its distribution capabilities by expanding the number of its retail stores worldwide. But the retail stores are typically located in highly developed countries and regions, which means there are still many underdeveloped regions have some available customers unreached. Since Apple has already explored the existing customer's group, it is time to expand its services areas and customers base.

      There are four main promotion methods: advertising, sales promotions, personal selling, and publicity. We found that nearly 20% interviewers are recommended by friends and relatives to purchase the iPhone. Maybe Apple can take sales promotion into considerations. Since iPhone is still unaffordable for students to take, Apple may consider the students or teenager sales to promote itself. By the way, the idea and concept of Apple is a little bit out of dated; it is time to change a new icon to chase the fashion trend and become its icon. 

Conclusion

            It is clear that Apple operates in a highly competitive industry for the smartphones, with the entry of different players over the years. The business model of Apple focuses on positioning itself in the target market as a preferred smartphone brand by customers and is less concerned about making huge sales, rather than maintaining its leadership position in the industry. The survey indicates that the Apple products remain highly expensive for certain customer segments. Hence, it would be appropriate for them to change tactics of coming up with products whose prices are in line with different financial capabilities of the various social classes in the society so that it can be the brand for all, but not the current situation where it is the brand for the rich. In conclusion, Apple needs to invest heavily in advertising and sales promotion to boost its future sales according to the findings of this study.