team 3 apple icam marketing plan (final)
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Marketing Report Contents
Executive Summary (Part 1).........................................................................................................3
Market Analysis (Part 2)...............................................................................................................5
Brand Analysis.....................................................................................................................5
Market Segmentation Approach..........................................................................................6
Market Segmentation...........................................................................................................7
Needs by Segment...............................................................................................................8
Market Survey Results.......................................................................................................10
Analysis of Current & Potential Competitors....................................................................11
Top Three Current Competitors.........................................................................................12
Top Three Potential Competitors.......................................................................................13
Environmental Analysis.....................................................................................................14
Technology........................................................................................................................14
Society...............................................................................................................................15
Industry..............................................................................................................................16
Market Analysis Conclusions............................................................................................17
Marketing Plan (Part 3)..............................................................................................................18
Description of the Market Opportunity (Part A).....................................................................18
Description of Need...........................................................................................................18
Discussion of Market Potential..........................................................................................18
Description of Product Concept.........................................................................................19
Product Strategy (Part B)...............................................................................................20
Description of Product.......................................................................................................20
Objectives for Product.......................................................................................................21
Features and Benefits.........................................................................................................22
Product Quality Strategy....................................................................................................23
Product Service Strategy....................................................................................................24
Competitive Positioning of Product...................................................................................24
Estimated Costs.................................................................................................................25
Pricing Strategy (Part C)............................................................................................................26
Basic Pricing Strategy........................................................................................................26
Distribution Strategy (Part D)....................................................................................................28
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Marketing Communication and Promotional Strategy (Part E)............................................32
Promotional Strategy.........................................................................................................32
Overall Promotional Objectives........................................................................................33
Advertising Strategies........................................................................................................33
Television Advertisements................................................................................................34
Online Advertisements......................................................................................................34
Print Advertisements.........................................................................................................35
Billboard Advertisements..................................................................................................35
Personal Selling.................................................................................................................36
Sales Promotions Strategies...............................................................................................36
Apples In-Store Displays..................................................................................................36
Retail Outlets In-Store Displays........................................................................................37Word-of-Mouth Promotion................................................................................................37
Projected Initial Advertising Costs (Year 1).....................................................................38
Competitor Issues..............................................................................................................38
Technological Issue (Part 4)........................................................................................................39
Market Trends....................................................................................................................39
Impact on Product Offering...............................................................................................43
Financial Analysis (Part 5)..........................................................................................................44
Sales Volume Forecast......................................................................................................44
Marketing & Service Prevision Costs................................................................................45
Estimated Income..............................................................................................................46
Marketing Effectiveness (Part 6)................................................................................................ 47
References..........................................................................................................................50
Appendix............................................................................................................................54
Appendix
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Executive Summary
The basis of this report is intended to analyze the potential ramifications of Apple
introducing a new product to exploit, profit, and capitalize on the opportunities in the digital
camera market. In analyzing the digital camera market in context of its lifecycle, our analysis
shows the digital camera market is mature and highly saturated at all price levels and offers a
wide array of available substitutes differentiating on quality and price. There are also a number
of competitors with strong brands, which base their strategies on incremental innovation when
introducing new products to exploit current opportunities and meet emerging customer demands.
The market analysis indicates the opportunity present in the digital camera market is for a
radical and innovative product that revolutionizes the marketplace by introducing an array of
new product features that were not previously associated with digital cameras. An opportunity
for Apple is to explore this market through a premium-priced, revolutionary product in order to
capitalize on emerging customer demands, according the research in this report. Based on the
survey results conducted for this report, 43% of individuals surveyed would be interested in a
digital camera made by Apple if it would integrate their lives more effectively with technology
and various social networking sites, which highlights this emerging opportunity for Apple based
on their strong brand, customer loyalty, and reputation for innovative products.
To capitalize on this opportunity in the digital camera market, the proposed Apple iCam
is revolutionary digital camera that will have the capabilities to interface with Apples existing
line of products (iPad & iPhone) and internet based applications (iTunes & App Store). This
digital masterpiece will allow users to enjoy the similar attributes that make Apples products so
desirable, including touch screen, and user selected applications. Therefore, the Apple iCam will
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allow users to take high quality pictures, edit them directly on their device, and seamlessly share
their experiences directly from their digital camera. In differentiating between competing
products and based on the survey results and previous pricing strategies of other products
introduced by Apple, this report suggests the Apple iCam be priced at $274.99. This price-point
will encourage the perception of a premium-priced product as well as a value perception by
consumers because of the prior prices of other product introduced by Apple.
Likewise, in order to fulfill the new demand created in the digital camera market pending
the introduction of the Apple iCam; the most effective method of distribution will be for the
Apple iCam to be sold through the Apple Stores and online. This product distribution strategy
will expose the Apple iCam to large potential customer market while also avoiding the extra
costs associated with traditional retail. Thus, to promote the Apple iCam, the advertising
programs will include various television, print, internet, billboard, and radio advertisements;
however, the majority will focus on television advertisements to promote the product.
Therefore, based on the aforementioned marketing analysis, product design
specifications, pricing as well as promotional and distribution strategies; this report estimates the
Apple iCam to generate first year revenues of $82.9 Million and contribute positive net income
of $12.1 Million its first year, which are based on estimated unit sales of 500,000. In addition,
the forecast for the second year is for 550,000 unit sales generating revenues of $97.2 Million
and net income of $43.5 Million. Likewise, all of the above claims and facts are supported
within this report by quantifiable research and verified strategies tested in controlled research
settings.
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Market Analysis
Brand Analysis
In analyzing the market and in preparation to launch a new product, the first step is to
determine the relative strength of the given brand within the marketplace, and if it is capable of
supporting a product expansion under the firms main brand. In this context, Apple currently has
the 17th highest rated global brand and has steadily grown their brand image since 2001 when
Apple ranked 51st, which indicates Apples ability to steadily increase their brand strength over
time (Interbrand, 2010).1 After introducing several revolutionary products in the consumer
electronics market since 2001,2 Apple has been at the forefront of industry innovation employing
a dynamic combination of incremental and radical innovations creating an almost textbook
definition of an ambidextrous firm based on their current product portfolio mix and strategies.3
In addition, using the suggested criteria for a evaluating a brand presented in the article
entitled,The Brand Report Card, Apple scored a very respectable 97 (Keller, 2000).4 The
compiled information attempts to evaluate the strength of Apples current brand and does
indicate a high level of stability, strength, and capacity to support another brand, and in this case
product, under the main Apple brand. Therefore, the Apple brand is capable of supporting a new
sub-brand (the iCam) and will contribute to the credibility, brand association, imagery, and
initial customer perceptions of the product (iCam) simply because it is another Apple product
1. Please reference the graph entitled, Apple Global Brand Improvement in the Appendix on p. 55
2. New products since 2001 include iPod, iPhone, and iPad
3. Please reference the chart entitled, Boston Consulting Group Product Matrix: Apple in the Appendix on p. 56
4. Please reference the chart entitled, Apple Inc. The Brand Report Card in the Appendix on p. 57
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and due to Apples previous successful track record of introducing radical new products into the
marketplace.
Market Segmentation Approach
As an initial first step in introducing the iCam, Apple must segment the camera market,
which will help them define customer value and the most applicable methods to exploit these
market opportunities. Market segmentation will increase their marketing efficiency and will
contribute to their competitive advantage within this sector because their strategy will be (1)
measurable, (2) attainable, (3) profitable, and (4) match the capabilities of their firm with the
needs existing in the marketplace. In this context, Apple will segment its market by skill level
(experienced or intermediate) of potential customers, and then if these same users currently
own an Apple product, which is defined by owning either an iPhone, iPod, iPad, and/or Mac
(Amazon Corporation, 2010).5 Furthermore, based on the research conducted for this customer
definition; Apples current customer definition based on a certain experience level will expose
them to 66.2% of the total market based on product unit costs6 associated with either of these
two skill levels, and 80.2% of the overall available substitutes (other cameras) within the digital
camera market.7 In addition, when segmenting the market by major competitors (based on
available products), research indicates Apples main competitors based on the above criteria,
show Cannon, Nikon, and Sony may likely be the most pressing competitors when competing
for customers within this segmented market because they account for 48.4% of all available
5. Please reference the chart entitled, Initial Customer Segmentation Strategy shown in the Appendix on p.58
6. Please reference the graph entitled, Digital Camera Market Segmentation by Cost shown in the Appendix on p. 59
7. Please reference the graph entitled, Digital Camera Market Segmentation by Quality shown in the Appendix on p. 59
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substitutes using the defined criteria.8 Thus, this first initial stage of market segmentation gives
us an elementary understanding of Apples basic customer target market.
Market Segmentation
As stated the journal article Customer-Centered Brand Management, the author states
successful firms create and develop products that build the respective brand around customer
segments as opposed to fitting customer segments around a particular brand (Rust, 2004).
Therefore, in taking this approach and segmenting the digital camera market into defined
sections, Apple will then seek to fulfill these respective demographic needs through their new
product, the Apple iCam. Furthermore, the segmentation approach developed in this marketing
report identifies consumers by a five-criterion matrix model that defines the optimal customer
but still proceeds to identify various qualities attributable to other customers within the broader
digital camera market as well that may also benefit from the proposed Apple iCam .9 In this
context, Apple will segment the digital camera market and its potential customers in the
following order (the description of each respective segment is briefly defined as well):
1) Price: For the first level of segmentation, Apple will focus on differentiating between
consumers based on a premium pricing strategy by pricing the Apple iCam above the
median price of digital cameras currently sold on the market.
2) Digitally Integrated Products: For this second level of market segmentation, Apple
must segment the digital camera market by identifying customers with a specific
8. Please reference the graph entitled, Digital Camera Market Segmentation by Brand shown in the Appendix on p. 59
9. Please reference the chart entitled, Optimal Customer Matrix Model shown in the Appendix on p. 60
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need, and reach consumers who are seeking a digitally integrated products and
lifestyle with technology.
3) Current Apple Users: For this third market segment, Apple should identify potential
customers based on their usage and ownership of current Apple products . This would
include customers who own one or more of Apples flagship products; including the
iPod, iPhone, iPad, and/or Mac.
4) Experience Level: For the fourth level of segmentation, Apple should attempt to
define its potential customers based on their experience level with both digital
photography and technology in general. This will enable them to communicate the
product features associated with the iCam and determine which benefits and attributes
are most relevant to potential customers.
5) Customer Age: For this fifth level of market segmentation, Apple will identify its
primary customers by their respective age range. This is defined into four specific age
groups, which are as follows: (#1) 18-24, (#2) 25-35, (#3) 35-45, and (#4) 45+. In
this context, defining its primary customer age range, will allow Apple to market the
iCam in an effective manner that is conducive to its specific customers age
preferences and stereotypes.
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Needs by Segment
As stated in the journal article How Global Brands Compete, To succeed, transnational
companies must manage brands with both hands. They must strive for superiority on basics like
the brand's price, performance, features, and imagery; at the same time, they must learn to
manage brands' global characteristics, which often separate winners from losers (Holt, 2004).
In this context, Apple will focus on three fundamental aspects of fulfilling customer needs that
are universal among all market segmentations identified in the previous section. In addition,
certain features are described that will be present in the iCam that will enable it to fulfill the
indentified needs found from the market analysis and actual survey results.10
In context of the above description, the first universal need among potential customers
that will be fulfilled with the Apple iCam is the ability to integrate user experiences (digital
photographs) among various applications such as Facebook and Twitter but also among other
Apple hardware devices such as the iPhone, iPad, and Mac. This will also differentiate the iCam
from other competing products because it will have Wireless Connection Capability (Wi-Fi),
which other competing digital cameras currently do not have. Furthermore, the Apple iCam will
allow users to integrate their lives seamlessly without computers and straight from the camera,
which fulfills the need of integrating user experiences to popular social networking sites.
The second need fulfilled by the Apple iCam is a high quality picture that portrays the
most vivid and exact images of its users in the highest quality with the utmost ease. In this case,
the iCam will take vivid 14-Megapixel quality pictures highlighted by a flash feature, stability
control, and photo editing software. Likewise, all of these features can be used and edited on the
10. To review the findings of the survey used in this report, please reference the Appendix on p. 59 & 60
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camera, by the user, before it is shared or uploaded by the user from the camera; this eliminates
the need of a secondary device to edit and/or share pictures and more quickly connects the user
with their respective social networks.
The third need fulfilled by the iCam is the innovative quality, durability and virtual
integration and multimedia capabilities of the camera itself. This radical innovation by Apple,
will again, solidify their position as a industry leader in revolutionizing technological hardware
integrating user experiences into social networks via internet applications and other file sharing
mechanisms (Bluetooth, Sync, and Wi-Fi).
Market Survey Results
The strategy used for the results presented in this paper attempt to segment the digital
camera market by a consumers desire for a particular quality camera (picture quality) and the
willingness of the consumer to purchase that camera for a certain price. In addition, the findings
of our survey also analyzed the age demographic of potential customers as well the gender of
potential customers associated with a specific price and picture quality. In this context, the
overall survey consisted of 114 completed surveys, an average age of 25.1, and an overall 43%
response rate saying yes they would purchase the Apple iCam if it existed or was introduced
into the marketplace.11
Likewise, our overall survey consisted of four separate individual surveys, which allowed
us to effectively test price sensitivity (price-premium) and the importance of quality (in terms of
picture quality; i.e. megapixels). However, we also collected data regarding the ages of each
11. Please reference the chart entitled, Apple iCam Survey Results shown in the Appendix on p. 61 & 62
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individual surveyed and their respective gender. This in turn allowed us to see how demand
could be affected by price combined with a particular image quality . As a result, our initial
surveyed results demonstrated that a digital camera between the price range of $249.99 and
$274.99 would be most effective provided it had 14-megapixel quality, which in turn would
target consumers who are between 24.5 and 25.9 years of age. In addition, the split would
encompass a targeted gender demographic of 53% men and 47% women, according to our
survey results.12 Furthermore, should you wish to review all of the exact findings of our surveys;
please reference the Appendix on page XYZ to see each individual survey as well as the
cumulative results of all surveys combined.
Analysis of Current & Potential Competitors
In this section, the goal is to identify the top three current competitors present in the
digital camera market as well as the three most likely competitors that may emerge based on
Apples presumed entry into this new market. The top three competitors of the digital camera
market currently provide 48.4% of the available digital cameras, and represent the primary and
immediate threat to Apple in this market. Likewise, the top three potential competitors are
companies that currently compete with Apple in different markets but have previously
introduced new products in response to the introduction of new products by Apple, and as a
result could be expected to repeat this reaction.
12. Please reference the chart entitled, Apple iCam Survey Results shown in the Appendix on p. 61 & 62
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Top Three Current Competitors
1) Canon: In analyzing the digital camera market, Canon quickly emerges as a primary
and most prominent competitor in this industry offering 21.6% of the available
products in the marketplace. Likewise, Canon primary offers premium priced digital
cameras, which would directly compete with Apples iCam because the pricing
strategy would be identical between the two companies (Kidson, 2010, p. 15). In
addition, despite its large presence in the digital camera market, Canon is a reputable
provider of an extensive range of products for consumer, business-to-business, and
industrial digital imaging solutions. Canon is also ranked as the fourth highest patent
holder of new proprietary technology (Canon, 2010; Samadi, 2010, p. 23).
2) Nikon: Nikon is the second largest supplier of available digital cameras offering
15.7% of all available products and provides a wide-array of products catering to
consumers seeking both low-cost and premium priced products. In this context, the
primary portion of Nikons digital cameras are priced using a premium pricing
strategy, which would compete with the proposed pricing strategy for the Apple iCam
(Kidson, 2010, p. 15). Nikon also offers a variety of optical devices for academic
personal individual consumer use, business-to-business, and academic research
markets (Nikon, 2010; Samadi, 2010, p. 26).
3) Sony: Sony currently offers 11.1% of all available digital cameras covering both all
cost pricing levels. It has strong brand among consumer electronics as well as
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businesses and is well established in digital cameras as well as gaming and other
consumer electronic devices; including its proprietary Blue-Ray technology (Samadi,
2010, p. 25; Sony, 2010).
Top Three Potential Competitors
1) Microsoft poses the largest immediate threat to Apple pending the launch of the iCam.
Microsoft has a strategic software advantage and has previously introduced products
(albeit unsuccessfully) in response to Apple and may well again attempt to enter the
camera market when Apple introduces the iCam.
2) Research in Motion is a primary threat to Apple because they already compete head-
to-head in the smart-phone market and Research in Motion already posses many
software and hardware components necessary to easily produce a camera. It also may
help to diversify the companys product line away from its current business
application to more consumer-leisure, which might be exacerbated pending the
introduction of a new product by Apple.
3) Hewlett-Packard emerges as a possible competitor as well because they already
distribute Canon and Samsung products along with their HP camera printers.
Likewise, the possibility of Hewlett-Packard expanding their current products from
their strong brand is a logical, next step, based on their current portfolio and as a result
of Apple introducing the iCam.
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Environmental Analysis
While the competitive landscape and environment of photography has changed
drastically since the emergence of digital cameras, the industry and market of consumers have
negated the effects of traditional distribution models, pricing strategies, and additional features.
Traditional methods of retail have particularly suffered from this change as well as the traditional
film industry resulting from digital technology and the virtual integration of technology through
computer technology devices. A particular instance of this change in the environment is Best
Buys recent purchases of smaller retailers as well as the introduction of Geek Squad to adjust to
the emerging trend of integration of technology into the consumer sector through digital devices .
The actions of Best Buy are not a single or singular activity as analysis shows a large trend of
large scale consolidation by major retails that is expected to continue as consumers continue to
integrate technological devices and purchase products online (Kidson, 2010, p.8). In addition,
environmental analysis indicates traditional retail channels are consolidating to locations that are
easily accessible and have high traffic along with favorable customer demographics
characteristics (Kidson, 2010, P. 21).
Technology
The current technologies available in the digital camera market are diverse and primarily
differ by the price a consumer is willing to pay for a particular camera; in addition, the features
and quality of the camera are the primary drivers that affect the price of a digital camera. As the
functionality, quality and convenience of digital cameras have improved, this has increased
customer awareness and demand for digital cameras by consumers (Kidson, 2010, p. 14).
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Likewise, premium-priced digital cameras have proven to be most successful because consumers
associate a higher priced product with superior image quality (megapixels), superior technology
(flash power and zoom capability), design (size and other features), and brand image (Kidson,
2010, p. 15).
Society
In terms of digitally technology and its effects on society, todays consumers are
becoming increasingly conscious with integrating their lives with technology in order to share
their experiences on a consistent basis each day (Tapscott, 2008). Furthermore, multitasking and
efficiency are critical factors that influence customer perceptions of new technologies. This trend
is strengthening and new consumer devices, such as smart-phones, are expected to have
multipurpose uses in addition to that of their primary purpose in order to create value. In this
context, a digital camera can no longer simply take pictures to be successful; rather, digital
cameras must do more to provide value and fulfill the needs of todays technologically integrated
consumers if companies expect their respective products to be successful.13
Industry
Despite the setback in digital camera sales during the 2008-2009 recession, sales of
digital cameras are expected to increase in 2010-2011; however, industry sales are expected to
struggle beyond 2012, according to industry analysts (Kidson, 2010, p.9). As the industry
13. To see these findings supported, please reference our surveys in the Appendix on p.61 & 62
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continues consolidating its primary channels of distribution to consumers, larger retail
distributers such as Best Buy, Wal-Mart, and Target will continue to capture larger segments of
the market due to competitive pricing and purchasing smaller private competitors. In addition,
growth in the digital camera market is likely to be concentrated in larger organizations and
among national chain stores due to competitive advantages (Kidson, 2010, p.10). Likewise, the
internet is expected to affect the pricing of digital cameras and drive down margins when the
features are equal among competing products (Kidson, 2010, p.11). In addition, there appears to
be an emerging trend of cameras becoming more integrated with online technologies and other
products through Wi-Fi avenues (Kidson, 2010, p. 9).
Based on the findings of the analysis presented in this report, the digital camera industry
appears to be highly fragmented and a number of opportunities for consolidation between
competitors and products to the similarity between products. The opportunity for a radical
product innovation for digital cameras with a number of new features, not typically associate
with a digital camera, would also add new value, stimulate new consumer interest, and increase
demand. While advances in digital technology have stimulated consumer demand in the past, it
is now up to the industry to combine existing technologies centralized around a revolutionary
digital camera with completely new capabilities and features (Kidson, 2010, p. 11).
Market Analysis Conclusions
In context of the information presented within this market analysis, the primary
recommendation to management is fundamentally based on the findings presented in the paper
entitled, Product-Market Strategy And The Marketing Capabilities Of The Firm: Impact On
Market Effectiveness And Cash Flow Performance, which states that while various product
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marketing strategies exist, the most effective strategy encompasses three essential elements.
These elements are essential components to any successful marketing strategy, and are (1)
product differentiation, (2) cost focus, and (3) product-market scope (Vorhies, 2009). The
market analysis for the digital camera market has shown the following competitor, industry, and
product trends:
The Apple brand is capable of supporting a product extension
There are clear market opportunities for radical product innovation
The main source of competition stems from low-cost pricing strategies
There is a need among consumers for new technology integrated products
A premium priced, revolutionary product, would have a competitive advantage
Therefore, industry analysis of the digital camera market indicates a fragmented industry
among competitors as well as highly price-competitive market because the available products
and substitutes do not substantially differ between one another. As a result, the Apple iCam
would differentiate based on its new innovative features, its premium pricing strategy, and
ability meet the emerging needs of consumers to integrate their lifestyles because of changes in
technology.
Marketing Plan (Part 3)
Description of the Market Opportunity (Part A)
Description of Need
Broadly defined, the need present in the digital camera market at this time is for a
product that would deliver superior picture quality while integrating the users experiences
(photographs) with social networking applications and eliminating the need for a secondary
technological device. Radical product innovation in the digital camera market has become almost
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nonexistent and consisted of mainly incremental innovations primarily relating to increases in
megapixel quality and price reductions. In this context, the opportunity to exploit this need
would be to develop a completely new type of digital camera (radical innovation) that introduces
new product features and capabilities as well as a premium cost differentiation strategy.
Discussion of Market Potential
While the digital camera market is highly saturated at all price levels and offers a wide
array of available substitutes for quality and price; it is a mature market with slow innovation. A
new product with a new design, features, and capabilities would dramatically alter the potential
in the digital camera market and spur a new phase of industry growth and innovation as a result
of launching the Apple iCam.14 In addition, the market consists of a wide array of customers that
are currently not loyal to a particular brand in the majority of cases, which presents a large
opportunity to reach new customers in addition the general characteristics described above.
Description of Product Concept
Apple currently possesses the ability to develop not only a digital camera, but also one
that embodies the technological advances present in many of their other products. The proposed
Apple iCam will have the capabilities to interface with Apples existing line products, such as
the iPhone, iPod, iPad, and iTunes. This digital masterpiece will allow users to enjoy the
similar attributes and features that make Apples products so desirable, including a vivid touch
screen and Wi-Fi capability, as well as a variety of internet applications allowing the user to
integrate their experiences with their social networks. The key differentiation strategy for the
14. Please reference the chart entitled Product Industry Lifecycle in the Appendix on p. 63
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proposed Apple iCam will not only be able to incorporate the key features of the iPhone , iPod,
iPad and Mac, but it will also provide users with exceptional picture quality. Pictures are worth
a thousand words, and the Apple iCam will allow users to capture their personal experiences
with precision and top quality while simultaneously enabling users to have the ability to
seamlessly integrate their lives with their friends and family through a variety of available
applications; all directly from their Apple iCam.
With its sleek and modern design, prolonged battery life, and vivid picture and wireless
capabilities; the Apple iCam will provide what no other digital camera has been able to do
before. The Apple iCam will enable users to share their experiences strait from their camera
without the need of secondary device and will set a new standard for digital cameras and
photography; continuing the radical innovation Apple has consistently demonstrated over the
past ten years while also raising the expectations for future types and features of digital
cameras.
Product Strategy
Description of Product
The Apple iCam is a next generation digital camera that will deliver superior
performance to consumers. The Apple iCam boasts several cutting-edge features and capabilities
that will set the standard in the digital photography market for years to come. These features
coupled with a stylish design combine to create an exceptional product.
The Apple iCam amalgamates a professional quality digital camera with user-friendly
platforms and applications. The camera has sixteen mega-pixels that deliver a studio quality
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photo. The camera allows the user to zoom at two, four, eight, and sixteen times magnification.
The Apple iCam is also outfitted with a flash that will activate in low light conditions. The photo
is displayed on a 3.5 inch (diagonal) LCD touch screen. This LCD touch screen allows the user
to quickly store photos while instantly interacting with other forms of digital media.
The Apple iCam also features a high-performance battery, common in many of todays
Apple products. This technology enables the Apple iCam to operate with an expected life of fifty
hours for each battery charge. The fifty hours extended camera time is without equal in the
digital camera market. The long lasting battery will make the product attractive to professional
photographers as well as average consumers.
The Apple iCam comes equipped with several image-processing applications. These
applications may include Hipstamatic, Photoshop Express, and other apps that will be available
through the Apple Store and chosen by the individual user. These applications make editing and
customizing possible on the camera itself. The last generation of digital camera required a user to
synchronize the camera with a desktop before any changes could be made. The Apple iCam
increases customer flexibility by bringing these features to the camera.
A WIFI card will allow users to share pictures and videos on Facebook, Flicker, and
YouTube. A wireless connection to the internet will make syncing data through a USB port a
thing of the past. A sixteen-gigabyte hard drive enables the user to organize and archive stored
data. This hard drive will allow users to store thousands of photos and movies. The Apple
iCams storage capacity and Wi-Fi connectivity combine to create an original and unique photo
taking experience. The Apple iCam will also have the ability to print directly at any Apple Store.
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By printing at the store, users are able to print pictures with high quality resolution. The Apple
Store direct print feature is a convenient resource for many users. The company will also feature
application support.
Objectives for Product
Apple is releasing the Apple iCam in order to reach several important objectives . Some
objectives are market-based while others are customer-oriented. Regardless of the objectives
classification, all are aimed toward improving the companys profitability.
Apple has many market-based objectives the company hopes to meet with the release of
the Apple iCam. Most importantly, Apple is seeking to manufacture a camera with a positive
contribution margin. A positive contribution margin means the product is profitable. A
profitable product line contributes to the companys bottom line and brings the company closer
to its break-even point. In addition, Apple is striving to become the market leader in premium
quality digital cameras. Many comparable premium cameras have a similar asking price, on
average, than the Apple iCam. In which case, the Apple iCam will offer superior features at a
lower cost.
In regards to the customer-oriented objectives, the Apple iCam strives to be user friendly.
User friendly means that the camera is easy to use and operate. Stellar features are of little use if
the features are complicated or difficult to operate. While technology is important, it must be
incorporated in a smooth operating system if a gadget is to gain widespread appeal among
consumers. Thus, ease of use is essential if the Apple iCam is to compete in a highly
competitive digital camera market.
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Features and Benefits
Apple integrates many cutting-edge features into the Apple iCam. The features are
designed to deliver superior performance to consumers. Users can benefit from these handy
features in several ways.
Consumers will benefit from the main operating system running the Apple iCam
applications. The operating system allows users to access several image processing applications.
These applications empower users to edit, resize, or reformat photos on the Apple iCam. Users
no longer need to connect to a central computer system to alter their photos and videos. The
operating system also allows the end user to organize and store multimedia in an organized
fashion. Consumers can create storage files so that their media is instantly sorted and arranged.
This operating system will in turn allow applications to run smoothly creating an enjoyable
customer experience.
Wi-Fi and GPS technology are also beneficial to users. Wi-Fi allows users to access the
internet from the camera. The internet connection allows users to instantly update their social
media profiles. Wi-Fi connectivity also enables users to synchronize information with another
computer without having to connect through a USB port. GPS technology allows for greater
customization of online applications to the end user.
The customer will benefit greatly from the extended-life battery and a large hard drive
that are included with the Apple iCam. The battery can keep a charge for up to fifty hours . Fifty
hours of charge offers exceptional reliability for the user. The Apple iCam can eliminate the
need to take a battery charger on a family vacation. The sixteen-gigabyte hard drive allows users
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to store thousands of photos and videos without having to worry about limited storage space.
Thus, an extended-life battery and a large hard drive mean less hassles and more flexibility for
the purchaser.
Product Quality Strategy
With the launch of the Apple iCam, Apple plans to maintain its commitment to the
quality of its products. Apple has a reputation for producing high quality devices. These items
have endeared the company to millions of loyal Apple users worldwide. The Apple iCam will be
no exception. Apple recognizes that their products perform well in the market because
satisfaction drives loyalty, which drives profitability (Day, 1994). With innovative technology
and a sleek design, the Apple iCam will sit atop its class in the digital camera market.
Product Service Strategy
Apple will offer service support through its retail outlets. The Apple store as well as other
Apple authorized service providers seek to offer the highest customer satisfaction. The service
personnel are trained to quickly assess the nature of the problem and inform the customer of all
available service options. Should a customer experience a problem using the Apple iCam,
customer service personnel can quickly diagnose the problem.
Competitive Positioning of Product
Apple should be mindful of its competitive position within the digital camera market .
Apple must map the area of its competitive position in order to ensure the Apple iCams long-
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term profitability and sustainability. When plotting a competitive position, certain factors (price
to benefit) are often difficult to concretely position within the market. The lack of understanding
about competitive positions is clear in industries such as consumer electronics, where the number
of features makes comparisons complicated (D'Aveni, 2007). In a highly competitive electronics
market, the competitive position is likely to change often. Therefore, Apple must recognize that
the introduction of the Apple iCam will disequilibrate the competitive position of its top
competition. Companies that introduce radical product innovations into the market should be
prepared for a competitive response from other companies in the industry (Aboulnasr,
Narasimhan, Blair, & Chandy, 2008). Thus, Apple must constantly assess the competitive
positioning of the iCam in order to remain profitable in a highly dynamic digital camera market .
Therefore, the Apple iCams competitive position is benchmarked against Cannon,
Nikon, and Sony. The Apple iCam differentiates itself on several levels. First, the Apple iCam is
a premium quality product. The quality differential is apparent in the numerous features that the
Apple iCam offers that competitors cameras do not. Second, the camera distinguishes itself by
the fact that the Apple iCam is a new product that should attract a great deal of publicity. In
addition, the Apple iCam differentiates itself in terms of price. While there are several cameras
that are priced near the Apple iCam, the camera is clearly priced at a premium level.
Estimated Costs
All costs are estimated using a tear down analysis of other Apple products such as the
iPhone, iPod, and iPad. Many of the necessary components can be taken from other Apple
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products and applied to the Apple iCam. For this reason, the component costs can be estimated
rather accurately, according to our research documented in this report and in appendix.
The lens and motor are estimated to cost $40 and $10, respectively. The extended-life
battery will cost a projected $5.20. Given its high level of sophistication, the battery is a cost-
efficient feature. A Wi-Fi card is estimated to cost $1.40; GPS components cost $0.35 per
phone; a sixteen-gigabyte hard drive is estimated to cost $12 to produce. The display model
costs approximately $19.25. A touch screen is expected to cost $16.00. The main operating
system costs an estimated $70.00. The camera components will cost an estimated $9.35. Other
enclosures for the camera cost around $10.00, while the box contents cost $5.00.
Using the tear down analysis of other Apple products, direct materials account for around
ninety-seven percent of the product cost. Likewise, the Apple iCam should also expect to incur
similar costs. The Apple iCam is sold at a premium price, so the product should maintain a
strong profit margin.
Pricing Strategy
Basic Pricing Strategy
An appropriate pricing strategy is critical to the sustained success of any new product.
The pricing strategy must work in harmony with all components of the marketing strategy (Paley
2006). If you charge too much for your product, then it will not sell. Conversely, if you charge
too low of a price, then you forge potential revenue and fix your products market value at a low
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level (Marn 2003). Much marketing information and research must be done to correctly price
your product.
After market research showed the willingness to accept a new premium camera , Apple
will use a premium-pricing strategy along with a skim pricing strategy to introducing the Apple
iCam. Skim pricing involves setting a premium price that attracts the premium consumers. In
order to successfully implement a price skimming strategy, Apple must have a premium product
that attracts price insensitive customers (Noble 1999). This price skimming strategy for the
Apple iCam falls directly in line with the rest of Apples current product strategy.
In this context, the theory of price skimming is based on the premise of setting the sales
price of a product high at the beginning of the product life cycle to recover initial costs, and then
lowering the price as the product matures. If you are able to successfully skim the price along
each stage of the product life cycle, you can be highly profitable as long as you deliver high
customer satisfaction. As competition increases for your product, the selling price will decrease
which will increase the demand for your product (Noble 1999). This creates a situation where the
consumer perceives he is getting a great deal because of the new reduced price. As technology
evolves, the company will innovate and improve their product. When the company comes out
with a new and improved product, the product should be placed at a premium price to repeat the
cycle. Apple has proven this to work with the several different versions of the iPhone . The
original iPhone had a premium price that successfully skimmed the market. When a new version
enters the market, the price of the older version decreases which increases the demand for the old
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product by the majority of consumers while the early adopters transition to the new radical
product innovation.
The Apple iCam will be targeted to the premium consumers in the digital camera market.
The will be priced on the high end of the premium camera segment. The high initial price will
allow Apple to recover some of its developmental costs. Customers will be initially attracted to
the Apple iCam due to the technological innovations it provides. These customers are the early
adopters who are willing to pay the price to be the first ones to have the product (Noble 1999).
They form the base consumers of the new product. Apple already has a strong brand following
and a large number of consumers that are eager to try the new Apple product.
As an organization, Apple has successfully positioned itself as a premium brand that sells
its products at a premium price. Its consumers know and accept that Apples products are not
low cost options. Apples consumers are fiercely loyal to the Apple brand. When consumers
think of an Apple product, they think of an innovative product. The iPod, iPhone, and iPad were
all revolutionary products that called for a premium price. Apple successfully implemented a
premium pricing strategy to when they introduced these products and was highly profitable
doing so. Each product was successfully launched with a premium price, targeted to the high-end
tech savvy consumer. Apple also has been successful managing the innovation of their products
throughout the product life cycle. The Apple iCam will surely follow the same successful
pricing plan.
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Distribution Strategy
Distribution is defined as a process in which the product flows from the producer to the
consumer; this encompasses three different distribution strategies: intensive, exclusive and
selective (Perner, 2008). In this context, Apple has and will continue to use both exclusive and
selective distribution strategy when it launches the Apple iCam. It will use exclusive distribution
through its own retail store, and they could use selective distribution through its use of retailers;
Apple will also use the internet to sell the Apple iCam.
Apple can sell the Apple iCam online through its own website, which is also known as
the Apple Store, as well as other online sellers such as Amazon. Apple has also had success in
selling its products through retail stores such as Wal-Mart, Target, Best Buy, RadioShack, Toys
R Us and the AT & T stores. The most important retail factor, though, is Apples own retail
store, which provides the most effective method of distribution.
Many experts who compared Apple Stores to the former Gateway Stores, and did not
predict the retail Apple Stores to be very successful; however, the Apple Store has been a critical
component in Apples success since the first store opened back in 2001 . In 2008, Apples retail
store was given the Best Vendor Award for the second consecutive year. That same year the
Apple retail store generated 6.35 billion in revenues, which was up 55.8 percent in revenues
from the previous year. That revenue total gave placed the Apple retail stores in 4th place behind
only Wal-Mart, Best Buy, and the now defunct Circuit City (Olenick, 2009). Apple now
operates over 270 retail stores including over 200 in the United States (Thormahlen, 2010).
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The main reason Apple should exclusively sell the Apple iCam is due to the great buying
experience that customers generally report with Apple. According to a survey by PC World, the
online Apple store rated as very good, while the Best Buy website rated as only fair. The online
store rated the same as Dell, whose primary route for its business is the direct sales generated
through their website (Kandra, 2004).
The Apple retail store also rated as a very good buying experience. The Apple retail
store was actually the only retail store to receive that score, and Best Buy received just a good
score. The two main places where Apple lost points in the survey was in the pricing and
selection categories, but that is to be expected as Apple sells a premium product , and Apple only
sells its own products limiting the selection available in the stores. With the results of this survey
and the other benefits, Apple is seemingly better off selling the Apple iCam exclusively through
its own online and retail stores (Kandra, 2004).
This strategy will be a problem for competitors as two major factors in the success of
camera stores are location and customer service (Kidson, 2010, P. 21-22). Apple has generally
located its stores in high traffic locations such as busy malls and shopping districts (Thomahlen,
2010). Apple also had the highest rating in the PC World survey . The rating also said that Apple
was the most helpful in its buying advice and knowledgeable employees tend to draw in more
sales and improve customer satisfaction (Kandra, 2004). The last major factor is that some
companies offer training in how to use the cameras. Apple retail stores offer this with the
Genius Bar at each store, which is a place where customers can go to ask for advice on how to
use the product, and where they can go if they have a problem with their products (Olenick,
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2009). By offering the Genius Bar, Apple differentiates itself from Wal-Mart and Target and
may be able to sell their product better at the Apple store as a result.
Marketing Communication and Promotional Strategy
Promotional Strategy
The marketing communication and promotional strategy for the iCam is essential in order
to create a positive brand image and to build brand awareness among consumers. The following
strategy to be implemented is thorough and consistent in order to increase success and
effectiveness throughout the target market. Through the proficient use of advertising and
promotions, Apple will strive to deliver a clear message to the Apple iCams target audience .
Said message will not only convey top quality, but also desirability that will ultimately fulfill
consumers everyday wants and needs.
Apple currently possesses the ability to develop not only a digital camera, but also one
that embodies the technological advances present in their other products. The Apple iCam will
have the capabilities to interface with Apples existing products, such as the iPhone, iPad, and
iTunes. This digital masterpiece will allow users to enjoy the similar attributes that make
Apples products so superior, including, but not limited to, touch screen, Wi-Fi, and
applications. Pictures are worth a thousand words, so why not capture them in top quality and
have the option to share them with friends and family?
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It is vital that the techniques described within the marketing report are executed as
described because they emphasize the Apple iCams unique features in order to position itself
strongly within the market thereby sparking renewed customer interest in the digital camera
marketplace and available products.
Overall Promotional Objectives
The overall promotional objectives include several critical components necessary for the
Apple iCams success. First, the Apple iCam must uphold consumers current expectations for
Apple products. It must distinguish itself from competition and effectively relay its benefits to
consumers. Furthermore, promotions for Apple iCam will: (1) build awareness (2) create
interest (3) provide information (4) stimulate demand and (5) reinforce the brand (Types of
promotion, 2010). Through the efficient use of advertising channels and promotional activities,
these objectives will be accomplished.
Advertising Strategies
The advertising efforts will focus on continuing Apples existing brand personality;
accentuating lifestyle, imagination, liberty regained, innovation, passion, hopes, dreams and
aspirations, and power to the people through technology (Apples branding strategy , 2008). The
advertisements created to represent the Apple iCam will be memorable and well placed within
the market. By developing the perfect mix of television, online and print ads, and billboards,
Apple will be able to raise the Apple iCams product awareness among consumers. Companies
utilize multiple channels of advertising due to the fact that each media channel promotes and
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reinforces one another, ultimately driving awareness (Tiernan, 2001, pg. 2). The major market
segments for digital cameras include ages ranging from 18 to 44 years old. This encompasses
approximately 56% of the total market (Kidson, 2010, pg. 3). The Apple iCams advertisements
will mainly focus on the aforementioned points and can be viewed in the Appendix, which
clearly demonstrates these ideas and claims described in the preceding paragraphs.
Television Advertisements
The Apple iCams television advertisements will remain in line with Apples
current strategy of producing simplistic, yet creative advertisements that portray the latest
technological advances while remaining congruent with popular culture. These
advertisements will run on channels such as MTV, CBS, ABC, NBC, and ESPN.
Furthermore, to enhance the Apple iCams launch campaign, Apple will place an
advertisement during the World Series or the Super Bowl, reaching millions of existing
and potential customers.
Online Advertisements
The emergence of the internet and the vast majority of individuals that utilize it on
a day-to-day basis encourages the use of online advertising. Research has proven that
website visitors who are exposed to display ads on news sites are more likely than
average to visit the advertiser website and are avid online buyers. Moreover, online news
publishers are also developing innovative ad formats, which are intended to create a
richer, more engaging experience for consumers (Comscore, 2010). Thus, Apple can
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effectively advertise Apple iCam on websites such as The New York Times Online and
The Wall Street Journal Online, allowing visitors to be subjected to the infamous Apple
experience online. The online newspaper statistics for May 2010 can be observed in the
Appendix (Comscore, 2010).
Print Advertisements
In order to capture the attention of those individuals that are influenced by print
media, the Apple iCam should place advertisements in magazines like that of Rolling
Stone and Wired, both which possess high target demographic circulation. The typical
Rolling Stone reader is male or female approximately 31 years old with an average
household income of $69,000 (Rolling Stone, 2009). Furthermore, characteristics of
Wired subscribers are males between the ages of 18-34 with an average annual income of
$100,000 or more (Quantcast, 2010). Refer to the Appendix for a comprehensive outline
of Wireds demographics. Both magazines closely correspond to the target market
possessing discretionary funds to spend on luxury items, such as the Apple iCam.
Billboard Advertisements
An effective and cost efficient way for Apple to spread the word about the Apple
iCam is using billboards, especially because billboard advertising is on the rise in
America (Resources for Entrepreneurs, 2010). Moreover, billboards promote 24 hours a
day, 7 days a week to everyone and anyone. The Apple iCams billboards will be placed
in high traffic, urban vicinities in order to increase exposure and build brand awareness.
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is expected to not only fulfill, but also exceed consumers expectations, untimely
providing them with copious benefits that outweigh the costs incurred.
Projected Initial Advertising Costs (Year 1)
For the introduction of the Apple iCam, Apples current advertising expenditures for this
fiscal year (2010) approximately reached $501 Million (Elmer-DeWitt, 2009). In order to
execute the preceding advertising strategies among all avenues; this paper suggests a total $47
Million dollar initial advertising strategy for the first year encompassing television, internet,
radio, print, and billboard advertisements designed to promote the Apple iCam and develop
brand image and drive product awareness.15
Competitor Issues
The low barriers to entry in the digital camera industry allow Apple easy access into the
market. However, there are extremely high competition levels present. The Apple iCams
major competitors are Nikon, Canon, and Sony. The industry structure can be observed in the
Appendix (Kidson, 2010, pg. 3). Based on these industry conditions, Apple must be weary of
competitor retaliation because the major competitors typically spend a considerable amount of
resources on television and newspaper advertising in order to generate consumer demand
(Kidson, 2010, pg. 21). It is highly likely that competitors will attempt to imitate the Apple
iCams distinctive technological features to maintain their market share.
15. Reference the chart Apple iCam Ad Budget in the Appendix on p. 62 for a complete cost breakdown
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Technological Issue
Market Trends
To launch any kind of new product it is always beneficial to understand the current
market trends and understand what the end user or the consumer needs, rather than launching
some product off track, which consumers will have hard time figuring out and accepting it .
Speaking about the Digital Cameras it has come a long way since the time it was introduced,
cameras now are small, sleek and equipped with high quality mechanics to take better and
precise pictures, and it is not limited only to take pictures, it is also equipped to take high quality
videos. Cameras now come in lot of genres to attract specific set of consumers right from basic
Point and Shoot for amateurs to SLRs for professionals.
The popular current trends that have come up in the Digital camera segment that
companies are trying follow and capitalize on, are described below:
1) Increasing megapixels: Pixels are dots in a digital image, which stores data. A digital
picture is made up of several pixels. Larger the number of pixels, more information it
will store in a file and result into better picture quality for large prints. At present, point
and shoot digital cameras are available in 10 12 megapixels (1 megapixel = 106pixels),
and as per Photo Marketing Association, this number is going to increase only and it is
expected that by late 2011, point and shoot digital cameras will have image resolution in
the range of 15 18 megapixels.
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2) Camera Equipped with HD Video Recording: This is the one of the latest trend that has
come up in the recent times, after the introduction of the HD Televisions, people wanted
to take and record their own HD Videos. Therefore, in the recent times, digital camera
market is offering cameras that are equipped with this feature. Introduced two years ago,
HD (1,280 x 720-pixel) video recording is now fast becoming a staple in point-and-
shoots, with the compacts having such a function. However, cameras announced recently
are touting a boost in video resolution, capturing movie clips in full-HD (1,920 x 1,080-
pixel) quality (Goh, 2010). Since then, camera makers have been steadily rolling out
improvements to movie recording. The main thing they have gone after is resolution and
video quality. As per Goldman (2009), slapping "HD" on a camera is the video
equivalent of megapixels. Put "full HD" on a model and you will really grab some
attention. Squeeze an HDMI jack on the camera and you're in even better shape to sell
some units to consumers interested in getting one product that takes good photos and
videos and can play them back instantly on an HDTV.
3) 3D Cameras: After High Definition, it is the 3D that has attracted masses, so this trend
has not stopped following even in the digital camera segment. Since now everyone wants
to say Cheese in 3D, this is one of the latest and most recent trend that more and more
companies are trying to capitalize on. Sony is constantly working on 3D cameras and is
expected to reveal its first prototype in Photokina 2012 (Photokina is the world's biggest
trade fair for the photographic and imaging industries). Sweep Panorama mode, which is
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a technology that is available in Sonys Cyber-Shot compact cameras, has been
improved: you can now take a sweeping panorama shot in full resolution, rather than a
cut-down resolution, as was the case with Cyber-shot cameras. Furthermore, 3D Sweep
Panorama mode will be able to shoot 3D images, which can then be played back on
Sonys 3D televisions (Plastiras, 2010). If 3D TV becomes a big hit, everyone will want
to shoot their own 3D videos and photos. Fujifilms FinePix Real 3D W1, first digital
camera with 3D shooting feature, is now available in market and costs $600 for the
camera and $500 for a special display that shows video and photos in 3D; you don't need
to wear glasses, as long as you view the display from certain angles. However, it not an
actual 3D, still it is considered as major shift in digital camera market. Samsung is also
reportedly working on a 3D still camera with a two-lens design similar to that of the
Fujifilm model (Moynihan, 2010).
4) Rough and Tough Cameras: Apart from the high technological breakthroughs like HDs
and 3Ds theres another trend that has come up in the recent times , that is Shock Proof
and Water Proof Cameras. These sorts of cameras are not targeted for camera enthusiasts,
but to sports enthusiasts, swimmers, divers who want to take pictures under water and in
extreme weather conditions. Because of this kind of features it has able to attract lot of
other set of consumers who do not want to take proper care of their cameras, and because
of this reason, shock proof and water proof cameras are gaining high popularity very fast
. According to Saltzman, Waterproof is the buzzword this year, and for good reason, as
there are plenty of options available for those who want either a compact point-and-shoot
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digital camera or high-definition video camera or both in one device. Moreover, these
cameras take great dry shots on land, too. In fact, if you accidentally get sand on these
cameras, simply wash them off in a sink(Saltzman, 2010). Underwater housing units
for DSLR bodies can cost upwards of $1499 at most distributors. Waterproof cases for
point-and-shoots already average $150. However, this year, a major trend in most camera
companies is the point-and-shoot designed for underwater use and toss-around durability
at a competitive cost. Around the show at PMA 2010, almost every major point-and-
shoot manufacturer had an array of cameras ready for any environments (Lum, 2010).
5) Inbuilt storage: Usually digital cameras use storage cards for storing images but it is
always tough to carry multiple storage cards as with increasing megapixels, file size is
also increasing. Hence, camera companies are focusing more and more on providing
large inbuilt storage. Sony's new DSC-T700 lets you store 1,000 high-resolution pictures
without a card. There is a big 3.5-inch monitor to view them on, too. It is kind of a cross
between a camera and a portable photo album.
6) Internet connectivity and GPS: Internet connectivity in digital cameras is getting
important day by day. Every other camera manufacturer is trying to come up with some
kind of internet connectivity on the camera by which users can directly email the photos
without having them transfer to the computer, and can upload to multiple websites with
one click. In addition, integrated GPS is playing a big role as it allows the user to geo-
tag their photos.
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Impact on Product Offering
While developing iCam, current market trends have been considered and out of the six
popular trends listed earlier, four have been carefully covered in the Apple iCam.
1) Increasing megapixels: Apple iCam will be available in two models, one with 12
megapixels and other with 15 megapixels. As it is expected that by 2011, digital camera
market will have cameras with 15 megapixels, having 15 megapixels at this time is going
to be advantageous for Apple iCam.
2) HD video recording: Apples iPhone 4 has HD video recording but it does not have full
HD video recording, as it is difficult for a phone lens to capture videos in full HD format
with good video quality. With its high quality HD recoding, Apple iCam is going to fill
this gap.
3) Inbuilt storage: The iCam will be having 16 GB of inbuilt storage, which can store more
than 6000 photographs. The technology is being adapted from iPhone 3GS and iPhone 4.
With this distinguishing feature, iCam will be the camera with largest onboard storage in
digital camera market.
4) Internet connectivity and GPS: The iCam will be having Wi-Fi and onboard micro-GPS
chip. The presence of Wi-Fi will provide users to connect to Wi-Fi networks and users
will be able to directly upload pictures from their camera to websites such as Facebook,
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Flickr, Picasa; to blogs, and users will be able to email the photographs without using any
communicating device. Presence of micro-GPS chip will allow users to geo-tag their
photographs.
Financial Analysis
Sales Volume Forecast
In attempt to forecast the anticipated demand for the Apple iCam in order to arrive at a
given sales volume, the analysis considered the previous launches of the Apple iPad and iPhone
as potential indicators of potential sales. In this context, the iPad sold an estimated 1.9 Million
units its first and the iPhone over 2.39 Million units, which indicates the potential of a new
product in terms of unit sales (Hughes, 2010; Krazit, 2008). This marketing report as a result has
estimated first year unit sales of 500,000 (Year 1) and 550,000 (Year 2) based on the
aforementioned data regarding previous Apple product launches. Similarly, at a per unit selling
price of $274.99, this report estimates year one sales volume as $137,495,000 (500,000 Units
Sold) and $151,244,500 (500,000 Units Sold) for the second year.16
Furthermore, based on the public financial information available regarding Apple, these
estimated results would translate into an additional $0.48 per share in additional revenue for the
first year and $0.53 per share for the second year. In addition, these calculations are based on
very conservative unit sales estimates that are fifty-percent lower than the previous unit sales of
other products that Apple has introduced in the past. Likewise, sales in the second year are
16 . To review our calculations and respective cost estimates, refer to the statement entitled, Pro Forma Per Unit Cost Analysis in the
Appendix on p. 65
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expected to only increase by ten percent, which again, is far below the historical growth rate of
Apple products during the second year as well. Therefore, it is important to note that the
estimated unit sales and revenues were conservative estimates that attempted to analyze the
benefit of the Apple iCam at below average historical demand for other Apple products.
Marketing & Service Prevision Costs
The marketing prevision costs are the largest incurred expense other than the direct costs
(Cost of Goods Sold) associated with manufacturing the Apple iCam; the estimated first year
costs amount to $47 Million dollars. However, after the initial sticker shock, this estimated
marketing budget employs a rigorous and focus advertising strategy to reach consumers.
Furthermore, in year two, the associated marketing budget is assumed to decrease by twenty
percent thereby going to $37.6 Million. In addition, the servicing costs normally associated with
a product would be negligible based on the quality standards currently in place at Apple but also
because Apple would not be distributing (selling) the Apple iCam through traditional retail
outlets other than through its Apple Stores. As a result, the normal servicing costs associated
with traditional can be eliminated which dramatically reduces costs while still exposing Apple to
a large number of potential consumers through their Apple Stores.
Estimated Income
In the previous sections, we have discussed the potential revenues related to the Apple
iCam based on a specific estimated level of demand (unit sales); likewise, based on these
predictions and research documenting the associated cost structure with producing the Apple
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iCam this section will estimate the respective income generated by the given product for the first
two years. In this context, the Apple iCam is estimated to generate total revenues of $33,395,000
in the first year and $57,090,500 in the second year based on the aforementioned number of unit
sales. These net income estimates translate into an increase in earnings per share of $0.12 for the
first year (20X1) and $0.20 for the second year (20X2) as well.17
Furthermore, on a gross margin basis, the Apple iCam is estimated to have a gross
margin of 60.3% for the first year and 64.3% for the second year; in turn, this translates, after
other costs, to a projected net income (before tax) return of 40.4% for the first year and 58.7%
for the second. In relation to other products supplied by Apple, the proposed Apple iCam would
fall into the middle category of profitable products generating a strong return in excess of 40% in
its first year but below other star products such as the iPhone.18 However, increased demand as
well as other operating efficiencies may translate into even stronger income should Apple see
stronger than anticipated demand or find even larger saving in its manufacturing process .
Marketing Effectiveness
According to the article published at the London School of Business entitled,Experience
and the Brand, todays consumers are continually studied and targeted by marketing
communications from various corporations; as a variety of companies attempt to differentiate
17 . To review these claims and see the supporting calculations, reference the two statements entitled, Pro Forma Per Unit Cost Analysis and
Pro Forma Per Share Analysis both of which are shown in the Appendix on p. and p.64 & 65
18 . To review these claims, reference the statement entitled, Pro Forma Per Unit Cost Analysis in the Appendix on p. 65
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their brands and respective product(s). Furthermore, marketing communication success relies
identifying the correct target demographics of potential customers (i.e. target market) as well as
the effectiveness of the actual brand message itself (i.e. advertisement effectiveness) that are
used to achieve a certain objective and influence customer perceptions, purchasing behaviors,
and wants/needs in the marketplace (Voss, Valencia, Westberg, 2005). In this context, Apple
has several targets it hopes to reach with the release of the Apple iCam that will be used to
evaluate its performance. These metrics used to evaluate the performance of the Apple iCam are
quantifiable while others are also qualitative in nature. However, all of the described goals are
designed to attempt to improve Apples long-term profitability and sustainability of its new
product (i.e. the Apple iCam). The market benchmarks include the following: sales growth,
retention, profitability, awareness, positioning, and cost reduction. All of these goals must be
met in order to reach the stated company benchmarks.
Sales growth is of vital importance to the Apple iCam. If early sales falter, then the
product will surely fail. The company projects sales of 500,000 units in year one. Sales in year
two are estimated to be 550,000 units. These projections represent a 10% increase in sales from
year one to year two.
Apple is also concerned about customer retention. Mostly, the Apple iCam will try to
attract current Apple customers. Apple users have proved to be fiercely loyal to the Apple brand.
Thus, current Apple consumers are natural target customers. Apple will also attempt to attract
and retain other tech-savvy consumers with the introduction of the Apple iCam.
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in this particular case based on the aforementioned data and research contained within this
report.
References
Aboulnasr, K., Narasimhan, O., Blair, E., & Chandy, R. (2008). Competitive Response to
Radical Product Innovations.Journal of Marketing, 72(3), 94-110.
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Amazon Corporation (2010). Digital cameras.Amazon Corporation. Retrieved on October 28,2010, from website: http://www.amazon.com/s/ref=nb_sb_noss?url=node%3D281052&field-keywords=&x=7&y=21
Apple's branding strategy. (2008). Marketingminds.com. Retrieved on November 7, 2010, from
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Canon. (2010). Company Overview. Canon USA Inc. Retrieved on November 6, 2010, fromwebsite: http://www.usa.canon.com/cusa/about_canon
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D'Aveni, R. (2007). Mapping YOUR Competitive Position. Harvard Business Review,
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