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AppleiPhone KTeam Two: Tyler Darke, Carly Jones, Sarah Hirschmann, Ina Koelle, and Hyunsoo KimFundamentals of MarketingBUS 306-01, Fall 2013Presented to Professor Carol DavisTable of ContentsTable of Contents..............................................................................................................................2List of Figures...................................................................................................................................4Executive Summary..........................................................................................................................5Situation Analysis.............................................................................................................................7Market Summary..............................................................................................................................7Geographics......................................................................................................................................8Business to Business.............................................................................................................8Business to Consumer...........................................................................................................8Demographics...................................................................................................................................9Business to Business.............................................................................................................9Business to Consumer...........................................................................................................9Behavior Factors / Psychographics.................................................................................................10Business to Business...........................................................................................................10Business to Consumer.........................................................................................................10Market Needs..................................................................................................................................12Market Trends.................................................................................................................................12Market Growth...............................................................................................................................13SWOT Analysis..............................................................................................................................15Strengths.............................................................................................................................16Weaknesses.........................................................................................................................15Opportunities......................................................................................................................16Threats................................................................................................................................17Competition....................................................................................................................................17Product Offering.............................................................................................................................18Keys to Success..............................................................................................................................19Critical Issues.................................................................................................................................20Marketing Strategy.........................................................................................................................21Value Proposition...............................................................................................................21Mission................................................................................................................................21Marketing Objectives..........................................................................................................21Financial Objectives...........................................................................................................21Target Markets....................................................................................................................22Positioning..........................................................................................................................22Strategies.............................................................................................................................22Marketing Mix................................................................................................................................22Pricing.................................................................................................................................22Distribution.........................................................................................................................23Marketing Communications...............................................................................................23Marketing Research........................................................................................................................23Financials........................................................................................................................................24Break-even Analysis...........................................................................................................24Sales Forecast.....................................................................................................................25Expense Forecast................................................................................................................26Controls..........................................................................................................................................27Implementation...............................................................................................................................27Marketing Organization..................................................................................................................27Contingency Planning....................................................................................................................28References......................................................................................................................................29List of FiguresFigure 1: Household Income of Potential iPhone K Consumers....................................................10Figure 2: Likelihood of Parents to set Parental Controls on a 5-12 year-old Child’s Smartphone.....................................................................................................................................11Figure 3: Comfort Level of Parents to set Parental Controls on a 5-12 year-old Child’s Smartphone.....................................................................................................................................11Figure 4: Percentages of Adults and Children Living in Households with Only Wireless Telephone Service or No Telephone Service.................................................................................14Figure 5: Opening Weekend iPhone Sales Through the Years......................................................16Figure 6: Highest Price Parents are Willing to Pay for a Smartphone Under a 2-year Contract for a 5-12 year-old Child......................................................................................................................19Figure 7: Likelihood of Parents to Give a Smartphone to a 5-12 year-old Child...........................20Figure 8: Cost Break Down............................................................................................................24Figure 9: Break-Even Analysis.......................................................................................................25Figure 10: Sales Forecast................................................................................................................26Figure 11: Marketing Expenses......................................................................................................26Figure 12: Marketing Department Organization............................................................................26Executive SummaryToday, almost everyone has a smartphone, so it makes sense that more and more children want one at a younger age. Apple is one of the market leaders when it comes to smartphones. With the iPhone K, Apple develops the opportunity for parents to give their children a smartphone and still have the control over what their kids are doing with it. ?????????? The primary target market will be concerned parents between the ages of 25 and 50, with average to high incomes. The iPhone K will be made for children between the ages of 5 and 12.????? Although there are already many applications available for parents to set restrictions on their children’s smartphones, all these restrictions have to be set separately, which makes it more difficult and complicated. Kajeet, a downloadable service, is the biggest competitor to the iPhone K, but rarely known.?????????? Apple will market both business-to-business and business-to-consumer. Since Apple considers the needs and wants of concerned parents when it comes to the iPhone K, its marketing strategy is consumer-orientated.?????????? In order to make sure that the iPhone K is successful for a long time, one has to take a look at market trends such as changes in purchasing power and brand loyalty, parental concern, and business lifestyles. These variables do not seem to pose a problem. Since children tend to want the same product as their family members or friends, and Apple is already viewed as a company with high family values, the loyalty Apple has utilized might still remain for the iPhone K. If the number of parents who want to stay connected to their children increases, the iPhone K will benefit from this trend as well. ?The financials include fixed costs, variable costs, and selling costs. Fixed costs include machinery, maintenance, rent, and administrative cost, which total $550,000 per quarter. Variable costs are $267 per unit, factoring in materials, manufacturing, transportation, and storage. The cost for marketing and selling the product varies year-to-year. For the first year, this cost is $160,000,000 and includes advertising, travel, promotions, and distribution. In sequential years, this cost is 1.37% of the previous year’s revenue. Factoring in qualitative data based on Apple, we determined our projected sales to meet iPhone K’s breakeven point of 174,784 units during the first quarter.We will market the iPhone K through communication tools such as an official product announcement and introduction, Apple’s pre-established website and stores, online and physical advertisements, and selling wholesale to cell-phone service providers.Apple’s mission shows a commitment to supplying customers with the latest, safest, most efficient, and most convenient cellular phone for young children. The iPhone K exemplifies this in their marketing strategy by being a leader in the market through innovating current technology to create value for parents by providing a safe and protective communication tool their children will want. Situation AnalysisAccording to new research conducted by Zact, a wireless service provider, 40% of children between the ages of 2 and 14 own a smartphone. Today, parents do not ask, “Should I buy a smartphone for my child?” but rather, “When should I buy one for my child?” (Samberg, 2013). Regardless of this trend, they are worried about the way their children will be able to use these smartphones. Also, according to research conducted by the Family Online Safety Institute (FOSI), in 2012 84% of parents report that they monitor their children’s mobile activity “very” (31%) or “fairly” (53%) closely. The iPhone K provides parents with a better solution for monitoring their children’s smartphone activity without depriving them of the latest technology.In the market for parental controls, there are already many applications available for parents who want to restrict the smartphone activities accessible by their children. However, they would have to download multiple applications to achieve the same level of security the iPhone K offers. For example, they would need to download applications that allow for GPS tracking, monitored messaging, and any others desired restrictions separately. Many of these applications require monthly payments and consume vast amounts of data. The largest competitor with the iPhone K is Kajeet, a downloadable service only offered through Sprint. Kajeet offers different brands of smartphones for kids such as LG, Nokia, Samsung, Sanyo, ZTE, HTC, and Kyocera that are preloaded with the Kajeet software. However, based on data from the survey we conducted, 60% of parents are not familiar with this type of smartphone application for children. Market Summary More and more young children are being exposed to advanced technology at a younger age. One of the most popular devices among young children is the smartphone, which allows them to play games, listen to music, communicate with their friends, and use the internet. According to Business News Daily, 40% of children under the age of 17 own a smartphone (Mielach, 2013). While children love the idea of owning such a popular device, it presents an area of great concern for parents. Many parents worry about the access their children will have to adult content through the use of a smartphone. For some parents, the concern is so great that it stops them from buying their children smartphones at all.While parental controls are available on most smartphones, they present challenges within themselves. Many parents like the idea of using parental controls, but simply do not possess the technical ability to confidently apply the controls to their children’s phones. Parents need a foolproof solution that allows them to comfortably purchase a smartphone for their 5 to 12 year old child without worrying about giving their children access to inappropriate content.Currently there are no comprehensive solutions to this dilemma. A company called Firefly manufactures phones for children, but they are limited in the functions that they offer. Kajeet is a software company that offers parental control options for parents, but it lacks the advantage of being able to produce both the software and the hardware together. There is a gap in the market between childish phones with limited functions and standard smartphones that are built primarily for adults. The iPhone K fills this gap, offering a fully functioning children’s smartphone that blends hardware and software together seamlessly, as Apple is so well-known for doing.With this phone, we will target concerned parents who do not currently have a viable option for purchasing a smartphone for their children. We will primarily target parents between the ages of 25 and 50 with average to high incomes. Marketing will be focused around urban areas surrounding large cities where early adopters are commonly found.GeographicsBusiness-to-BusinessThere are certain regions where the iPhone K could achieve rapid growth in sales and profits. ?We anticipate the product being most successful in urban areas surrounding major United States cities. These are generally the locations where higher income citizens and early adopters live (Derickson, 2012). These are the people we have identified as being most likely to purchase the iPhone K for their children. We will start by marketing the iPhone K in urban areas surrounding major cities. These are areas where Apple stores are currently placed, making them prime targets for marketing the iPhone K as they represent geographic locations where Apple is already accessible (Apple, 2013).Business-to-ConsumerThere are no identifiable geographical locations where the iPhone K will fail, because many consumers are not familiar with phones made for children. The product could be marketed in almost any location because it presents a new opportunity to concerned parents. Through market analysis, though, we will first focus on urban areas that hold the greatest concentration of our target consumer groups.DemographicsBusiness-to-BusinessThe iPhone K will appeal to parents with children between the ages of 5 and 12. Smaller firms can use the iPhone K to increase their awareness level and profit. For instance, firms that serve as a distributor can offer this product directly from Apple to the consumer, playing a big role in marketing. Targeted firms will include electronic stores and online retailers.Business-to-ConsumerThe iPhone K is perfect for parents with young children. Through our research, we determined that most parents of young children (between the ages of 5 and 12) are between 25 and 50 years old. This age range represents an important demographic group for us to target. Members of this demographic group live in many different geographic locations, but primarily in urban areas surrounding major cities (Governing, 2013). These parents want to give their children a chance to communicate with their friends and family without gaining access to inappropriate content.Technology is constantly developing and many children have a conventional smartphone which does not restrict content that is not age appropriate. The iPhone K provides an option to parents within the early adopter demographic who want their children to be familiar with the latest updates in technology, but are concerned with purchasing a conventional smartphone for their children.Another important demographic to target is people with mid-to-high income levels, as this represents the majority of consumers who found interest in the iPhone K. According to data from the survey we conducted, these parents can comfortably afford to purchase the iPhone K. The chart below shows the data we collected regarding household incomes of potential iPhone K consumers.Figure 1Behavior Factors/PsychographicsBusiness-to-BusinessThis marketing should focus on identifying firms that are willing to collaborate with Apple to sell this product for mutual profit. These firms are also affected by rapidly developing technology and need compete against their rivals. Their attitude towards the iPhone K will likely be enthusiastic because it is a new concept that can set a new standard for child-oriented technology.Business-to-ConsumerThe first target group of the iPhone K will consist of parents who want their children to be protected from adult content that conventional smartphones allow them to access. They want to set parental controls to restrict their children’s smartphone access, but they may not have the technical ability to accomplish this. According to our research, most adults claim to have little to moderate comfort with setting parental controls on a smartphone. This group will be most attracted to the iPhone K since it protects their children from inappropriate content while also giving them the freedom to play games, listen to music, and enjoy other features. The following charts show the desire of parents to set parental controls on their children’s smartphones and their relative technical ability to do so based on data we collected from the survey we conducted.Figure 2Figure 3Market NeedsThrough our research, we have concluded that our product needs to have intuitive parental controls that are easy to use. Parents want to purchase their children phones that are safe to use and easy to restrict. Current phones in the marketplace have parental controls that are limited in functionality. Some functions are only attainable by downloading third-party applications; some require a monthly payment. Parents want access to controls that limit inappropriate content which is being sent or received, such as pictures or text messages. Safe internet usage and downloads is one of the issues which will be solved. The iPhone K will use parental controls to limit websites and access to internet with ease. With the previous two issues in need of solving, privacy concerns arise as well. The concern for parents to maintain child privacy will be managed.Smartphones bring about new concerns for parents such as safety, overuse and addiction, privacy concerns, distraction from school and relationships, “sexting”, and cost of lost phones. According to data acquired from the survey we conducted, more than 73% of parents want to set parental controls on a 5 to 12 year old child’s smartphone.According to our assessment of the market, many parents want to set parental controls for their child’s phone; however, they do not have much information regarding the process. Many articles say that smart parents are needed to operate a child’s smartphone; parental controls are difficult to set. The iPhone K will give parents a simple way to setup parental controls on their child’s phone. They can limit internet access, monitor messaging, restrict time on games, and geographically track the phone with GPS. The iPhone K also provides children easy access to making emergency calls. A new report from Nielsen indicates that many children want an iPhone as a present (Nielsen, 2012). Giving an iPhone to one’s child, satisfies his or her desire for a smartphone more than any other type of smartphone can.Market TrendsIn the market summary, trends were introduced that occur in the iPhone K’s marketplace. These market trends include parental concern and busy lifestyles, changes in purchasing power, and brand loyalty.The first variable that Apple’s iPhone K can benefit from is brand image and loyalty. As companies develop brand images, consumers tend to buy from those that they relate to or admire. Also, younger generations constantly search for products that will cause them to feel a certain way or help them to fit into a desired group. Children are most susceptible to this trend and tend to ask for the same products as their peers and family members. ?These variables can have influence on the iPhone K because Apple is already viewed as a company with high family values and this product can reinforce that image.The second variable is parental concern and busy lifestyles. Overall, there are increasing numbers of parents who work full-time and want to stay connected to their children. There are many parents who do not take the time to learn how to properly use certain types of technology and the child is usually much more knowledgeable than the adult. The iPhone K will benefit from this trend because a device with simple, easy-to-setup parental controls will allow for consumers to efficiently monitor the way children use smartphones without taking time from their busy schedules.Market GrowthNaturally, the iPhone K’s target market includes parents of younger children. Market growth for the iPhone K is shaped by these people becoming more reliant on mobile devices as well as a decrease in the age of first-time mobile phone users.According to Aaron Smith (2013), as of 2013 “56% of all Americans are smartphone users.” This is a 21% increase in smartphone users since 2011.These increases in smartphone usage cause the market to refocus suppliers to combine products or provide applications desired by the consumers. Rind found that 43% of survey-respondents reported their smartphones replaced their cameras, 34%, mp3 players, and 24% utilize GPS on their phones (Rind, 2013). People are also relying on mobile devices for communication. Return Path (2013) reported email usage on PCs decreased by 9.5% between April and September 2011 while mobile email usage increased by 34%. Another factor to consider in the communication is the change in phone services used in homes. Chart 4, from a survey conducted by the CDC on an article from Beschizza (2012), shows the number of adults and children living in wireless-only homes has risen exponentially. As of 2012, 40.6% of children in the U.S. do not have a landline in their home. The iPhone K’s market share can increase through giving children the ability to easily communicate with parents who rely on smartphones for daily tasks and communication.The iPhone K can also help market growth because the average age of children receiving smartphones is decreasing. Daily Mail (“Children own”, 2013) reported a study, conducted by MobilePhoneChecker.co.uk, that found most children are given their first phones at the age of 7.5; the average age children got phones in 1993 was 13.5. The same study also found 74% of parents “give children mobiles for safety reasons and 'peace of mind'” while 22% gave their children phones simply because the child’s peers had a phone (“Children own”, 2013). A survey we conducted about the iPhone K concluded that 60% of parents with children between the ages of 5 and 12 would be likely to give their child a smartphone. 71% of those surveyed would be likely to set parental controls; however, 60% are uncomfortable with setting parental controls. Based on this data, the iPhone K can be expected to grow the market for safe, parent-approved smartphones through easy-to-setup parental control technology.Figure 4SWOT AnalysisIn order to analyze Apple’s market situation, one has to take a good look at the company’s strengths, weaknesses, opportunities and threats.StrengthsApple possesses many strengths that make the company unique. One of its major strengths is brand loyalty. Consumers are so dedicated to the brand, they are willing to wait overnight outside its stores in the freezing cold just to be one of the first to purchase the new iPhone, iPad, or Mac.Another strength of Apple is its brand reputation. Apple has a reputation of highly innovative, well designed, and well-functioning products. According to a report from Interbrand, a brand consulting company, Apple replaced Coca-Cola as first among the 100 most valuable brands based on criteria including financial performance. Its brand is valued at about $98.3 billion (“Interbrand”, 2013).Apple has not only the most valuable brand, but according to a report by The Boston Consulting Group, it is the leading innovator of the world for 2013 as well. “The report was based on information taken from more than 1,500 senior executives in a global survey that spans a wide range of industries around the world” (Su, 2013).It is not a mystery why Apple has the power to be able to sell its products at such high prices. Even though its competitors sell their devices at lower prices, they have no impact on Apple, and according to the opening weekend sales of iPhone 5S and iPhone 5C, the company obviously does not care about lowering (Worstall, 2013).WeaknessesThere are also weaknesses one has to consider. As mentioned, Apple has the ability to sell its products at high prices, but what happens when people cannot afford acquiring such a costly smartphone every year? Since customers can easily get similar quality at a lower price, the price of Apple devices can quickly become a weakness. Another weakness is the defects on new products. It is obviously not only an Apple weakness, but because some iPod and iPhone releases had faults, the firm’s reputation was affected. The iPhone 4, for instance, has a design flaw. When holding the phone in a particular way, the positioning of one’s hand would cause the phone to lose a few bars of wireless network signal (Bourque, 2010).In addition to that, another weakness lies in Apple’s restrictiveness of its operating system. In comparison to other smartphones, iPhones are too restrictive which forces the users that want to push the envelope to “jailbreak” their iPhone. Customers can only have a firewall or special themes on their iPhone if they first jailbreak it.OpportunitiesThere are a few opportunities which Apple takes advantage of. ?First, there is a high demand for the iPhone 5s and 5c. As the following chart indicates, the opening weekend sales of iPhones rose from $1 million in 2008 to $9 million in 2013. This leads to the conclusion that the sales of the coming iPhones will continue to climb (Yarrow, 2013). ?Figure 5Apple has a strong advantage with iCloud and iMessage. Due to the growing emphasis on mobility, people are dependent on external, portable storage. This leads to an increasing demand for cloud-based services. According to MacNN, Apple’s cloud-based services have grown substantially. Over two billion iMessages are sent per day, and over 250 million users have iCloud accounts to sync contacts, calendar data, notes, photos and other data (“Macnn”, 2013).ThreatsOne of the biggest threats to Apple’s success is the rapid technological change Apple faces. Apple, along with every other technological company, is under great pressure to release new products faster and faster as well as to be the best innovator to keep up with competitors.This leads to the next threat: Apple has strong competitors. When it comes to smartphones, Google’s Android operating system is very popular, making them a major competitor. Samsung is a serious competitor in the hardware market. It sells similar-quality, innovative devices, and its smartphones are just as affordable. Other competitors include: Research in Motion, Nokia, Sony, and LG.A final threat to Apple is its primary supplier and producer, Foxconn, which has caused many negative headlines leading to a bad reputation of fights, protests and workers springing out of their windows due to despair of the working and living conditions. The wages are too low and the number of work hours is too high. This forced Foxconn to install safety nets in many of its factories and dorms (Moore, 2012). However, it is also important to consider that Foxconn produces for some of Apple’s competitors such as Sony and Microsoft as petitionThere are two major competitors in the market for children’s smartphones. Kajeet is the primary competitor to the iPhone K, offering software solutions that are designed to be used by children. The software is loaded into a variety of popular smartphones like the Samsung Galaxy S4. The company is limited because its phones are only available through Sprint. Kajeet claims to provide a solution for concerned parents to convert adult-oriented smartphones into child-oriented smartphones, but it lacks the comprehensiveness of iPhone K. The phones offered by Kajeet are generally fairly priced for smartphones and they have the advantage of looking identical to popular conventional smartphones.The other major competitor is Firefly, which offers mobile devices designed for children. While the company offers a variety of mobile phone options ranging from very simple phones to relatively complex ones, none of them can really be considered smartphones. Some devices are so limited that they can only call two programed phone numbers and emergency services, while others are sophisticated enough to offer texting and gaming. The primary issue with Firefly devices is that they are not focused on the needs and wants of children. They do not carry the “cool factor” that comes along with having a smartphone at a young age. Children do not want a Firefly phone when they can have an Apple phone, simply for reasons of brand recognition. Firefly phones are generally inexpensive and unattractive. They are more concerned with marketing to parents and making them want the phone, rather than making the children want the phone.Product OfferingThe iPhone K is a new Apple iPhone design made for children and marketed to parents. This phone is compatible with existing Apple products and other products that use USB drives or Apple technology. It utilizes innovative software and modified hardware. Software features are focused around intuitive parental controls that are easy to set up. When the phone is plugged into the user’s computer and iTunes account, an icon in the iPhone set-up screen gives the user password-protected access to a parental control account. The options for data accessibility include limited internet, availability for email, and choice to allow only downloading child-appropriate applications, songs, and videos. Also, the user can choose monitored or restricted messaging and the option to block calls from strange numbers or prevent calls made to unknown numbers. The iPhone K utilizes GPS technology for the phone’s location to be monitored from a computer or a separate verified phone. This software is available anytime the phone is linked to the iTunes account for users to adjust settings at their discretion. The modified hardware features include a cheaper, more-durable design: a plastic exterior and steel frame interior, same as the iPhone 5C; and new technology called liquid repellent nano-coating, manufactured by P2i, to protect the phone from accidental water damage.Optional features include the amount of storage, warranties, data plans, and manufacturer accessories. The amount of storage capacity offered for the iPhone K includes a A6 chip with either a 16GB or 32GB drive (Apple, 2013). Warranties and data plans are only available through wireless carriers; however, an optional reinforced, child-proof case will sold through both the wireless carriers and the manufacturers for an extra charge.Keys to SuccessIn order to be successful with our new smartphone for children we are focusing on factors that will lead to the same fascination customer have about the iPhone 5s. According to data from the survey we conducted, 54% of consumers are not willing to pay more than $50 for such a smartphone under a 2-year contract, as shown in the following chart.Figure 6Since the price is a strong key to success, we will have to make sure to sell the iPhone K at a reasonable price and still meet the expectations of our customers along with the same quality our users are used to. The most important factor is the parents’ willingness to buy a smartphone for their kids. Up to now, according to our research, 39% of consumers are not likely to give a smartphone to a child between the ages of 5 and 12, as seen in the graph below.Figure 7This leads to our last key factor: courage. Since most of the respondents were extremely satisfied with our variety of parental controls and we are right at the beginning of our research, we will stay confident and keep marketing our new device. We need to be courageous to enter a new market.Critical IssuesThere are many factors that might obstruct the success of the Apple iPhone K concept. First, one fundamental fact that may inhibit the success of the product is if someone launches a similar smartphone before or at the same time as the iPhone K, beating us to the market. This would decrease benefits because Apple would have to compete with the other company to become the market leader. This would lead to lower sales figures for the iPhone K. Technological change is another major factor affecting the success, because it is rapidly changing. If another firm is developing a new technology, like an application equal to the technology of the iPhone K and applicable to all smartphones, and also replaces the need for an iPhone K, Apple will not have a great chance to sell its smartphone to its targeted customers (“UKEssays”,2013).Marketing StrategyDuring the past few years, Apple has marketed itself to a specific type of customer: wealthy and trendy early adopters. Due to its imaginative, cutting-edge, and fresh approach to conducting business, Apple has achieved great success. The company has developed a series of exceptional products with creative design and innovative function. The iPhone K will broaden its product line with more satisfied customers.Normally, children’s wants and needs vary from those of adults. The makes advertising and marketing difficult for the company to target those two groups. However, in this case, those two groups’ desire and satisfaction are similar. Parents want to give the best products to their children for a reasonable price, and children want trendy, creative products.Value PropositionApple is a company which has a great brand image and value proposition. People are willing to pay more money for Apple’s products because it was the first producer to develop a convenient smartphone with a touch screen. People tend to think that the first company to enter the market produces the best products; therefore, the iPhone K will benefit from the company’s brand image. The product will have a high value proposition like other iPhone models have in the past.MissionApple is committed to supplying customers with the latest, safest, most efficient, and most convenient cellular phone for young children.Marketing ObjectivesThrough our marketing efforts, our objective is to reach members of our target market and capture their attention. We hope to appeal to them strongly enough for them to decide to purchase an iPhone K for their children. Consumers should be made aware that the iPhone K is their best option for purchasing a safe, quality smartphone for their young children since 65% of our survey respondents indicated they would be likely or extremely likely to give their 5 to 12 year-old child a smartphone. Consumers should find that the iPhone K is consistent with the high standard of quality that the other iPhone models meet.Financial ObjectivesBecause Apple already has a fantastic brand reputation and great brand awareness, we anticipate doing much better than simply breaking even in the first year. Break-even analysis shows that we must sell 699,136 units to break even within the first year. We anticipate sales of 57,500,000 units in the first year, drastically exceeding the break-even point.Target MarketsThe iPhone K will be marketed towards parents of young children between the ages of 5 and 12. These parents generally fall within the age range of 25 to 50 years old. This will be the primary group we will target. Within that age range, members of our target market will have mid-to-high incomes. These are generally the people who can afford the iPhone K. Our product will likely capture the attention of early-adopters who are always looking for innovative new technology to incorporate into their lives.PositioningOur product will be positioned as a high-end smartphone for children. It will fall under the category of “more for more” because we will charge a premium price for the most advanced technology available in the market. Our competitors offer lower prices for inferior products that lack the features and abilities of the iPhone K. We offer a seamless combination of advanced hardware and software for an optimal product.StrategiesOur strategy to market the iPhone K will be to appeal to concerned parents who are dissatisfied with the current options in the market for children’s phones. Our product will be easy for consumers to purchase because it will be available for purchase from all of the current outlets that other iPhone models are available through. We have created a product that comprehensively addresses the concerns that parents have in regards to giving their young children smartphones. We have chosen to concentrate marketing efforts on parents, as they are the decision makers in terms of what their children can have and cannot have.Marketing MixPricingApple’s continued success of the iPhone has proven that consumers are willing to purchase them at their current price point. According to our survey, people are not willing to pay as much for a children’s smartphone as an adult’s smartphone. As shown in Figure 6, only 27% of our survey respondents indicated they are willing to pay more than $100 for a children’s smartphone under a 2-year contract. As the break-even analysis indicates, the minimum price we can set for the 16 GB iPhone K with no contract is $300. We decided to sell it for $499.DistributionThe iPhone K will follow the distribution process of the other iPhone models. It will be offered at Apple stores, online, and in other stores such as Best Buy, Walmart, and wireless retailers. It will be available unlocked or under contract from AT&T, Sprint, Verizon, and T-Mobile.Marketing CommunicationsIn order to reach our target market, we will proceed just as Apple would with other products. We will utilize television commercials, billboards, and social media to advertise. In addition, we will reach target market through mobile service providers such as AT&T and T-Mobile which advertise our products as well. We must make it a priority to address children. For instance, the best time to promote on TV would be in the afternoon, when children are home from school. When it comes to social media, the advertisements must be on pages that a 10-year old child will likely visit on Facebook.Marketing ResearchOur primary research was accomplished by an online survey we created using Google Forms. The survey gave us an overview of what parents expect from the a children’s smartphone; for instance, features or restrictions. It also showed us how much they are willing to pay for the phone. These responses allowed us to gather a lot of information about our target market.?????????? We used secondary data to determine further information about our target market and to find information regarding the sales history of other iPhone models. We also used secondary data to determine how many people own smartphones and what demographic categories these users fall within.?????????? Over the course of the product release, primary data needs to be collected to determine consumer opinions of the iPhone K. This research can also help Apple to determine which forms of marketing were effective and which forms need improvement. Increasing the efficiency of marketing efforts will lead to long-term success for Apple.FinancialsIn order to add the iPhone K to Apple’s existing product line, we established that variable costs would be $267 per unit, selling costs of $160,000 for the first quarter, and fixed costs would be $550,000 per quarter (Hodgkins, 2013). In order to break even, we must sell 174,784 units per quarter. Based on data from previous Apple iPhone 5C sales and our survey, we established our projected sales forecast to be, on average, 1,725,000 units per quarter for the first year.Cost Break DownVariable CostsPrice per Unit Materials$174 Manufacturing$60 Transportation$13 Storage$20Total per Unit$267??Fixed CostsPrice per Quarter Machinery$300,000 Maintenance$10,000 Rent$190,000 Administrative$50,000Total per Quarter$550,000Figure 8Break-even AnalysisBased on previous iPhone sales and costs, the iPhone K would only have to sell 174,784 units per quarter to break even (Brown, 2012). Each iPhone K is sold at a price of $499 wholesale; 174,784 units sold would yield a break-even value of $87,217,216. These sales are easily attainable, as seen in the Sales Forecast section, and we plan on breaking even within the first month of sales.Figure 9Sales ForecastDue to the previous success of Apple products, we determined sales would be extremely high almost immediately. Since families may be reluctant at first, the number of units sold starts lower and as the product gains recognition and reputation, sales are expected to increase exponentially.The chart below represents iPhone K sales in the U.S. As of 2010, there were 114,800,000 families in the U.S. Factoring in our survey findings that 32% of people would be extremely willing to buy their 5 to12 year-old child a smartphone, the ability of a parent to afford the phone with a data plan, and natural reluctance, we established a reasonable sales forecast in the U.S. over three years (“Total number”, 2012).-69469033972500Figure 10Expense ForecastTo determine the selling cost of the iPhone K, we chose a likely cost of $160,000,000 based on Apple’s previous advertising budget. From data retrieved from CNN Money, we based our marketing expenses for Year 2 and 3 on Apple’s previous marketing budget of 1.37% of revenues (Elmer-De Witt, 2009). The following is a breakdown of those expenses:Marketing ExpensesExpenseYear 1Year 2Year 3 Advertisements$70,000,000$78,984,438.75$103,891,252 Marketing Travel$20,000,000$22,566,982.50$29,683,215 Promotions$40,000,000$45,133,965$59,366,430 Distribution$30,000,000$33,850,473.75$44,524,822Total$160,000,000$180,535,860$237,465,719Figure 11ControlsiPhone K sales will be continuously observed and compared by the units sold per quarter and, later on, per year. We will have constant growth in units sold, which is shown in the sales forecast. To meet our sales and market goals for the first four quarters, we will rely heavily on marketing to all possible retail locations. At the end of the first year, a total of 57,500,000 units should be sold. Orders are placed through business segments which will then be transmitted to Apple, helping to guide production.ImplementationTo implement the production of the iPhone K, Apple must instruct its engineers to construct the phone which will be an adapted version of the iPhone C. The next step is to design the software, which will be an adaptation of iOS7, and test its functionality. The iPhone K will have a team that is responsible for overseeing the distribution of the photos to retail locations to reach consumers. After this process, retailers can begin selling to customers. Satisfied customers will promote the phone through word-of-mouth marketing. The iPhone K will be marketed through all social media outlets, TV commercials, and posters on the official company homepage (Rouse, 2007).Marketing OrganizationThere will be four main teams: the conversion team, creation team, strategy team, and the customer service team. The conversion team will facilitate the transaction and selling of the phone. The team will be travelling and representing the iPhone K at sales exhibitions and select retail locations. Advertising and Public relations will be the responsibility of the creation team. They will design various commercials for television and social media, and ads for use in billboards and brochures. This team will emphasize the strength of Apple and its brand reputation. One of the most beneficial factors of the marketing plan is that the iPhone K is very helpful in customers’ lives. Promoting this will be the function of the strategy team, which represents the core message of the phone and the marketing material. The last team is the customer service team which maintains contact with customers, creating an opportunity to market the product. For example, the phone support representatives will have the opportunity to offer upgrades while speaking to customers. The technical support members will also have a marketing opportunity when they repair the defects of new phones.Marketing Department OrganizationFigure 12Contingency PlanningThe most risky scenario for iPhone K is if another phone company launches a similar smartphone before or at the same time. Apple’s iPhone has succeeded in gaining attention from customers because of its reputation as the first successful smartphone. Dominating the marketplace as a first mover is a very important factor for becoming the market leader. If the other company launches a children’s smartphone at the same time or before the iPhone K at a lower price, Apple will need to spend more money on marketing. Although the marketing cost seems high, being a market leader is a crucial factor to success. Apple needs to rely on its brand image and reputation. The iPhone K will attract more and more Apple users who are already satisfied with their other Apple products. Also, our product will be released at a reasonable price for the technology offered. It will be a strong starting point for marketing.ReferencesApple retail stores, united states. (2013). Apple. Retrieved December 5, 2013, from: , R. (28 December 2012). The long slow death of the landline. Boing Boing. Retrieved October 12, 2013, from: , J. (June 24, 2010). iPhone 4 reception loss: Antenna design flaw at fault?.Retrieved October 17, 2013, from:, R. (September 4, 2012). The cost of making an iPhone. Investopedia. Retrieved December 1, 2013 from: own a mobile by age seven: Youngsters now get a phone six years earlier than a decade ago. (August 7, 2013). Daily Mail. Retrieved October 15, 2013, from: evaluate the segmentation utilised by Apple iPhone marketing essay. (May 17, 2013). UKEssays. Retrieved 2013, from: . (November 30, 2012). Demographics of early adopters, november 2012 [chart]. e-Strategy Trends. 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