Apple's marketing strategy for the iPad 2

iPad 2

The product being analyzed is the iPad 2, a tablet computer marketed by Apple Corporation. The iPad 2 was introduced in 2011 and sold an estimated one million units in its first weekend of sales, at prices starting at $499 (Madway & Raj, 2011). The product represents an upgrade on the successful iPad, adding new features in response to consumer demand. The product has helped solidify Apple's control of the tablet computer market, which is estimated at a 61% share. The company has a substantial marketing budget for its products, and new product launches are no exception. Apple's marketing tactics are therefore sophisticated, covering a broad range of price, promotion, distribution (place) and product. This paper will examine the marketing program for the iPad 2 from the perspective of the marketing manager.

Apple Inc.

Apple is a consumer electronics company that is focused on personal computers and portable devices. Its main products include the Mac line of computers, the iPod mp3 player, the iPhone smartphone, the iTunes online retail outlet and the iPad. The company has enjoyed a strong run of success in recent years. Its annual sales in fiscal 2010 were $65.2 billion, up 52% from the previous year. Net profits were $14 billion, up 70% from the previous year. The company's balance sheet is very strong, showing rapidly growing equity and over $28 billion in cash. The company does not have any long-term debt (MSN Moneycentral, 2011).

Apple employs a differentiated strategy, positioning its products as premium and charging premium prices for them. The products themselves utilize proprietary operating systems and software, in addition to stylish design. The price points are high, allowing Apple to earn healthy margins on its goods. The distribution of Apple products is closely controlled. The company uses both its own stores and third-party retailers. New products are often held in short supply in order to stoke further demand. The iPad 2, for example, was chronically undersupplied for several months (King, 2011). The company's promotions emphasize lifestyle factors and the Apple brand over individual products, creating pent-up demand for new Apple goods, rather than any one specific product (Kahney, 2002). The company focuses on creating a brand identity around Apple rather than any single product. This has allowed for strong initial sales of new product introductions, and allowed Apple to create a halo effect around its iPod product, using that product's popularity to bring new customers to the company's other products (MarketingMinds, 2010).

iPad 2

The iPad 2 was launched in March of 2011, following up on the success of the original iPad. The iPad was essentially a re-boot of the tablet computer segment. The first tablet computers were introduced in the early part of the 2000s by companies such as Microsoft, Samsung and PaceBlade. The product did not resonate with consumers at that time, however, and remained a minor niche product. Apple's launch of the original iPad brought life to the category. This is an interesting situation. The iPad line has enjoyed tremendous success relative to other tablets. But there are indications that this speaks less to dominance of the industry than it does to weakness of tablets in general. A recent survey noted that 94% of potential tablet purchasers are considering buying an iPad. This implies that loyal Apple customers are interested in tablets, while the product in general simply does not appeal to consumers at large. Tablet ownership in the U.S. is only at 8%, supporting the idea that tablets are not especially popular (Poeter, 2011). A more positive interpretation would be that Apple has essentially created the tablet segment, and it exists almost solely for the iPad product.

The iPad 2 has a number of strengths from which it draws its success. The Apple brand is driving some of the demand for the iPad 2, and provides an advantage over all of the non-Apple tablets on the market. The product itself, however, represents a significant upgrade over the original iPad. Several new features were added, such as cameras, multitasking, a faster processor, better graphics, HDMI video output and it is thinner and lighter than the original. Many iPad features are similar to those of competitors, but the product has carved a niche for itself in between laptops and smartphones.

There are some weaknesses for the product and for tablets in general. The tablet segment has failed to resonate beyond Apple's core market, meaning the upside limit of the iPad 2 may be capped. In addition, the product is unlikely to provide a significant halo effect. There are still some features that are missing from the iPad 2 that can be found in other tablets. The price of the iPad 2 makes sense in the scheme of Apple products, but is high compared with netbooks that offer superior performance.

This is not to say that the iPad 2 does not have substantial opportunity. This product still has a large untapped audience of Apple users, in particular those who own either an iPhone or an iPod. If the iPad 2 can capture some of these users, there is still potential for new sales to be generated. There is substantial opportunity in marketing ancillary products and services -- apps through iTunes, sleeves, adapters and more. There has not yet been full global penetration, meaning that the iPad 2 still has significant sales growth opportunities outside the key U.S. market that can be exploited.

There are few threats to the iPad 2. While there are numerous competitors, few of them have resonated with the market, leaving the iPad 2 with the dominant market share (Poeter, 2011). It is not expected that any competitor will seriously challenge this market share in the near future. However, rapid changes in technology could provide some threat, especially if advancements in smartphones bring Android or other successful products into more direct competition with the iPad 2 (Android tablets have failed to provide much competition). The iPad 2 is also under threat from internal change. The device has a planned obsolescence when the next generation of iPad is launched, so selling the iPad 2 is limited to a restricted time frame. The closer we get to the new product launch, the more difficult it will be to sell the iPad 2. Lastly, counterfeiting remains an ongoing threat to all of Apple's businesses, and the recent cases in China illustrate that substantial sales are threatened by aggressive counterfeiting operations in a number of countries around the world (Martina, 2011).

Competitor Analysis

Although in terms of market share there are no serious competitors to the iPad 2, there are some other tablets on the market that have strong offerings. Research shows that the second-most likely to be purchased is the HP TouchPad and after that the Samsung Tab 10.1. The HP TouchPad is based on the WebOS operating system that HP purchased when it acquired Palm. The TouchPad has generally been rated poorly compared with the iPad 2. The product has a lower level of support, weaker hardware and worse security, among other problems, despite apparently a superior interface (Gruman, 2011; Berte, 2011; Reisinger, 2011).

The Samsung Tab 10.1 is an Android-based tablet. It has strong usability, hardware and support. The apps for the iPad 2 are considered to be superior, as is the security (Gruman, 2011). The performance of this tablet with respect to its speed is comparable to the iPad 2 (Franklin, 2011). This tablet is generally viewed to be one of the closest to the iPad 2 in terms of performance and lightness, and it comes in at the same price point (Phone Arena, 2011). The tech community appears to support, in general, the idea that the iPad 2 is a superior product. Only products with the same price point are comparable in terms of quality, but the iPad 2 benefits from the experiences that Apple had with the original iPad. Refinements from that product put Apple slightly ahead of the competition in terms of developing a product that users favor.

Global Issues

Consumer electronics has long been a global business, with major players coming from North America, Europe and Asia. Apple's business is also global, although the company's premium positioning keeps it from achieving significant market shares in the developing world. The company also has trademark violation issues in some markets, beyond the infamous fake stores in China. The iPad 2 is marketed around the world wherever Apple sells its products. It has a strong position in major markets such as South Korea and Japan. In all markets, including the U.S., the iPad 2 is a groundbreaking product that has created much of the tablet market. Major global issues to keep in mind, in addition to intellectual property issues, involve procurement and shipping. The tsunami in Japan in particular caused problems for the iPad 2 because the company had trouble sourcing a sufficient supply of components in the wake of that disaster (AFP, 2011).

Current Situation

The iPad 2 is in the maturity part of the product life cycle. As with most new Apple products of the past several years, the iPad did not have an introductory life cycle, but moved directly into the high-growth stage. Sales slumped slightly after the initial launch, but have recently recovered (Ong, 2011). The June quarter saw an estimated 6.7 million unit sales of the iPad 2. The product is expected to continue selling at a high level for the remainder of the calendar year, and will not enter the decline phase of the product life cycle until the next iteration of the iPad is imminent.

Conclusion

The iPad 2 has enjoyed a very successful launch. Many of the factors that have driven the company's success in recent years have driven the iPad 2's success. Strong build-up in the pre-launch phase, a superior product, leveraging the Apple name, stock shortages and pre-launch secrecy about the product all combined to drive sales to a very high level immediately after the product was launched. At this phase of the iPad 2's life cycle, the product is still in high demand and still dominates the tablet market. The tablet market was essentially created by Apple and this has kept non-Apple competitors from making headway into tablets. Some of the more recent competitors have developed products that are comparable in quality in to the iPad 2 and that trend is expected to accelerate as the iPad 2 gets older. These competitors, however, have yet to establish a strong brand or market for their products.

It is recommended that the iPad 2 receive significant marketing support, in particular in terms of promotion. The product lags other devices like the iPhone and the iPod in creating a halo effect for the Apple family. Without any strong tablet competitors, there is opportunity to use Apple's domination of the category to bring non-Apple consumers into the Apple fold. This can be done by focusing the promotions on the features of tablets in general, and the industry-leading iPad 2 in particular. Such promotions could convince more non-Apple customers to consider tablets as an option, knowing that the iPad 2 is going to be their top choice. This would not only help to grow the market for the iPad 2 but also for Apple in general, using a similar growth strategy as was employed with the iPod line and the iPhones.

Works Cited:

Madway, G. & Raj, J. (2011). Apple iPad 2 sales seen clearing 1 million units. Reuters. Retrieved August 18, 2011 from http://www.reuters.com/article/2011/03/14/us-apple-research-idUSTRE72D30020110314