Running Head: APPLE IPHONE K
Apple
iPhone
K
Team Two: Tyler Darke, Carly Jones, Sarah Hirschmann, Ina Koelle, and Hyunsoo Kim
Running Head: APPLE IPHONE K
Fundamentals of Marketing
BUS 306-01, Fall 2013
Presented to Professor Carol Davis
Table of Contents
TABLE OF CONTENTS.............................................................................................................1
LIST OF CHARTS ....................................................................................................................2
Situation Analysis .................................................................................................................3
Market Summary ..................................................................................................................3
Geographics ..........................................................................................................................4
Demographics ......................................................................................................................5
Behavior Factors / Psychographics .......................................................................................6
Market Needs ........................................................................................................................8
Market Trends .......................................................................................................................8
Market Growth ......................................................................................................................9
SWOT Analysis .................................................................................................................11
Competition.........................................................................................................................13
Product Offering .................................................................................................................14
Keys to Success ..................................................................................................................15
Critical Issues ......................................................................................................................16
REFERENCES ........................................................................................................................17
APPLE IPHONE K
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List of Charts
Chart 1 ...................................................................................................................................6
Chart 2 ...................................................................................................................................7
Chart 3 ...................................................................................................................................7
Chart 4 .................................................................................................................................10
Chart 5 .................................................................................................................................12
Chart 6 .................................................................................................................................15
Chart 7 .................................................................................................................................16
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Situation Analysis
According to new research conducted by Zact, a wireless service provider, 25% of
children ages two and under own a smartphone, and 40% of children between the ages of 2 and
14 own a smartphone. Today, parents do not ask, “Should I buy a smartphone for my child?” but
rather, “When should I buy one for my child?” Regardless of this trend, they are worried about
the way their children will be able to use these smartphones. Also, according to research
conducted by the Family Online Safety Institute (FOSI), in 2012 84% of parents report that they
monitor their children’s mobile activity “very” (31%) or “fairly” (53%) closely. The iPhone K
provides parents with a better solution for monitoring their children’s smartphone activity
without depriving them of the latest technology.
In the market for parental controls, there are already many applications available for
parents who want to restrict the smartphone activities accessible by their children. However, they
would have to download multiple applications to achieve the same level of security the iPhone K
offers. For example, they would need to download applications that allow for GPS tracking,
monitored messaging, and any others desired restrictions separately. Many of these applications
require monthly payments and consume vast amounts of data. The largest competitor with the
iPhone K is Kajeet, a downloadable service only offered through Sprint. Kajeet offers different
brands of smartphones for kids such as LG, Nokia, Samsung, Sanyo, ZTE, HTC, and Kyocera
that are preloaded with the Kajeet software. However, according to our research, 60% of parents
who have more than one child are not familiar with this type of smartphone application for
children.
You’ll still want to shrin these gaps for the final paper
Market Summary
More and more young children are being exposed to advanced technology at a younger
age. One of the most popular devices among young children is the smartphone, which allows
them to play games, listen to music, communicate with their friends, and use the internet.
According to Business News Daily, 40% of children under the age of 17 own a smartphone.
(Mielach, 2013) While children love the idea of owning such a popular device, it presents an area
of great concern for parents. Many parents worry about the access their children will have to
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adult content through the use of a smartphone. For some parents, the concern is so great that it
stops them from buying their children smartphones at all.
While parental controls are available on most smartphones, they present challenges within
themselves. Many parents like the idea of using parental controls, but simply do not possess the
technical ability to confidently apply the controls to their children’s phones. Parents need a fullproof solution that allows them to comfortably purchase a smartphone for their 5 to 12 year old
child without worrying about giving their children access to inappropriate content.
Currently there are no comprehensive solutions to this dilemma. A company called Firefly
manufactures phones for children, but they are limited in the functions that they offer. Kajeet is a
software that offers parental control options for parents, but it lacks the advantage of being able
to produce both the software and the hardware together. There is a gap in the market between
childish phones with limited functions and standard smartphones that are built primarily for
adults. The iPhone K fills this gap, offering a fully functioning children’s smartphone that blends
hardware and software together seamlessly, as Apple is so well-known for doing.
With this phone, we will target concerned parents who do not currently have a viable
option for purchasing a smartphone for their children. We will primarily target parents between
the ages of 21 and 50 with average to high incomes. Marketing will be focused around urban
areas surrounding large cities where early adopters are commonly found.
Geographics
Business-to-Business
There are certain regions where the iPhone K could achieve rapid growth in sales and
profits. We anticipate the product being most successful in urban areas surrounding major United
States cities. These are generally the locations where higher income citizens and early adopters
live. These are the people we have identified as being most likely to purchase the iPhone K for
their children.
We will start by marketing the iPhone K in states on the West Coast the United States,
where Apple headquarters is located. Marketing will then be spread throughout the country,
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focusing on urban areas surrounding major cities. Areas where Apple stores are currently placed
are prime targets for marketing the iPhone K as they represent geographic locations where Apple
is already popular.
Business-to-Consumer
There are no identifiable geographical locations where the iPhone K will fail, because
many consumers are not familiar with phones made for children. The product could be marketed
in almost any location because it presents a new opportunity to concerned parents. Through
market analysis, though, we will first focus on urban areas that hold the greatest concentration of
our target consumer groups.
Demographics
Business-to-Business
The iPhone K will appeal to parents with children between the ages of 5 and 12. Smaller
firms can use the iPhone K to increase their awareness level and profit. For instance, firms that
serve as a distributor can offer this product directly from Apple to the consumer playing a big
role in marketing. Targeted firms will include electronic stores and online retailers.
Business-to-Consumer
The iPhone K is perfect for parents with young children. Through our research, we
determined that most parents of young children (between the ages of 5 and 12) are between 21
and 50 years old. This age range represents an important demographic group for us to target.
Members of this demographic group live in many different geographic locations, but primarily in
urban areas surrounding major cities. These parents want to give their children a chance to
communicate with their friends and family without gaining access to inappropriate content.
Technology is constantly developing and many children have a conventional smartphone
which does not restrict content that is not age appropriate. The iPhone K provides an option to
parents within the early adopter demographic who want their children to be familiar with the
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latest updates in technology, but are concerned with purchasing a conventional smartphone for
their children.
Another important demographic to target is people with mid-to-high income levels, as this
represents the majority of consumers who found interest in the iPhone K. These parents can
comfortably afford to purchase the iPhone K. The chart below shows the data we collected
regarding household incomes of potential iPhone K consumers (Survey).
Chart 1: Household Income of potential iPhone K Consumers
Behavior Factors/Psychographics
Business-to-Business
This marketing should focus on identifying firms that are willing to collaborate with
Apple to sell this product for mutual profit. These firms are also affected by rapidly developing
technology and need compete against its rivals. Their attitude towards the iPhone K will likely be
enthusiastic because it is a new concept that can set a new standard for child-oriented technology.
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APPLE IPHONE K
Business-to-Consumer
The first target group of the iPhone K will consist of parents who want their children to be
protected from adult content that conventional smartphones give them access to. They want to set
parental controls to restrict their children’s smartphone access, but they may not have the
technical ability to accomplish this. According to our research, most adults claim to have little to
moderate comfort with setting parental controls on a smartphone. This group will be most
attracted to the iPhone K since it protects their children from inappropriate content while also
giving them the freedom to play games, listen to music, and enjoy other features. The following
charts show the desire of parents to set parental controls on their children’s smartphones and their
relative technical ability to do so. (Survey)
How likely are you to set parental controls on a 5 - 12 year-old child's smartphone?(1:
1: extremely unlikely; 5: extremely likely
Chart 2: Part of Survey
How comfortable are you with setting parental controls on a smartphone?
1: extremely uncomfortable; 3: moderately
comfortable; 5: extremely comfortable
Chart 3: Part of Survey
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Market Needs
Through our research, we have concluded that our product needs to have intuitive parental
controls that are easy to use. Parents want to purchase their children phones that are safe to use
and easy to restrict. Current phones in the marketplace have parental controls that are limited in
functionality. Some functions are only attainable by downloading third-party applications; some
of which require a monthly payment. Parents want access to controls that limit inappropriate
content which is being sent or received, such as pictures or text messages. Safe internet usage and
downloads is one of the issues which will be solved. The iPhone K will use parental controls to
limit websites and access to internet with ease. With the previous two issues in need of solving,
privacy arises as well. The concern for parents to maintain child privacy will be managed.
Smartphones bring about new concerns for parents such as safety, overuse and addiction,
privacy concerns, distraction from school and relationships, “sexting”, and cost of lost phones.
According to our research, more than 73% of parents want to set parental controls on a 5 to 12
year old child’s smartphone (Survey).
According to our assessment of the market, many parents want to set parental controls for
their child’s phone; however, they do not have much information regarding the process. Many
articles say that smart parents are needed to operate a child’s smartphone; meaning parental
controls are difficult to set. The iPhone K will give parents a simple way to setup parental
controls on their child’s phone. They can limit internet access, monitor messaging, restrict time
on games, and geographically track the phone with GPS. The iPhone K also provides children
easy access to making emergency calls. A new report from Nielsen indicates that many children
want an iPhone as a present. Giving an iPhone to your child, satisfies their desire for a
smartphone more than any other type of smartphone can.
Market Trends
In the market summary, trends were introduced that occur in the iPhone K’s marketplace.
These market trends include parental concern and busy lifestyles, changes in purchasing power,
and brand loyalty.
APPLE IPHONE K
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The first variable that Apple’s iPhone K can benefit from is brand image and loyalty. As
companies develop brand images, consumers tend to buy from those that they relate to or admire.
Also, younger generations constantly search for products that will cause them to feel a certain
way or help them to fit into a desired group. Children are most susceptible to this trend and tend
to ask for the same products as their peers and family members. These variables can have
influence on the iPhone K because Apple is already viewed as a company with high family
values and this product can reinforce that image.
The second variable is parental concern and busy lifestyles. Overall, there are increasing
numbers of parents who work full-time and want to stay connected to their children. There are
many parents who do not take the time to learn how to properly use certain types of technology
and the child is usually much more knowledgeable than the adult. The iPhone K will benefit from
this trend because a device with simple, easy-to-setup parental controls will allow for consumers
to efficiently monitor the way children use smartphones without taking time from their busy
schedules.
Market Growth
Naturally, the iPhone K’s target market includes parents of younger children. Market growth for
the iPhone K is shaped by these people becoming more reliant on mobile devices as well as a
decrease in the age of first-time mobile phone users.
According to Aaron Smith (2013), in 2013 “56% of all Americans are smartphone users,”
this is a 21% increase in smartphone users since 2011.These increases in smartphone usage cause
the market to refocus suppliers to combine products or provide applications desired by the
consumers. Rind reports 43% of survey-takers reported their smartphones replaced their cameras,
34%, mp3 players, and 24% utilize GPS on their phones. People are also relying on mobile
devices for communication. Return Path (2013) reported email usage on PCs decreased by 9.5%
between April and September 2011 while mobile email usage increased by 34%. Another factor
to consider in the communication is the change phone services used in homes. Figure 1, from a
survey conducted by the CDC on an article from Beschizza (2012), shows the number of adults
and children living in wireless-only homes has risen exponentially. As of 2012, 40.6% of children
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in the U.S. do not have a landline in their home. The iPhone K’s market share can increase
through giving children the ability to easily communicate with parents who rely on smartphones
for daily tasks and communication.
The iPhone K can also help market growth because the average age of children receiving
smartphones is decreasing. Daily Mail (“Children own”, 2013) reported a study, conducted by
MobilePhoneChecker.co.uk, that found most children are given their first phones at the age of
7.5; the average age children got phones in 1993 was 13.5. The same study also found 74% of
parents “give children mobiles for safety reasons and 'peace of mind'” while 22% gave their
children phones simply because the child’s peers had a phone (“Children own”, 2013). A survey
we conducted about the iPhone K concluded that 60% of parents with children between the ages
of 5 and 12 would be likely to give their child a smartphone. 71% of those surveyed would be
likely to set parental controls; however, 60% are uncomfortable with setting parental controls.
Based on this data, the iPhone K can be expected to grow the market for safe, parent-approved
smartphones through easy-to-setup parental control technology.
Chart 4: Percentages of adults and children living in households with only wireless telephone service or
no telephone service: United States, 2003 – 2012
APPLE IPHONE K
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SWOT Analysis
In order to analyze Apple’s market situation, one has to take a good look at the company’s
strengths, weaknesses, opportunities and threats.
Strengths
Apple possesses many strengths that make the company unique. One of its major strengths
is brand loyalty. Consumers are so dedicated to the brand, they are willing to wait overnight
outside its stores in the freezing cold just to be one of the first to purchase the new iPhone, iPad,
or Mac.
Another strength of Apple is its brand reputation. Apple has a reputation of highly
innovative, well designed, and well-functioning products. According to a report from Interbrand,
a brand consulting company, Apple replaced Coca-Cola as first among the 100 most valuable
brands based on criteria including financial performance. Its brand is valued at about $98.3
billion (“Interbrand”, 2013).
Apple has not only the most valuable brand, but according to a report by The Boston
Consulting Group, it is the leading innovator of the world for 2013 as well. “The report was
based on information taken from more than 1,500 senior executives in a global survey that spans
a wide range of industries around the world” (“International Business Times”, 2013).
It is not a mystery why Apple has the power to be able to sell its products at such high
prices. Even though its competitors sell their devices at lower prices, they have no impact on
Apple, and according to the opening weekend sales of iPhone 5s and iPhone 5c, the company
obviously does not care about lowering prices.
Weaknesses
There are also weaknesses one has to consider. As mentioned, Apple has the ability to sell
its products at high prices, but what happens when people cannot afford acquiring such a costly
smartphone every year? Since customers can easily get similar quality at a lower price, the price
of Apple devices can quickly become a weakness.
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Another weakness is the defects on new products. It is obviously not only an Apple
weakness, but because some iPod and iPhone releases had faults, the firm’s reputation was
affected. The iPhone 4, for instance, has a design flaw. When holding the phone in a particular
way, the positioning of your hand will cause the phone to lose a few bars of wireless network
signal (“Technorati”, 2010).
In addition to that, another weakness lies in Apple’s restrictiveness of its operating
system. In comparison to other smartphones, iPhones are too restrictive which forces the users
that want to push the envelope to “jailbreak” their iPhone. Customers can only have a firewall or
special themes on their iPhone if they first jailbreak it.
Opportunities
There are a few opportunities which Apple takes advantage of. First, there is a high
demand for the iPhone 5s and 5c. As the following chart indicates, the opening weekend sales of
iPhones rose from $1 million in 2008 to $9 million in 2013. This leads to the conclusion that the
sales of the coming iPhones will continue to climb (“Business Insider”, 2013).
SOURCE: “Business Insider”, 2013
Chart 5: Opening Weekend iPhone Sales Through The Years
Apple has a strong advantage with iCloud and iMessage. Due to the growing emphasis on
mobility, people are dependent on external, portable storage. This leads to an increasing demand
for cloud-based services. According to MacNN, Apple’s cloud-based services have grown
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substantially. Over 2 billion iMessages are sent per day, and over 250 million users have iCloud
accounts to sync contacts, calendar data, notes, photos and other data (“Macnn”, 2013).
Threats
One of the biggest threats to Apple’s success is the rapid technological change Apple
faces. Apple, along with every other technological company, is under great pressure to release
new products faster and faster as well as to be the best innovator to keep up with competitors.
This leads to the next thread: Apple has strong competitors. When it comes to
smartphones, Google’s Android operating system is very popular, making them a major
competitor. Samsung is a serious competitor in the hardware market. As mentioned, it is not just
that they sell a similar quality and innovative devices, their smartphones are just as affordable as
well. Other competitors include: Research in Motion, Nokia, Sony, and LG.
A final threat to Apple is its primary supplier and producer, Foxconn, which has caused
many negative headlines leading to a bad reputation of fights, protests and workers springing out
of their windows due to despair of the working and living conditions. The wages are too low and
the number of work hours is too high. This forced Foxconn to instal safety nets in many of its
factories and dorms (“The Telegraph”, 2012). However, it is also important to consider that
Foxconn produces for some of Apple’s competitors such as Sony and Microsoft as well.
Competition
There are two major competitors in the market for children’s smartphones. Kajeet is the
primary competitor to the iPhone K, offering software solutions that are designed to be used by
children. The software is loaded into a variety of popular smartphones like the Samsung Galaxy
S4. The company is limited because its phones are only available through Sprint. Kajeet claims to
provide a solution for concerned parents to convert adult-oriented smartphones into childoriented smartphones, but it lacks the comprehensiveness of iPhone K. The phones offered by
Kajeet are generally fairly priced for smartphones and they have the advantage of looking
identical to popular conventional smartphones.
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The other major competitor is Firefly, which offers mobile devices designed for children.
While the company offers a variety of mobile phone options ranging from very simple phones to
relatively complex ones, none of them can really be considered smartphones. Some devices are
so limited that they can only call two programed phone numbers and emergency services, while
others are sophisticated enough to offer texting and gaming. The primary issue with Firefly
devices is that they are not focused on the needs and wants of children. They do not carry the
“cool factor” that comes along with having a smartphone at a young age. Children do not want a
Firefly phone when they can have an Apple phone, simply for reasons of brand recognition.
Firefly phones are generally inexpensive and unattractive. They are more concerned with
marketing to parents and making them want the phone, rather than making the children want the
phone.
Product Offering
The iPhone K is a new Apple iPhone design made for children and marketed to parents.
This phone is compatible with existing Apple products and other products that use USB drives or
Apple technology. It utilizes innovative software and modified hardware. Software features are
focused around intuitive parental controls that are easy to set up. When the phone is plugged into
the user’s computer and iTunes account, an icon in the iPhone set-up screen gives the user
password-protected access to a parental control account. The options for data accessibility
include limited internet, availability for email, and choice to allow only downloading childappropriate applications, songs, and videos. Also, the user can choose monitored or restricted
messaging and the option to block calls from strange numbers or prevent calls made to unknown
numbers. The iPhone K utilizes GPS technology for the phone’s location to be monitored from a
computer or a separate verified phone. This software is available anytime the phone is linked to
the iTunes account for users to adjust settings at their discretion. The modified hardware features
include a cheaper, more-durable design: a plastic exterior and steel frame interior, same as the
iPhone 5C; and new technology called liquid repellent nano-coating, manufactured by P2i, to
protect the phone from accidental water damage.
Optional features include the amount of storage, warranties, data plans, and manufacturer
accessories. The amount of storage capacity offered for the iPhone K includes a A6 chip with
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either a 16GB or 32GB drive (Apple). Warranties and data plans are only available through
wireless carriers, however, an optional reinforced, child-proof case will sold through both the
wireless carriers and the manufacturers for an extra charge.
Keys to Success
In order to be successful with our new smartphone for children we are focusing on factors
that will lead to the same fascination customer have about the iPhone 5s. According to our
research, 54% of consumers are not willing to pay more than $50 for such a smartphone under a
2-year contract, as shown in the following chart.
What is the highest price you’re willing to pay for a smartphone under a 2-year contract for
a 5 – 12 year-old child?
Chart 6: Part of Survey
Since the price is a strong key to success, we will have to make sure to sell the iPhone K
at a reasonable price and still meet the expectations of our customers along with the same quality
our users are used to. The most important factor is the parents’ willingness to buy a smartphone
for their kids. Up to now, according to our research, 39% of consumers are not likely to give a
smartphone to a child between the ages of 5 and 12, as seen in the graph below.
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APPLE IPHONE K
How likely would you be to give a smartphone to a child between the ages of 5 – 12?
1: extremely unlikely; 5: extremely likely
Chart 7: Part of Survey
This leads to our last key factor: courage. Since most of the respondents were extremely
satisfied with our variety of parental controls and we are right at the beginning of our research,
we will stay confident and keep marketing our new device. We need to be courageous to enter a
new market.
Critical Issues
There are many factors that might obstruct the success of the Apple iPhone K concept.
First, one fundamental fact that may inhibit the success of the product is if someone launches a
similar smartphone before or at the same time as the iPhone K, beating us to the market. This
would decrease benefits because Apple would have to compete with the other company to
become the market leader and offer the lowest prices. This would lead to lower sales figures for
the iPhone K. Technological change is another major factor affecting the success, because it is
rapidly changing. If another firm is developing a new technology, like an application equal to the
technology of the iPhone K and applicable to every smartphones, and also replaces the need for
an iPhone K, Apple will not have a great chance to sell its smartphone to its aspired customers
(“UKEssays”,2013).
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