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........................................................................................................ Geographics................................................................................................................. Demographics.............................................................................................................. Behavior Factors / Psychographics............................................................................ Market Needs............................................................................................................... Market Trends............................................................................................................ Market Growth............................................................................................................ SWOT Analysis.......................................................................................................... Competition............................................................................................................... Product Offering.......................................................................................................... Keys to Success........................................................................................................... Critical Issues............................................................................................................... APPLE IPHONE K List of Charts Chart 1............................................................................................................ Chart 2.......................................................................................................... Chart 3............................................................................................................... Chart 4.......................................................................................................... Chart 5........................................................................................................... Chart 6............................................................................................................... Chart 7............................................................................................................... 3 APPLE IPHONE K 4 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. APPLE IPHONE K 5 Market Summary More and more young children are being exposed to advanced technology at a younger age. One of the most popular devices among young children is the smartphone, which allows them to play games, listen to music, communicate with their friends, and use the internet. According to Business News Daily, 40% of children under the age of 17 own a smartphone. (Mielach, 2013) While children love the idea of owning such a popular device, it presents an area of great concern for parents. Many parents worry about the access their children will have to adult content through the use of a smartphone. For some parents, the concern is so great that it stops them from buying their children smartphones at all. While parental controls are available on most smartphones, they present challenges within themselves. Many parents like the idea of using parental controls, but simply do not possess the technical ability to confidently apply the controls to their children’s phones. Parents need a 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. APPLE IPHONE K 6 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 of the United States, where Apple headquarters is located. Marketing will then be spread throughout the country, 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. You’ll want to shrink these gaps before the final paper 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 consumercomma needed ? playing a big role in marketing. Targeted firms will include electronic stores and online retailers. APPLE IPHONE K 7 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 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). APPLE IPHONE K 8 Household Income of potential iPhone K Consumers Chart 1 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. APPLE IPHONE K 9 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: extremely unlikely; 5: extremely likely) APPLE IPHONE K 10 How comfortable are you with setting parental controls on a smartphone? (1: extremely uncomfortable; 3: moderately comfortable; 5: extremely comfortable) 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 concerns? 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). APPLE IPHONE K 11 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. 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. APPLE IPHONE K 12 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 words missing? 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 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. APPLE IPHONE K 13 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. APPLE IPHONE K 14 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. 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. APPLE IPHONE K 15 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). Chart ??? “Business Insider”, 2013 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 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). APPLE IPHONE K 16 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. APPLE IPHONE K 17 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. APPLE IPHONE K 18 Optional features include the amount of storage, warranties, data plans, and manufacturer accessories. The amount of storage capacity offered for the iPhone K includes a A6 chip with either a 16GB or 32GB drive (Apple). 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. APPLE IPHONE K 19 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. (1: extremely unlikely; 5: extremely likely) 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. APPLE IPHONE K 20 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). APPLE IPHONE K 21 References Beschizza, R. (28 December 2012). The long slow death of the landline. Boing Boing. Retrieved October 12, 2013, from: http://boingboing.net/2012/12/28/the-long-slow-death-of-thelan.html Children own a mobile by age seven: Youngsters now get a phone six years earlier than a decade ago. (August 7, 2013). Daily Mail. Retrieved October 15, 2013, from: http://www.dailymail.co.uk/news/article-2386527/Children-mobile-age-sevenYoungsters-phone-years-earlier-decade-ago.html Critically evaluate the segmentation utilised by Apple iPhone marketing essay. (May 17, 2013). UKEssays. Retrieved 2013, from: http://www.ukessays.com/essays/marketing/criticallyevaluate-the-segmentation-utilised-by-apple-i-phone-marketing-essay.php David, S. (January 7, 2013). Monitoring kids’ mobile phone use could take a village. VerizonWireless. Retrieved 2013, from: http://news.verizonwireless.com/news/2013/01/location-labs-family-services.html Interbrand. (2013). Top Riser. Retrieved October 18, 2013, from: http://www.interbrand.com/en/best-global-brands/2013/Apple iPhone. (2013). Apple. Retrieved October 13, 2013 from: http://www.apple.com/iphone/compare/ Jay Yarow. (September 23, 2013). Apple's Gigantic Opening Weekend iPhone Sales In Context. Retrieved October 19, 2013, from: http://www.businessinsider.com/apples-gigantic-opening-weekend-iphone-sales-incontext-2013-9 Jeremiah Bourque. (June 24, 2010). iPhone 4 reception loss: Antenna design flaw at fault?. Retrieved October 17, 2013, from:http://technorati.com/technology/article/iphone-4reception-loss-antenna-design/ Lookout Mobile Security and Harris Interactive Survey. (2013). Generation smartphone: a guide for parents of tweens & teens. Lookout. Retrieved 2013, from: https://www.lookout.com/resources/reports/smartphone-family-guide APPLE IPHONE K 22 MacNN. (January 24, 2013). Apple’s cloud-based services growing rapidly. Retrieved October 18, 2013, from: http://www.macnn.com/articles/13/01/24/messages.icloud.game.center.all.on.rise/ Malcolm Moore. (January 11, 2012). ‘Mass suicide’ protest at Apple manufacturer Foxconn factory. Retrieved October 17, 2013, from: http://www.telegraph.co.uk/news/worldnews/asia/china/9006988/Mass-suicide-protest-atApple-manufacturer-Foxconn-factory.html Marketing strategy in 7 steps - part 4 - critical issues, vision and goals. (2009). Examiner. Retrieved 2013, from:http://www.examiner.com/article/marketing-strategy-7steps-part-4-critical-issues-vision-and-goals Mobile marketing statistics 2012. (2012). Snaphop. Retrieved October 16, 2013, from https://snaphop.com/2012-mobile-marketing-statistics Mielach, D. (2013, July 30). Todler tech: how young is too young for a smartphone?. Retrieved October 20, 2013 from http://news.yahoo.com/toddler-tech-young-too-youngsmartphone-103705250.html P2i. (2013). Retrieved October 6, 2013, from: http://www.p2i.com/ Reissa Su. (September 27, 2013). Apple Inc named world's most innovative company 2013, Samsung in top 2 spot; how to promote innovation (INFOGRAPHIC). Retrieved October 18, 2013, from: http://au.ibtimes.com/articles/509569/20130927/samsung-google-microsoft-apple-incsteve-jobs.htm#.UmSVuxYTFd1 Rind, H.M. (May 15, 2012). Reliance on mobile phones rapidly increasing: report. The News. Retrieved October 13, 2013, from: http://www.thenews.com.pk/Todays-News-3-108242Reliance-on-mobile-phones-rapidly-increasing-report Smith, A. (June 15, 2013). Smartphone ownership – 2013 update. Pew Research Center. Retrieved October 10, 2013, from: http://www.pewinternet.org/~/media/Files/Reports/2013/PIP_Smartphone_adoption_2013 .pdf Victor, L. (September 14, 2012). Should you use your smartphone to track your kids?. Business & Money Time. Retrieved 2013, from: http://business.time.com/2012/09/14/should-youuse-your-smartphone-to-track-your-kids/ APPLE IPHONE K 23 Zact. (May 13,2013). Zact mobile report: navigating children's smartphone use. PR Newswire. Retrieved 2013, from: http://www.prnewswire.com/news-releases/zact-mobile-report-navigating-childrens-smartphone-use-215817311.html Overall, good work so far! You’ve got work to do on this, and clean-up to do as well. But the thinking process is good. The evidence is pretty strong. You need to add more citations (and I’m not sure I saw citations for ALL these sources). Remember, anything on this list MUST be cited in the report. Good clean-up of the layout in the version Sarah submitted.