Apple's Secret of Success

TABLE OF CONTENTS

ABSTRACT

STUDENT DECLARATION

ACKNOWLEDGEMENT

LIST OF FIGURES

ABBREVIATIONS

1 INTRODUCTION TO THE STUDY
1.1 Aims and Objectives
1.2 Research question
1.3 Background

2 LITERATURE REVIEW
2.1 Apple Background Information
2.2 Traditional Marketing Strategy
2.3 What is a Brand?
2.4 What is Branding?
2.5 Cult Marketing
2.5.1 Cult
2.5.2 Relation between Cult and Marketing
2.5.3 “7 Golden Rules of Cult Branding"
2.5.4 Cult of Apple
2.6 Customer loyalty
2.7 Evangelism
2.8 Maslow’s Hierarchy of Needs

3 METHODOLOGY
3.1 Research Methods
3.2 Primary and Secondary data
3.2.1 Primary data
3.2.2 Questionnaire
3.2.3 Sampling
3.2.4 Secondary data
3.3 Quantitative & Qualitative data
3.4 Reliability
3.5 Validity
3.6 Generalizability
3.7 Ethical issue

4 RESEARCH FINDINGS
4.1 The Strategic Change in 1997, Apple’s Rescue
4.1.1 Apple’s financial Situation in the 90’s
4.1.2 The Strategic Change in 1997
4.1.3 Apple’s Change on the Example of Mac
4.2 Traditional Marketing
4.2.1 The 4P Analysis of Apple
4.2.2 Product
4.2.3 Place
4.2.4 Price
4.2.5 Promotion
4.3 Cult Marketing
4.3.1 Reason for a Cult
4.3.2 Elaboration of the Seven Golden Rules on the Example of Apple
1. Consumers want to be a part of the group that is different
2. Cult Brands inventors daring determination
3. Cult brands sell lifestyles
4. Listen to your customers and create Cult-Brand evangelists
5. Cult Brands always create customer communities
6. Cult Brands are inclusive
7. Cult Brands promote personal freedom and draw power from their enemies

5 CONCLUSION
5.1 Cult factor
5.2 Steve Jobs’ image in relation to the Apple brand
5.3 Forecast and risks
5.4 Limitation of study

6 BIBLIOGRAPHY

7 APPENDIX

ABSTRACT

There is possibly no other company which is so casual and at the same time so powerful as the computer and entertainment manufacturer Apple. The company controls the online-music market, the market for portable music players and is now capturing the high-tech mobile phone market. Apple moves into new electronic markets with strong competitors, in order to monopolise them just a short time later.

The CEO, Steve Jobs, has brought a brand into being that is different and at the same time mainstream. A strong magnetic brand which yields more influence in people’s life than one would care to admit. This is absolutely the reason why every company in the world wishes for a strong magnetic brand which can be defined as a “CULT BRAND”. They get repeatedly chosen over the competition. They bring higher prices than the competition. And if they are a strong enough brand their customers not only use their products, but evangelize them to the world.

This project aims to analyze Apple’s marketing activities in order to figure out, what makes this company so successful. It adds to the traditional marketing theory, the new theory of “cult marketing” because traditional marketing delivers no approach to explain the behavior of cult brands.

The phenomena of a Cult Brand are comparable to the patterns of a religion and Apple as well has strong believers. When it comes to their favorite brand, they enjoy telling who ever will listen how great it is and why they love it so much. People are camping in front of Apple’s stores just to get their latest innovative product. And if their Messiah, Steve Jobs, enters the stage to introduce a new product to thousands of viewers, he brings the house down.

STUDENT DECLARATION

BA (HONS) MANAGEMENT, BUSINESS AND ADMINISTRATION

I hereby declare that:

This project is my own work. I have acknowledged material from the work of other people and I have clearly marked and given references to all quotations; and

I permit the lodging of a copy of this project in the College Library, which shall be made available for the academic use of staff and students

ACKNOWLEDGEMENT

The successful achievement of this dissertation would not have been possible
without the support, help, motivation and attention of a number of people.

Hereby I would first like to thank my project supervisor who has constantly
accompanied me in good spirits through this whole process.

Special thanks go to my family who has fin]ancially and emotionally supported
me to conduct my studies in the United Kingdom.

List of figures

Figure 1: Model of Marketing Mix

Figure 2: Forms of Cult

Figure 3: 7 Golden Rules of Cult Branding

Figure 4: Apple’s Marketing Patterns

Figure 5: Hierarchy of Needs

Figure 6: Two-by-Two Grid

Figure 7: Strategic Change on the Example of the Mac

Figure 8: To which brands do the pictures belong?

Figure 9: Identification pictures of two Brands

Figure 10: To which brand belongs your mp3-player?

Figure 11: Apple’s Product Life Cycle

Figure 12: Apple’s Multichannel Distribution

Figure 13: iPod Classic Price Development

Figure 14: iPod Sales Development

Figure 15: If you buy a mp3-player, what is important?

Figure 16: Advertising Expenses

Figure 17: Profit Margin

Figure 18: Elements: Look, Say & Feel

Figure 19: Apple’s New Look, Say & Feel

Figure 20: How often do you use your Mp3-Player

Figure 21: Apple’s Customer Relationship

Figure 22: Are you satisfied with your mp3-Player

Figure 23: Why have you bought the iPod?

Figure 24: If you have not bought an Apple product yet, would you buy one

Figure 25: Strategic Change Process of Apple

Figure 26: 4 Factors of Apple’s Ad efficiency

Abbreviations

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1 Introduction to the study

At the end of the year 2009, Apple surprised the Wall Street by announcing record­breaking profits, as the Californian technology company continues to defy the recession. By 2010, Apple had sold 250 million of its portable music devices answering to the name “iPod”, a synonym in the mp3-player market. In the third quarter of 2009, Steve Jobs, CEO of Apple, was celebrating a record profit of $1.67 billion (Johnson, 2009, [online]). “This is going to be huge” (Young & Simon, 2005, prologue) the CEO said when they launched, in 1998, the all new iMac, a personal all in one case desktop computer. And he was proved correct!

Their major competitor, Microsoft, as well as others, has suffered from the recession and as a result, they have made a part of their workforce redundant, whereas Apple chose to expand and trump their own stock records every month.

According to the CEO Steve Jobs, a lot of companies have chosen to downsize, and maybe that was the correct way for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets. (brainyquote, 2009, [online])

Apple does not behave like the mass. With their unique recipe for success, they were able to “step out of the crowd” (Chazin, 2009, [online]). As a result of their uniqueness, they have loyal fans (Müller, 2007 [online]).

The CEO Steve Jobs stated before Apple launched the Macintosh, “we’ve got to be a great Marketing company” (Kahney, 2008, p.131). This quotation shows Apple’s main focus is on marketing. It is a key success factor for Apple and the researcher’s focus for this project.

1.1 Aims and Objectives

In this project the author aims to investigate, with particular reference to the example of Apple, why a few brands are able to charge higher prices for their products and sell more of them than their competitors. The research is based on traditional- and Cult­marketing which contributes to Apple’s profitability success.

Therefore, the researcher has identified the following objectives:

- Explore Apple’s strategic change in 1997 which brought the company back to profitability, considering the launch of Mac.

The whole history of the company was not “a bed of roses”, Apple also experienced a time of near bankruptcy. Therefore the author explored Apple’s strategic change in 1997 which saved Apple’s future. The researcher applied Apple’s new vision and strategy on the example of the Macintosh which was the first product that was all new developed and re-launched after the strategic changes (Kahney, 2008, p.38).

- Analyze Apple’s traditional Marketing strategy by 4P Analysis

Apple’s untypical philosophy also affects all areas of the 4P analysis. The company strives for details which are not considered by the competition in the computing industry. For instance, Apple was the first computer manufacturer that paid attention to design.

- Explore Cult-marketing and implement Apple’s marketing strategy in the elaborated theory in order to identify Apple as a “Cult brand”.

There is resonating a spirit around Apple known as “cult”. Strong brands like Harley Davidson are “riding” on the same unicorn as Apple, with their committed fans which protect their brand like a treasure. The author is going to describe and analyse the most common cult-marketing theory and apply it to the case study of Apple.

- Evaluate the marketing strategy and the image of the CEO in order to understand the “Cult status” and profitability success of the company.

The project provides an evaluation of Apple’s marketing strategy and Steve Jobs’ image relating to the “Cult status” of the brand. The CEO’s special image as a person who dared the impossible and succeeded has a major influence on Apple’s share value (Riedel, 2007, [online]).

1.2 Research question

On the basis of these aims and objectives, the author created the following research question:

What is the secret of Apple’s profitability success? Analyzed by traditional- and cult marketing theories

1.3 Background

Some companies have a far superior performance in relation to sales, margins and especially customer loyalty, which the author has described on the basis of marketing. By reason of changing environmental influences the researcher become aware that traditional marketing strategies cannot provide appropriate explanation for the mentioned characteristics of “cult-brands” and therefore he extended his research to forward-looking cult-marketing models.

Additionally the author has personal interest in marketing and he believes that the project provides him a deep view into new marketing theories as well as it will enhance his understanding of marketing.

2 LITERATURE REVIEW

2.1 Apple Background Information

In 1974 two college dropouts were driven by the vision of a computer for personal use. Despite no professional qualifications and little capital, Steve Jobs and Steve Wozniak founded Apple. Large computer companies like IBM laughed about their unprofessional appearance and the vision of a computer which can be used by ordinary people. Their success story started with the launch of the first personal computer which was easy to use and fitted in a tiny case.

In the following years, they have launched innovative new personal computers with the emphasis on the ease-of-use. Steve Jobs became dominant in the organization and the creative director. The co-founder Wozniak was the person who realized Jobs’ ideas on technological basis but he was always eclipsed behind Jobs’ dominant personality. After a struggle with the board of directors, Jobs left the company in 1984 and returned in 1997 when the company was nearly bankrupt (Young & Somion, 2005; Kahney, 2006).

The return of Steve Jobs had a fundamental influence on bringing the desolated company back to a profitable business. During the time before he returned back to Apple, he built up NEXT and the well known film production company Pixar (Young & William, 2005).

Google’s CEO Schmidt said in relation to Jobs second act: “Its resurgence is simply phenomenal and extremely impressive. ” (Caplan, 2006, [online])

2.2 Traditional Marketing Strategy

According to Young and William (2005, p.261), strategic change in products and marketing strategy were fundamental for the success of the brand.

The book Principles of Marketing by Kotler et al. (2008) refers to the Marketing Mix as the most common model to set up a marketing strategy. It is a tactical tool which consists of synchronizing the elements as shown in the figure below: product, price, place and promotion. The mixture of the elements is unique for every business.

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Figure 1: Model of Marketing Mix

This model which is used by the vast majority as basic tool for a marketing strategy is fairly general. According to Weis (2007, p.245), the Marketing Mix is a useful basis to write down the marketing activities the organization is planning to realize. Due to the fact that this tool is general, it can also be utilised for Apple in order to get a detailed view of their marketing activities. The Marketing mix provides Apple’s basic marketing strategy which is set in a unique position compared to other entertainment brands.

This model does not adapt to specific marketing activities or arising phenomenon of strong magnetic brands called “Cult Branding” (see Branding).

2.3 What is a Brand?

- brand is something that lives in your head. It is a promise that links a product or service to customers, whether by words, images, emotions, or any combination of these three factors. Brands are associations that get stirred when you think about or hear about a particular car, camera, watch or organization. You can immediately tell what makes them different (Adamson, 2006, p.3).

Most brands are characterized by human character traits. “Human beings emboss brands”. (Kilian, 2010, [online])

Apple itself is characterized with adjectives likes cool, friendly, metro sexual, good looking and creative (Rhoads, 2007 [online]). The actor Justin Long represents, in the Apple “Get-a-Mac” ad campaigns these particular adjectives by his personality (Rhoads, 2007, [online]). When Jobs came back to Apple in the company’s crises he noticed that the Apple Brand had still a good image of being different, despite the fact that Apple’s sales had fallen in recent years. Strong brands can survive in people’s memories (Kahney, 2008, p.28).

2.4 What is Branding?

Branding is the process of building and executing a brand for profiling a company. It tends to increase the company’s worth in the customer’s view.

According to Levin (2003, p. 3), “Branding is a complex process, but its goal is simple: It is the creation and development of a specific identity for a company, product, commodity, group, or person”. Apple started a rebranding advertising campaign in 1997 because they noticed that their brand was one of their best assets. The explanation is extendable to Cult Branding as the process of building up a Cult Brand.

2.5 Cult Marketing

2.5.1 Cult

- cult is originally a ritual worship of the Godhead, a person or a good which includes religious acts regarding to something that enjoys extraordinary worship. It can deliver their followers with unknown power (Kilian, 2009.p.12).

The researcher has noticed the mistaken impression that followers of a cult have weak personalities and therefore are searching to be a part of such a group in order to strengthen their personality. However it is possible to distinguish between two forms of a cult:

Destructive cult which Ross describes as “groups with an absolute authoritarian figure at the top of the scheme of authority where there is no accountability for that leader (Ross 2001, cited in Bueno & Ragas, 2005 p. 5) Destructive cults hurt, harm, manipulate, and often brainwash their members. They don’t care about the well being of their members.

In contrast a Benign cult is defined as “any group of people that are intensely devoted to a person, place or thing, but where there is a relationship between the follower and there is harmless or benign”. (Ross 2001, cited in Bueno & Ragas, 2005 p. 5) Cult Brands belongs to the group of Benign Cults.

Figure 2: Forms of Cult

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As seen in figure 2 the destructive cult has a person at the top of the pyramid who assumed the power of a cult through brainwashing, harm and manipulation in order to convert people into subordinates. In contrast in the benign cult the powerful person is located at the middle of the circle and is surrounded by his followers. These followers are persuaded to fulfill their needs and wants by means of this particular cult. The powerful person creates a relationship to his followers through listening and providing them with their wants and needs.

With regard to Apple, Steve Jobs who is sometimes called iGod is the preacher of the Apple Cult. He listens to his customers and serves them with the products they want. Moreover, he uses the feedback through Apple User-groups as a tool to turn his customers into followers. As a result they get infected by the Apple brand and defend it and their iGod against criticism (Kilian, 2009, pp. 23-25).

The combination of both terms form the so called Cult-Marketing, which presents a method of mystification and symbolization of a specific brand. The normal use of the product becomes more and more unnecessary. Special brands all command super high customer loyalty and almost evangelistic persons or followers. Therefore these specific brands are called “Cult Brands” (Gerken, 1998, p.89).

Bolz & Bosshart (1995, p.251) state, “In a global world people are not connected by political or cultural belonging, they are connected by the cult-marketing of Global brands. ” It means that people find their connection to each other by using the same brands.

Bolz & Bosshart (1995) analyzed our society, norms and values and came to the conclusion that traditional marketing was no longer adjusted to the wants and needs of the customers.

Gerken (1998) also investigated the phenomenon of Cult Marketing whereas he extended his investigation to the company and customer relationship. He assumes that the ordinary is going to be monochrome and consequently the society demands for variety.

Gerken (1998) stresses that Cult Marketing is the only way to meet the future customers demands and to fulfill their highest level of needs (See Hierarchy of needs). However either Gerken or Bolz & Bosshart do not provide guidelines to become a Cult Brand.

Ragas & Bueno invented a means of building up a Cult Brand by looking at the similarities of 9 “Cult Brands”. This model consists of 7 cult-marketing rules which provide a guideline for brands to become a Cult Brand and gain strong customer loyalty (Ragas & Bueno, 2002, p.2).

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The researcher used this model to identify Apple’s pattern as a Cult Brand. This moswl will be elaborated on in section 4.3.

2.5.4 Cult of Apple

As one of the world’s top ten brands Apple has understood the new way of marketing already in the 80’s as its best and expanded their traditional marketing to Cult Marketing (Kahney, 2008, p.28). Apple’s first cult succeeded with Macintosh supported by the “1984” ad campaign (see promotion).

Figure 4: Apple’s Marketing Patterns

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Source: Own Analysis

Their CEO Jobs was the impulse for Apple’s Cult Marketing that speaks to the individual. In the case of the iPod, the product is promoted as an integral part of the consumer’s personality. Additionally the Apple slogan “think different” reflects people’s individual identity and the desire to be different (Kilian,2009, p24).

Steve Jobs has a sense for what customers really want and is adjusting the products to their wants. “He tells us what we should love.” (Verganti, 2010, [online]) The point is that people don’t know what they want until cult marketers show it to them (Ragas & Bueno, 2005 p. 4).

2.6 Customer loyalty

Customer loyalty can be described as a term which indicates how strongly customers relate to a brand. Brands with a significant level of customer loyalty attract customers more than a comparable brand with less customer loyalty. In the purchasing process, customers prefer products of those brands to which they are more loyal (Jill, 2009, p.213). The stronger the brand loyalty the higher is the peoples’ willingness to pay for the product and the possibility that they prefer these products although other brands deliver the same or even better performance.

Actually Cult Marketing is all about strengthening customer loyalty and about tools that work to achieve this aim.

Apple is among the brands having the strongest customer loyalty in the world and the highest repurchase rate in the computing field (MacNN, Staff, 2006, [online]). Apple’s customers are fans. “Apple’s customers, unlike most others, really do love Apple” (Nussbaum, 2005, [online]). When they launched their new iPad, Apple’s fans camped for four days in front of the New York Apple store, only to get one of the brand’s innovation (Stockrahm & Seifert, 2010 [online]).

2.7 Evangelism

Evangelists are strongly loyal customers to a specific brand. The term evangelism refers to a marketing method that fundamentally relies on the transmission of product or service information by word-of-mouth (Jill, 2009, p.935).

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