Apple MacBook Pro Situation Analysis Susanna Walter Advertising Management, 355.01 Professor Stack 22 October 2009 Walter 2 Table of Contents Current Marketing Situation Industry Company Product Stage of Product Life Product Sales Features Positioning Sales History Share of Market Target Market Competition Identification Strengths of Competition Weaknesses of Competition Marketing Activities of Competition Distribution Pricing Communications Strategies/History Walter 3 Current Marketing Situation The Industry The personal computer industry consists of both desktop and notebook personal computer hardware. Desktop PCs form the largest segment of the market, generating 55.2% of the total volume. Notebook sales make up the remaining 44.8% of the market's volume. The leading companies in the personal computer market are Dell, Hewlett-Packard, Acer, and Apple. The PC market generated total revenues of $50.8 billion in 2007, representing a compound annual growth rate of 5.6% for the period spanning from 2003 to 2007. Market consumption volumes increased with a compound annual growth rate of 8.5% between 2003 and 2007, to reach a total of 67 million units in 2007. The performance of the market is forecast to decelerate, with an anticipated compound annual growth rate of 4.6% for the five-year period from 2007 to 2012, which is expected to drive the market to a value of $63.7 billion by the end of 2012.1 The computer industry includes more than one thousand companies. The industry is highly concentrated, with the top fifty companies generating ninety percent of the revenue. Demand is tied to consumer and business income. The profitability of 1 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=25&hid=6&sid=3f8e03de-469e-473f-adb0- 7efba9635c0d%40sessionmgr110> Walter 4 computer companies depends on purchasing and production efficiencies, as well as technological expertise. Large companies have economies of scale in purchasing and production. Small companies can compete successfully by specializing their products or developing superior technology. The manufacturing process for PCs consists of integrating circuit boards, disk drives, and input/output devices into a final product. Companies typically assemble PCs from components bought from other manufacturers. Key components like motherboards are typically made especially for a particular product. Despite new technology, some assembly work is still labor-intensive. The manufacture of some products requires highly sophisticated machinery. Although components and other materials can typically be bought from a variety of vendors, some components are available from just a few suppliers. For instance, Intel is the major supplier of processor chips for PCs. Computer manufacturers rely heavily on technology to produce better products and lower costs. Research and development spending at some companies is quite high. Technological advances can rapidly make products obsolete. The life cycle for computers is often less than eighteen months. Computer companies sell to consumers primarily through large electronic retailers and department stores, or directly through web sites. Computer companies have become more dependent on Internet sales recently. Many companies sell directly to consumers through their own websites, or through retailers’ web sites. Walter 5 Advertising is widely used in the industry to reach consumers. Magazine advertising, direct mail, promotional pieces, and catalogs are common, as is Internet advertising.2 2 Hoovers <http://premium.hoovers.com/subscribe/ind/fr/profile/basic.xhtml?ID=212> Walter 6 The Company Apple is engaged in the design, development and marketing of personal computers and related software, peripherals, network solutions, portable digital music players, and related accessories. Apple offers Mac computing systems, iPods, iPhones, and servers. The company’s software applications include Mac OS, iLife, iWork, and Internet applications like Safari and QuickTime. Apple is headquartered in Cupertino, California and employs 32,000 employees. Apple recorded revenues of $32,479 million during the financial year ended September 2008, an increase of 35.3% over 2007. The operating profit of the company was $6,275 million during FY 2008, an increase of 42.3% over 2007. The net profit was $4,834 million in FY 2008, an increase of 38.3% over 2007. During FY2008, the iPod division recorded revenues of $9,153 million, an increase of 10.2% over 2007. The portables division recorded revenues of $8,673 million in FY2008, an increase of 37.8% over 2007. The desktops division recorded revenues of $5,603 million in FY2008, an increase of 39.4% over 2007. The other music related products and services division recorded revenues of $3,340 million in FY2008, an increase of 33.8% over 2007. The software, service, and other net sales division recorded revenues of $2,207 million in FY2008, an increase of 46.4% over 2007. The iPhone and related products and services division recorded revenues of $1,844 million in FY2008, compared to revenues of $123 million in 2007. The peripherals and other Walter 7 hardware division recorded revenues of $1,659 million in FY2008, an increase of 31.7% over 2007. Apple is one of the major providers of personal computers, portable digital music players, and mobile communication devices. Apple designs, manufactures, and markets personal computers and related software, services, peripherals, and networking solutions. The company also designs, develops, and markets a line of portable digital music players along with related accessories and services including the online distribution of third-party music, audio books, music videos, short films, and television shows. The company sells its products worldwide through online stores, retail stores, direct sales force, and third-party wholesalers and resellers. The company has 247 retail stores, including 205 stores in the US and a total of 42 stores internationally. Apple’s desktops product line includes iMac, eMac, Mac mini, Power Mac, Mac Pro, and Xserve. Portables include MacBook, iBook, MacBook Pro, and PowerBook. iPod products include iTunes Store and iPod services, and the company’s own and third party iPod accessories. Other music related products and services include hardware accessories of the company and third parties, wireless connectivity and networking solutions. Software services comprise Apple branded operating system and application software, third party software, AppleCare, and Internet services. Apple Computer was founded in 1976 by Steve Jobs and Steve Wozniak. They introduced the first Apple I computer in 1976. The Apple I was a failure, but Apple II launched in 1980 and was successful. Walter 8 In the early eighties, competition from the PC market and internal difficulties led to critical management changes. By 1983, Apple Computer encountered danger when IBM entered the PC market, and the Apple III version computer failed. Apple Computer introduced its first mouse driven computer, the Macintosh in 1984. By 1990, the market was flooded with PC clones and Microsoft had launched Windows 3.0. In 1994, the company launched the PowerPC chip based PowerMac. This new chip allowed Macs to compete with the speed of Intel’s PC processors. Apple Computer still had problems though, and in 1995, the company had a $1 billion order backlog. These problems were compounded by the launch of Windows 95. Apple’s performance nosedived from 1995 to 1996 when it lost $68 million. In 1996, Apple Computer acquired NeXT, and NeXT’s operating system, Rhapsody became Apple Computer’s next- generation operating system. By 1997, Apple Computer had incurred huge losses running in millions of dollars. Steve Jobs, the original co-founder, returned as interim Chief Executive Officer. Under his leadership, Apple Computer reorganized to concentrate on its more profitable competencies. Apple Computer eliminated its unsuccessful spin offs, including Newton, its personal digital assistant line of products during this period. Soon after Steve Jobs returned, an agreement was made with Microsoft, and was subsequently followed with the appearance of MS Office on Mac PCs. In 2001, Apple acquired PowerSchool, one of the providers of web-based student information systems for Walter 9 K-12 schools and school districts. They also acquired Spruce Technologies, a privately held company involved in developing and marketing DVD authoring products, in the same year. In the following year, Apple Computer, Ericsson and Sun Microsystems formed an alliance to create a standard format for delivering multimedia content to wireless devices, such as smart phones and PDAs. The alliance combined Apple Computer’s QuickTime video creation software, Sun’s content distribution software and hardware, and Ericsson’s mobile infrastructure and services expertise. Apple Computer pursued a number of acquisitions during 2002. It acquired Prismo Graphics, Silicon Grail and certain assets of Zayante, and also acquired the German based specialist music software manufacturer, Emagic, which became a wholly owned division of Apple Computer. Additionally, in the second quarter of 2002, Apple acquired certain assets of Nothing Real, a privately held company engaged in the development of high performance tools designed for the digital image creation market. Apple launched its iTunes music store, an online store for downloading music tracks and albums, in 2003. In the following year, Apple signed licensing agreements with three of the largest European independent music labels, adding tens of thousands of additional independent tracks from leading artists to the iTunes music store in the UK, France and Germany. In the same year, Apple Computer introduced its fourth generation iPod portable digital music player. Walter 10 In 2005, Apple made an agreement to use Intel microprocessors in its Macintosh computers. Later in the year, Apple collaborated with Acura, Audi, Honda and Volkswagen to deliver iPod with their car stereos for 2006 model lines and also introduced mobile phone with iTunes in collaboration with Motorola and Cingular Wireless. Chrysler, in association with Apple Computer, integrated iPod options in the audio systems in its 2006 models. In 2006, Apple Computer sold its student information systems division, PowerSchool to Pearson. In the same year, Ford, General Motors and Mazda teamed up with Apple to integrate iPod across their brand and models. In 2006, Apple Computer teamed up with Air France, Continental, Delta, Emirates, KLM and United Airlines to integrate iPod with in-flight entertainment systems. In 2007, the company changed its name from Apple Computer, Inc to Apple Inc to represent its expanding product portfolio and increasing focus on consumer electronics division. In the same year, Apple launched its revolutionary product iPhone. In 2007, Apple launched iPod nano featuring two inch display with 204 pixels per inch delivering comparatively better brightness. In the same year, the company selected T-Mobile, a major network operator in Germany as the carrier of iPhone in Germany. Apple also chose Orange as the iPhone carrier in France. In 2007, Apple released Final Cut Express 4, an upgraded version of its video edit software Final Cut Pro 6 with additional capabilities at a lower price. Walter 11 In January 2008, Apple introduced Time Capsule, a backup appliance that automatically and wirelessly backs up everything on one or more Macs running Leopard. In the same month, it also introduced Mac Pro with eight processor cores and new system architecture for higher performance than its predecessor. Subsequently, Apple introduced MacBook Air, a thin notebook, which measures a maximum height of 0.76-inches. Apple introduced Xsan 2, the first major upgrade to its easy to use, high performance, enterprise class SAN file system for Mac OS X in February 2008. In May 2008, HBO and Apple announced that programming from HBO is available for purchase and download on the iTunes Store. In June 2008, Apple introduced MobileMe, a new Internet service that delivers push email, push contacts and push calendars from the MobileMe service to native applications on iPhone, iPod touch, Macs and PCs. In September 2008, Apple introduced iTunes 8, the next major release of Apple’s music and video player for Macs and PCs. In the same month, Apple introduced the new iPod nano, and new iPod touch. In October 2008, Apple announced that all four of the major networks ABC, CBS, FOX & NBC were offering primetime programs in high definition on the iTunes Store. In January 2009, Apple introduced iWork ’09, the latest version of Apple’s office productivity suite. In the same month, Apple introduced iLife ’09, which features major upgrades to iPhoto, iMovie and GarageBand, and includes iDVD and an updated version of iWeb. Apple also unveiled the new 17-inch Walter 12 MacBook Pro featuring a new built-in battery that delivers up to eight hours of use and up to 1,000 recharges for more than three times the lifespan of conventional notebook batteries.3 SWOT Analysis Strengths • Strong brand image The Apple brand is well recognized amongst most consumers. Apple also enjoys a high level of brand awareness and brand recognition for its products in all its markets. The company’s brand value, as per the Interbrand rankings, has improved from 39 in 2006, 35 in 2007 to 24 in 2008. The brand value of the company improved to $13,724 million in 2008 from $11,037 million in 2007. Apple leverages its brand image to differentiate its product offering and drive sales. The company’s strong brand enables it to command a premium pricing for its products such as iMac, iPod and iPhone, giving it an edge over regional as well as other global competitors such as Sony. 3 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=113&sid=cb7f18fc-38be-4f14-991d- d51aed44d6b4%40sessionmgr104> Walter 13 • Robust financial performance Apple reported robust financial performance in the past few years. The company’s total revenue increased from $6,207 million in FY2003 to $32,479 million in FY2008, representing a compounded annual growth rate of 39%. The company’s operating income recovered from an operating loss of $1 million in FY2003 to an operating profit of $6,275 million in FY2008. As a result, the company operating profit margin has improved from 3.9% in 2004 to 19.3% in FY2008. Apple’s net income increased from $69 million in 2003 to $4,834 million in 2008. Following the trend, Apples net income margin improved from 1.1% in FY2003 to 14.8% in FY2007. The net sales increased around 35% in 2008 as a result of increased sales of Mac, iPods, iPhone, other music related products and services, peripherals and other hardware, and software, service, and other. The net sales of Mac, iPods, other music related products and services, peripherals and other hardware, and software, service, and other increased by 38%, 10%, 34%, 32%, and 46% respectively in FY2008. Net sales of iPhone and related products and services were $1.8 billion for 2008, with iPhone handset unit sales totaling 11.6 million. The company’s cash from operating activities reached $9,596 million in FY2008, as compared to $289 million in FY2003. Strong growth in revenues and cash flows indicates better financial position of Walter 14 the company and helps it to strengthen investor confidence. • Focus on research and development Apple has a strong focus on research and development as continual investment in research and development is critical to the development and enhancement of innovative products and technologies. In addition to evolving its personal computers and related solutions, the company continues to capitalize on the convergence of the personal computer, digital consumer electronics and mobile communications by creating and refining innovations, such as the iPod, iPhone, iTunes Store, and Apple TV. The company’s research and development expenditures were $1.1 billion, $782 million, and $712 million in 2008, 2007, and 2006, respectively. The company’s R&D spending is focused on further developing its existing Mac line of personal computers, its operating system, application software, iPhone and iPods; developing new digital lifestyle consumer and professional software applications; and investing in new product areas and technologies. In January 2009, Apple introduced the new 17- inch MacBook Pro featuring a new built-in battery that delivers up to eight hours of use and up to 1,000 recharges for more than three times the lifespan of conventional notebook batteries. In the same month, Apple introduced iWork ’09, the latest version of Walter 15 Apple’s office productivity suite and iLife ’09, which features major upgrades to iPhoto, iMovie and GarageBand, and includes iDVD and an updated version of iWeb. Strong focus research and development would lead to market leading and innovative products such as iPod and iPhone, thereby enhancing the brand image of the company. Weaknesses • Product recalls The company’s products and services experience quality problems from time to time. Apple sells highly complex hardware and software products and services that can contain defects in design and manufacture. Defects may also occur in components and products the company purchases from third parties. There can be no assurance the company will be able to detect and fix all defects in the hardware, software and services it sells. For instance, in September 2008, Apple announced Ultracompact USB Adapter Exchange Program. Under certain conditions, the new ultracompact Apple USB power adapter’s metal prongs broke off and remained in a power outlet, creating the risk of electric shock. Therefore, the company decided to exchange every ultracompact power adapter for a new redesigned adapter, free of charge. Product defects could result in harm to reputation and significant warranty and other expenses. Walter 16 • Patent infringement The company is involved in legal complaints relating to the patent infringement. As of September 2008, the company has defended more than 21 patent infringement cases, 13 of which were filed during FY2008, and several pending claims are in various stages of evaluation. For instance, Texas MP3 Technologies filed action against the company and other defendants on February 16, 2007 in the US District Court for the Eastern District of Texas, Marshall Division, alleging infringement of U.S. Patent No. 7,065,417 entitled “MPEG Portable Sound Reproducing System and A Reproducing Method Thereof.” The complaint seeks unspecified damages and other relief. The hearing is set for March 12, 2009, and trial is scheduled for July 6, 2009. In case the company fails to succeed in any of the matters related to infringement of patent or other intellectual property rights of others or several of these matters are resolved against the company in the same reporting period, the company’s financial condition and operating results could be materially adversely affected. Opportunities • Smartphones Demand for smartphones among the mobile users is likely to grow rapidly over the next few years. Walter 17 Increasing demand for PC functionalities to support the data services along with the voice are expected to drive the smartphone markets. According to industry forecast, worldwide smartphone sales to end-users totaled 36.5 million units in the third quarter of 2008, an 11.5% increase from the same period in 2007. Apple has launched the iPhone, which is a multimedia and Internet-enabled mobile phone catering to the required functionalities. iPhone is a combination of mobile phone, a widescreen iPod, and the internet functionalities and applications that support email, web browsing, and maps on a mobile phone. It has additional features such as multi touch display and related software. Apple gained third position in the global smartphone market and improved its market share to 12.9% in the third quarter of 2008. Apple’s sales increased more than four times compared to the same period in 2007 as a result of wider geographical availability. The success of iPhone 3G sales in the third quarter of 2008 propelled the Mac OS X to the No. 3 position in the global OS provider rankings. For the first time, iPhone sales exceeded sales of Microsoft Windows Mobile devices worldwide and in North America. Smartphone sales in North America were the fastest growing market, with a 68% increase in the third quarter of 2008. Smartphone sales in Europe, the Middle East and Africa increased 14% year-on-year. In Latin America, despite the decline in sales for all Walter 18 handsets, the smartphone market grew 56% in the third quarter of 2008. With an innovative product like iPhone, Apple is capable of increasing its share of growing smartphone markets. • New retail stores The company opened a total of 247 retail stores, including 205 stores in the US and a total of 42 stores internationally. The company has typically located its stores at high-traffic locations in quality shopping malls and urban shopping districts. A goal of the company’s retail business is to expand its installed base through sales to customers not owning the company’s products. The stores are designed to simplify and enhance the presentation and marketing of the company’s products and related solutions. To that end, retail store configurations have evolved into various sizes in order to accommodate market-specific demands. The stores employ experienced and knowledgeable personnel who provide product advice, service, and training. The stores offer a wide selection of third- party hardware, software, and various other accessory products and peripherals selected to complement the company’s own products. By operating its own stores and locating them in desirable high traffic locations, the company is better positioned to control the customer buying experience and attract new customers. Walter 19 Threats • Intense competition Apple operates in the highly competitive and rapidly evolving technology industry. The company faces intense competition in consumer electronics, personal computers and related software, and peripheral products. Rapid technological advances in both hardware and software, increasing the capabilities and use of personal computers and digital electronic devices, characterize these markets. Rapid changes in the technology have resulted in the frequent introduction of new products with competitive prices, features, and performance characteristics. Some of the competitors of the company include Microsoft Corporation, Dell, Hewlett-Packard, Fujitsu, Samsung Electronics, Sony, and Toshiba, among others. Further, acquisition of Gateway by Acer has created a large player in the PC market. The company is currently focused on market opportunities related to mobile communication devices including the iPhone. The mobile communications industry is highly competitive with several large, well-funded, and experienced competitors. In 2009, Mobile phone maker Nokia launched a software and media store that aims to compete with Apple online marketplace. Intense competition among the PC producers has resulted in the price erosion threatening to erode the market share of the company. Walter 20 • Uncertain global economic conditions Uncertainty in current global economic conditions poses a risk to Apple as consumers and businesses would postpone spending in response to tighter credit, negative financial news and/or declines in income or asset values. Economic slowdown in any major geographic segment of the company would affect its financial performance. For instance, economic slowdown in the US would decrease the demand for Apple’s products and services. The US represented Apple’s largest geographic marketplace with approximately 57% of net sales in 2008 from sales to customers inside the US. According to the IMF projections, the advanced economies like the US is forecast to report a huge decline in GDP figures for 2009, compared to 2008. The US economy, which was hit by the weak housing market, credit crunch and unemployment, is forecast to report a real GDP decline of 1.6% in 2009 compared to 1.1% growth in 2008. In addition, the current financial turmoil affecting the banking system and financial markets and the possibility that financial institutions may consolidate or go out of business have resulted in a tightening in the credit markets, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity markets. There could be a number of follow-on effects from the credit crisis on the company’s business, including insolvency of key suppliers resulting in product Walter 21 delays; inability of customers, including channel partners, to obtain credit to finance purchases of the company’s products; customer, including channel partner, insolvencies; and failure of derivative counterparties and other financial institutions negatively impacting the company’s treasury operations. Uncertain global economic conditions, could have a material negative effect on the demand for the company’s products and services. • Declining PC sales The PC sales are expected to decline in the near future. Analysts expect industry revenues to fall 5.3% from 2008 numbers as against an earlier forecast of a drop of around 4%. Sales of Macs in the US stores in November 2008 declined 1% from a year ago. The UK PC market is also expected to decline in 2009. Industry sources have decreased its unit forecast for the market by 15%. According to industry sources, the UK will witness a 3% fall in PC shipments during 2009 due to recession. The market is not expected to witness growth until 2010. Declining PC sales would affect the sales of Apple’s desktop products affecting its financial performance. • Dependence on specific suppliers The company depends on the third party suppliers for various components used in its products. In the case of personal computers, Apple acquires most of the general components from multiple Walter 22 sources and certain key components from single or limited customers. These key components include DRAM, NAND flash-memory, and TFTLCD flat- panel displays. The company also uses certain customized components from single source, which are not generally used by the other PC manufacturers. Continued availability of these components may be affected if producers concentrate on the production of components other than those customized to meet the company’s requirements. Lack of suppliers of key components could adversely affect the operations of the company.4 4Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=23&hid=6&sid=3f8e03de-469e-473f-adb0- 7efba9635c0d%40sessionmgr110> Walter 23 The Product Stage of Product Life Cycle The MacBook Pro is in the growth stage of the product life cycle. The portable computer division of Apple recorded revenues of $8,673 million in 2008, an increase of 37.8% over 2007. Apple continues to constantly develop and enhance the appearance and technology of the MacBook Pro. In January 2009, Apple introduced the new 17-inch MacBook Pro featuring a built-in battery that delivers up to eight hours of use and up to 1,000 recharges for more than three times the lifespan of conventional notebook batteries. Product Sales Features • Precision aluminum unibody enclosure • Full-size backlit keyboard • Multi-Touch trackpad for precise cursor control; supports two-finger scrolling, pinch, rotate, swipe, three-finger swipe, four-finger swipe, tap, double-tap, and drag capabilities • 13.3 inch, 15.4 inch, or 17 inch LED-backlit glossy widescreen display • Built-in battery that lasts up to 7 hours on a single charge and can be recharged up to 1,000 times • Built-in iSight camera • Built-in stereo speakers • Built-in omnidirectional microphone Walter 24 • Built-in AirPort Extreme Wi-Fi wireless networking • Built-in Bluetooth 2.1 + EDR • Built-in 10/100/1000BASE-T Gigabit Ethernet • Two USB 2.0 ports • FireWire 800 port • SD card slot • Mini DisplayPort • NVIDIA GeForce 9400M graphics processor5 Positioning The MacBook Pro is positioned as the most advanced notebook on the market. It is positioned as the epitome of precision engineering and advanced technology. The MacBook Pro is designed to provide the best computer experience possible. Everything works, and everything works together because Apple makes the hardware, the software, and the operating system. Only Apple could make a notebook like the MacBook Pro. The MacBook Pro truly is the next generation of notebooks. Sales History The MacBook Pro was first introduced in January of 2006. Apple recorded notebook revenues of $8,673 million in 2008, an increase of 37.8% over 2007. Apple’s growth in sales of notebooks was due, in part, to strong demand for the 5 Apple <http://www.apple.com/macbookpro/specs.html> Walter 25 MacBook Pro, which increased in every operating segment except Japan.6 Share of Market Apple's market share of personal computers rose from 7.4 percent in 2008 to 7.6 percent in the first quarter of 2009. Apple is in fourth place for both market share and shipments of computers in 2009, as it was in 2008. HP’s market share rose from 23.8 percent in 2008 to 27.6 percent in 2009. Dell saw its market share fall four points to 26.3 percent. Acer has 10.5 percent market share.7 6 Apple <http://www.apple.com/investor/> 7 Macworld <http://www.macworld.com/article/140029/2009/04/pcshipments.html> Walter 26 The Target Market The target market for Apple consists of students, consumers, creative professionals, businesses, and government customers. The MacBook Pro family of notebook computers is designed for professionals and advanced consumer users. The target market for the MacBook Pro consists of both males and females, ages fifteen and older, with middle upper income. The target audience for the MacBook Pro consists primarily of generations X and Y. The target audience for the MacBook Pro consists of those who can afford and are willing to pay premium prices for a superior computer. Professionals in media and design are certainly in the target audience, as are consumers with advanced computer needs or desires or a particular interest in photography, music, video, etc. Walter 27 The Competition Identification • Dell Dell is one of the leading technology companies, offering a broad range of products, including desktop PCs, servers, networking products, storage, mobility products, software and peripherals, and services. The company operates in the Americas, EMEA and Asia Pacific. It is headquartered in Round Rock, Texas and employs 78,900 people including 2,400 temporary employees. The company recorded revenues of $61,101 million during the financial year ended January 2009, a decrease of 0.1% over 2008.The operating profit of the company was $3,190 million in FY2009, a decrease of 7.3% over 2008. Its net profit was $2,478 in FY2009, a decrease of 15.9% over 2008.8 • Hewlett-Packard Hewlett-Packard (HP) is a global provider of personal systems, imaging and printing products, and technology solutions. The company is the largest player in the inkjet printer and laser printer market. HP is one of the major companies in the enterprise storage and servers markets. The company is also one of the market leaders in the global PC market. It operates in the US 8 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=7&hid=3&sid=bccf4bad-8bf7-45e8-941e- c7c7ed9ce94d%40sessionmgr10> Walter 28 and other countries. It is headquartered in Palo Alto, California and employs 321,000 people. The company recorded revenues of $118,364 million during the financial year ended October 2008, an increase of 13.5% over 2007. The increase in the company’s revenue was mainly due to strong growth in international sales. The operating profit of the company was $10,473 million in FY2008, an increase of 20.1% over 2007. Its net profit was $8,329 million in FY2008, an increase of 14.7% over 2007.9 • Acer Acer is engaged in research, design, manufacture and distribution of computers, mobile phones and related IT products. Its product range includes desktop personal computers (PCs), notebook computers, servers, storage products, liquid crystal display (LCD) monitors, high-definition televisions (HDTVs), projectors and handheld/navigational devices, among others. The company offers its products under four brands, including Acer, Gateway, eMachines and Packard Bell. The company operates in Taiwan, Europe, Asia, and North America. It is head quartered in Taipei, Taiwan and employs about 6,730 people. The company recorded revenues of TWD546,274.1 million ($17,344.2 million) during the financial year ended December 2008, an increase of 18.2% over 2007. The operating profit of the company 9 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=3&sid=9ca6ed6a-df54-4fc2-8f3b- 1dbefb66de89%40sessionmgr11> Walter 29 was TWD14,072.3 million ($446.8 million) in FY2008, an increase of 38.2% over 2007. Its net profit was TWD11,742.1 million ($372.8 million) in FY2008, a decrease of 9.4% over 2007.10 Strengths of Competition • Dell o Strong brand value Dell enjoys a strong brand image supporting its growth. The company is among the top 100 brands in the world, with a brand value of $11,695 million, according to Interbrand annual ranking 2008. It was ranked 32 in the list of top 100 brands. In the second half of the FY2008, Dell started offering products through indirect sales, such as leading retail chain stores. It offers select products through strategic relationships with a various major retailers like Wal-Mart and Best Buy in the US; Wal-Mart and Pontofrio in Latin America; Carphone Warehouse, Carrefour, Tesco and DSGi in EMEA region; and Gome, HiMart, Courts and Bic Camera in Asia Pacific region. With its entry into indirect sales channel model, Dell’s visibility among the individual customer in the retail space is increasing, which further increases its brand 10 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=3&sid=b4387afb-bc04-4df0-ab9f- 47ac6073303a%40sessionmgr14> Walter 30 value. Strong brand value enhances the company’s market penetration capability and provides cross selling opportunities. o Robust market position Dell has a robust market presence in IT systems market. Despite losing market share to other players in the recent past, Dell continues to remain a strong player in the IT systems market. Dell was the second largest player in the in the worldwide PC market with approximately 15% share of the volume shipment in 2008. In the notebook PC segment, it was the second largest player in 2008 with a market share of approximately 14%. In the US, the company continued to be the leading PC vendor with approximately 30% market share of the volume shipments in 2008. It is also a leading player in the computer peripheral equipment and software wholesaler market. The company is also the fourth largest player in the worldwide disk storage systems market with a market share of over 10% in 2008. It is the third largest player in the worldwide servers' segment with a market share of approximately 12% in 2008. Dell's strong market position in the IT systems market provides it with a competitive Walter 31 advantage.11 • Hewlett-Packard o Robust market position Hewlett-Packard (HP) has a robust market position in most of the product segments it serves. The company leads the global PC market in terms of shipments. HP managed to take market leadership from Dell in the global PC market in 2006 and sustain the position through 2008. In 2008, the company had over 18% market share of the global PC market followed by Dell (14%), Acer (11%) and Lenovo (7%). In the global server market, the company was a leader with over 30% share in 2008. Further, in the blade servers segment of the server market, the company was the leader with a market share of 47% of shipments in 2008, followed by IBM with over 26%. Further, HP continued to lead the global world printers market in 2008, with a market share of over 40%. It was the second largest player in the storage market behind EMC in 2008. HP is also one of the major IT services companies in the world. It further strengthened its position in the IT services market through the acquisition of EDS in 2008 to become the second largest player. 11 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=7&hid=3&sid=bccf4bad-8bf7-45e8-941e- c7c7ed9ce94d%40sessionmgr10> Walter 32 Robust market position in various market segments provides economies of scale for the company, besides increasing its chance of winning customers. o Significant brand recognition The company has significant brand recognition. The HP brand is recognized by various rating and ranking agencies. For instance, HP was ranked 12 in the list of top 100 Best Global Brands 2008 ranking by Interbrand, an international brand consultancy. HP brand was valued at $23,509 million, an increase of 6% over 2007. Further, HP was listed on all four FTSE4Good Index lists including the US, Global, the UK and Europe. It was also ranked 10 globally and 1 in the US in Environment, Social Impact Ratings by The Economist. Significant brand recognition provides a competitive advantage to the company and allows it to penetrate new markets with ease. o Successful inorganic growth Over the years, HP has been successful in growing through large deals. The company’s major mergers and acquisitions in recent past include Compaq Computer Corporation in 2002, Mercury Interactive in 2006 and Electronic Data Systems Corporation (EDS) in 2008. These large acquisitions have allowed the company to Walter 33 gain scale and expand its capabilities in related areas. The merger with Compaq allowed HP’s revenue to scale up from $48.8 billion to over $87 billion, and made it one of the leading players in the IT market. Further, the company’s acquisition of Mercury Interactive at a value of approximately $4.5 billion strengthened its portfolio of IT management software and services. Moreover, the company’s acquisition of EDS in a transaction valued at $13.9 billion created a leading player in IT services market. The acquisition, by value, was the largest in the IT services sector and the second largest in the technology industry, following HP's acquisition of Compaq in 2002. The company’s successful inorganic growth allows it to increase its competitiveness both through scale and expanded portfolio of offerings. This would create value for both investors and customers of the company.12 • Acer o Robust market position Acer has robust market position in the global PC and notebook markets. In 2008, the company was ranked as the third largest player 12 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=3&sid=9ca6ed6a-df54-4fc2-8f3b- 1dbefb66de89%40sessionmgr11> Walter 34 in the global PC market with a market share of 12.8%. Acer was ranked the second largest in the global notebook market with a share of 19.6%. According to industry sources, Acer reported 57.9% growth in PC shipments in 2008 compared to 2007 and was the highest among the top 5 vendors. In addition, Acer was ranked the third largest player in the US in PC market and notebook markets with a share of 13.6% and 16.8% respectively, in 1Q2009. The company was ranked the second in Europe, Middle East Africa (EMEA) PC market with a share of 19.1% in 1Q09. It was the top player in EMEA notebook market with 26.6% market share as of 1Q09. Acer also holds 7.3% and 13.9% of Asian notebook and PC markets respectively, as of 1Q09. Furthermore, Acer was named "Gold" Computer TrustedBrand in Asia for tenth consecutive year in the 2008 Reader's Digest TrustedBrand survey. Acer’s strong market position in the PC and note books market provides it with a competitive advantage. o Successful integration of acquisitions In the recent periods, the company has successfully integrated its acquisitions. In September 2008, the company completed acquisition of 100% ownership of E-Ten Walter 35 Information Systems, a handheld device company based in Taiwan. The acquisition helped the company to strengthen its position in handheld devices, including smartphones and GPS devices. In 2008, Acer completed the acquisition of Packard Bell. The company also acquired Gateway, one of the largest PC companies in the US, in 2007. The successful mergers of Gateway and Packard Bell helped the company to strengthen its presence in the US and enabled deeper penetration into the European and Asian markets. These acquisitions helped the company in generating increasing revenues from non- Taiwan markets. The revenues from non- Taiwan markets reached TWD523,185.6 million ($166,11.1 million) in FY2008, representing a compounded annual growth rate of 31% for the period 2006-2008. Successful integration of acquisitions helped the company in expanding its reach and enhancing its financial performance.13 Weaknesses of Competition • Dell o Lack of strength in certain product segments The company lacks strength in certain 13 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=3&sid=b4387afb-bc04-4df0-ab9f- 47ac6073303a%40sessionmgr14> Walter 36 product segments. As Dell stands on a competitive platform with other major players like IBM and HP, its portfolio of offerings lack competitiveness in certain segments. For instance, the company lacks any significant software product or IT service, compared to competitors such as IBM and HP. Moreover, in recent years, IBM has been concentrating on high margins solutions business, while HP has expanded its technology services business through the $13.9 billion acquisition of EDS in 2008. Further, the company’s storage offering are dependent on its relationship with EMC. However, the company is making strategic moves to strengthen its position in these markets. For instance, it is improving storage products and services through acquisitions, such as EqualLogic, one of the leading providers of high-performance storage area network solutions. Lack of strength in certain product segments could affect the growth prospects of the company in future. o Product recalls The company had to recall several products in the recent past owing to quality issues. In August 2006, the company announced the recall of 4.1 million notebook batteries owing to fire risk. These Dell-branded batteries Walter 37 were based on cells of Sony. According to the company, there was a risk of overheating of batteries, which could result in fire. Earlier in December 2005, the company offered replacement batteries for some models of Dell Latitude, Dell Precision, and Dell Inspiron notebook computers owing to quality issues. The company also recalled several other products during previous years owing to quality problems, including AC Adapters (2004), printer (2004), Auto-Air PowerAdapter (2004), and battery (2000 and 2001). Frequent product recalls reflect poorly on the quality function at Dell. Additionally, in October 2008, Dell updated its battery-replacement program based on additional information it received from lithium-ion battery supplier, Sony. According to Sony, 300 batteries manufactured by Sony on November 9, 2004 and April 11, 2005 and supplied to Dell may present a fire and burn hazard. As a result, Dell announced that it would voluntarily replace these batteries at no charge. Consistent product recalls could undermine the faith of consumers in the products, benefiting the competitors of the company. o Relatively weak R&D capabilities Dell has relatively weak research, Walter 38 development and engineering (R&D) capabilities compared to its major competitors. The company employs a collaborative approach to product design and development, where it works with a network of technology companies. It uses original design manufacturing (ODM) partnerships and manufacturing outsourcing relationships for manufacturing. However, it undertakes essential manufacturing processes including assembly, software installation, functional testing and quality control. As a result, the company’s R&D spending has been lower than its competitors. Dell’s R&D expenses were $663 million, $610 million, and $498 million, respectively, FYs 2009, 2008 and 2007. By contrast, its competitors such as HP reported R&D spending of $3,543 million, $3,611 million and $3,591 million, respectively, in FYs 2008, 2007 and 2006; and IBM reported R&D spending of $6,337 million, $6,153 million and $6,107, respectively, in FYs 2008, 2007 and 2006. Furthermore, the company’s R&D spending as percentage of total revenues was 1.1% in FY2009, compared to HP (3%), IBM (6.1%) and Lenovo (1.4%). As a result, the company had lesser patents than its competitors. At the end of FY2009, it had a worldwide portfolio of 2,253 patents and additional 2,514 patent applications pending. By contrast, HP had a worldwide portfolio of over 32,000 patents, and IBM achieved over 4,000 Walter 39 patents only in 2008. Although, the company’s business model was not highly dependent on R&D over years, changing industry dynamics with increasing competition and commoditization of PC market call for differentiation though innovation. Further more, the company’s relatively weak R&D makes it depend on licenses for third- party patents, and could affect its ability to introduce innovative products. Dell’s relatively weak R&D capabilities affect its competitiveness as well as make it dependent on third parties for patent licenses.14 • Hewlett-Packard o Lack of significant presence in various market segments The company lacks significant presence in various segments of the IT market when compared to its major competitors. For instance, the company’s portfolio of offerings lack significant software product or manage consulting services when compared to its major competitors including IBM, Accenture and EMC, among others. Moreover, the company depends upon other vendors to complement its offerings. Further, increasing number of IT 14 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=7&hid=3&sid=bccf4bad-8bf7-45e8-941e- c7c7ed9ce94d%40sessionmgr10> Walter 40 companies are establishing management consulting divisions in order to provide a more comprehensive and integrated range of services. Both IBM and Accenture have strong management consulting practices. Indian companies such as Infosys Technologies have also added management consulting practice to their technology services in order provide better breadth and depth of services. However, HP has been continuing to enhance its portfolio. For example, the acquisition of EDS was an effort to strengthen its IT services offering. The company’s lack of significant presence in various areas, could affect its competitiveness and makes it dependent on others for providing complementary offerings.15 • Acer o High dependence on Europe Acer is significantly dependent on Europe for its revenues. In FY2008 and FY2007, the company generated around 51% of its total revenues from Europe. The company’s principal market, Europe is experiencing a slowdown in the recent periods. The European market (primarily comprising the Euro region and the UK) is forecast to 15 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=3&sid=9ca6ed6a-df54-4fc2-8f3b- 1dbefb66de89%40sessionmgr11> Walter 41 slowdown. Euro region slowed down from 2.7% in 2007 to 0.9% in 2008, and is forecast to contract by 4.2% in 2009. The UK economy is forecast to be weak in the coming years, with its GDP growth rate declining from 3% in 2007 to 0.7% in 2008 and forecast to contract by 4.1% in 2009. The company’s high dependence on Europe makes its operations vulnerable to fluctuations in Europe economy.16 Marketing Activities of Competition • Dell Dell’s advertising campaign in the early 2000s featured actor Ben Curtis playing the part of Steven, who comes to the assistance of confused computer purchasers. Each ad ends with Steven’s catch phrase “Dude, you’re getting a Dell!” • Hewlett-Packard HP’s advertising campaign “The Computer is Personal Again” was introduced in 2006. The campaign’s ads feature well-known personalities such as Jay-Z and Shaun White. The ads all show a neck- down view in which the endorser, aided by graphics, visually shows how they use HP products. 16 Datamonitor <http://web.ebscohost.com/bsi/pdf?vid=4&hid=3&sid=b4387afb-bc04-4df0-ab9f- 47ac6073303a%40sessionmgr14> Walter 42 Distribution • Apple Retail Stores • Apple Online Store • 1-800-MY-APPLE • Third Party Wholesalers and Resellers Pricing • 13 inch— $1199 and up • 15 inch— $1699 and up • 17 inch— $2499 and up17 17 Apple <http://www.apple.com/macbookpro/> Walter 43 Communications Strategies/History Apple’s longtime advertising agency TBWA\Chiat\Day is responsible for Apple’s advertising campaigns for Mac computers. Lee Clow, the creative director of TBWA\Chiat\Day, works along side Steve Jobs, the chief executive of Apple, to create advertising campaigns for Macs. Together, Clow and Jobs have created extremely successful ads for Apple. In the early 1980s, Clow helped to create Apple’s path breaking “1984” television commercial introducing the Macintosh. The “1984” ad ran only once, during the 1984 Super Bowl, but it has never been forgotten. In 1997, the remarkable “Think Different” campaign identified Apple with figures like Martin Luther King Jr., Albert Einstein, and Bob Dylan and featured actor Richard Dreyfuss reading the “Here's to the Crazy Ones” speech.18 The campaign was used to re-establish Apple in the market. TBWA\Chiat\Day went on to create the 2002 “Switchers” campaign, which captured real computer users describing why they switched from their PCs to Macs. In 2006, Clow proposed the extremely successful “Get a Mac” campaign to encourage PC users to switch to Mac.19 Apple advertises Macs primarily through television commercials. The “Get a Mac” campaign is also viewable through Apple’s website. Apple’s total advertising budget for 2008 was $486 million. Apple’s advertising budget for 2007 was $467 million. Apple’s advertising budget for 2006 was $338 million. Advertising costs make up approximately thirteen percent of Apple’s overall budget.20 18 BusinessWeek <http://www.businessweek.com/technology/content/apr2009/tc20090415_602968.htm> 19 NYTimes <http://www.nytimes.com/2009/08/30/business/media/30ad.html?pagewanted=1&_r=1> 20 <http://edgar.sec.gov/Archives/edgar/data/320193/000119312508224958/d10k.htm> Apple MacBook Pro ! ! ! ! ! ! ! Advertising and Media Strategy ! Susanna Walter Advertising Management, 355.01 Professor Stack 24 November 2009 ! Walter 2 ! ! ! Table of Contents Marketing Positioning Statement Target Market Description Marketing Objectives Product Price Place Promotion Advertising Advertising Objectives Advertising Strategy Media Media Strategy Media Mix Media Vehicles Media Schedule Creative Strategy/Brief Budget !!!!!!!! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Walter 3 Marketing Positioning Statement The MacBook Pro will be positioned as the most advanced notebook on the market. It will be positioned as the epitome of precision engineering and advanced technology. Several aspects that will be highlighted in the campaign include the fact that the MacBook Pro is designed to provide the best computer experience possible; everything works, and everything works together because Apple makes the hardware, the software, and the operating system; and only Apple could make a notebook like the MacBook Pro. The MacBook Pro will be positioned as the next generation of notebooks. The positioning of the MacBook Pro will convey that all of the consumer’s needs and wants in a computer can be satisfied by the MacBook Pro. An important aspect of the positioning of the MacBook Pro will be to convey that Mac computers are superior in almost every sense to Windows based PCs. Another important aspect of the positioning of the MacBook Pro is to clarify that a Windows based PC of similar quality to a MacBook Pro would actually be much more expensive than the MacBook Pro. So the MacBook Pro is not only a higher quality notebook, but it is also a better value than Windows based PCs of similar quality. ! Walter 4 Target Market Description The target market for Apple consists of students, consumers, creative professionals, businesses, and government customers. The MacBook Pro family of notebook computers is designed for advanced consumer users and professionals. The target market for the MacBook Pro will consist of both males and females, ages sixteen and older, with upper-middle to upper income, who are educated. The target market for the MacBook Pro will consist primarily of generations X and Y. The target market will consist of those who can afford and are willing to pay premium prices for a superior computer. The target market will consist of consumers who are technologically savvy. The target market will consist of those who value aesthetically pleasing electronics. Consumers with advanced computer needs or desires or a particular interest in photography, music, video, etc. are certainly in the target market for the MacBook Pro, as are professionals in media and design. The target market for the MacBook Pro includes Windows based PC owners who are looking to upgrade to a new, better computer. The positioning of the MacBook Pro will convey that if consumers are going to upgrade, they should upgrade to the best computer available—a Mac, and that the MacBook Pro is actually a better value than a Windows based PC.1 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! "!Claritas <http://www.claritas.com/MyBestSegments/Default.jsp?ID=30&SubID=&pageName=Se gment%2BLook-up> ! Walter 5 Demographic Profile • Males and Females • Between the ages of 16-55 • Upper-middle to Upper Income • Highly educated • Live in urban or suburban areas Psychographic Profile • Individuals who value quality over price • Technologically savvy individuals • Individuals who value aesthetically pleasing electronics • Individuals interested in photography, music, and video ! Walter 6 Marketing Objectives The goal of this marketing plan is to increase the total sales of the MacBook Pro. Taking into consideration the current economic conditions and the MacBook Pro’s relatively high price, an increase in sales of 15% in our test markets is a fairly realistic goal. Other aspects of the marketing objectives can be seen in analyzing the four P’s of marketing: product, price, place, and promotion. Product The marketing goal in terms of product is to continually improve the MacBook Pro. Apple constantly invests in research and development in order to continually improve every aspect of the MacBook Pro so that it is the most advanced notebook on the market. Apple continues to constantly develop and enhance the appearance and technology of the MacBook Pro. Since Apple’s introduction of the MacBook Pro in January of 2006, Apple has developed a precision aluminum unibody enclosure, a full-size backlit keyboard, a multi-touch track pad for precise cursor control, a built-in iSight camera, built-in stereo speakers, and a built-in omnidirectional microphone, among countless other features.2 In January 2009, Apple introduced the new 17-inch MacBook Pro featuring a built-in battery that delivers up to eight hours of use and up to 1,000 recharges for more than three times the lifespan of conventional notebook batteries. Developing and !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 2 Apple <http://www.apple.com/macbookpro/specs.html> ! Walter 7 enhancing the features of the MacBook Pro will not only attract new customers looking for the most advanced notebook on the market, but it will also further differentiate the MacBook Pro from the competition. Price The marketing goal in terms of price is to keep the MacBook Pro’s price at the current retail listing. The three options currently available to consumers are the 13 inch MacBook Pro starting at $1199, the 15 inch MacBook Pro starting at $1699, and the 17 inch MacBook Pro starting at $2499.3 The MacBook Pro’s price is certainly significantly higher than most of the competition, so it would not benefit Apple to raise the price of the MacBook Pro. Nor would it benefit Apple to lower the price of the MacBook Pro. Apple chooses not compete in the low-end of the computer market; they only make high-quality, high margin computers. Apple therefore will not reduce the price of their products because they will not reduce the quality of their products in order to do so. Although Apple has a relatively low overall market share of only 8%, their revenue share of the premium price market— computers over $1,000—is an overwhelming 91%., which means that nine out of every ten retail dollars that is spent on computers that cost over $1,000 goes to Apple. By refusing to make low quality, low cost computers, and continuing to make only the highest quality, high margin computers, Apple maintains their premium branding. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 3 Apple <http://www.apple.com/macbookpro/> ! ! Walter 8 Place The marketing goal in terms of place is to make consumers aware of the locations in which one can buy a MacBook Pro, and to encourage consumers to visit Apple retail stores and Apple’s website. Promotion The marketing goal in terms of promotion is to promote the MacBook Pro as not only the most advanced notebook on the market, but also the best value for the money. This can be achieved by offering the incentive of a free iPod or free printer with the purchase of a MacBook Pro. Apple often offers either a free iPod or printer as an added benefit of purchasing a Mac. This promotion would make the MacBook Pro’s cost seem less prohibitive because it includes an iPod or printer that would normally cost hundreds of dollars. ! Walter 9 Advertising Advertising Objectives • To position the MacBook Pro as the most advanced notebook on the market in consumer’s minds • To increase consumer awareness and knowledge of the unique features of the MacBook Pro • To increase traffic in Apple retail stores and on Apple’s website • To encourage Windows based PC owners to switch to Mac • To encourage Mac owners to upgrade to MacBook Pro • To increase sales of the MacBook Pro in the test markets ! Walter 10 Advertising Strategy Media Media Strategy This advertising campaign for the MacBook Pro will observe the sales of the notebook in two test markets—New York City and Los Angeles. A combination of television, magazine, and online advertising will be used in an attempt to attract members of the target market. Since the target market is particularly affluent, highly educated, and technologically savvy, this advertising campaign will place premium advertisements on the television shows, magazines, and websites that are preferred by the target market. Television advertisements on shows that are preferred by members of the target market will be used in this advertising campaign. Television advertisements allow for high quality video and audio of the MacBook Pro and its features. Apple’s commercials are consistently received well by the target market and can be highly effective. While many television commercials these days are ignored because of clutter, many consumers enjoy Apple’s commercials so much that they make a point to pay attention to them. In fact, most of Apple’s commercials are so well liked that they are actually ! Walter 11 sought out by consumers. Apple places many of their commercials on their website, and almost all of Apple’s commercials are available on YouTube. This means that anyone who wants to view Apple’s commercials can do so any time, and Apple gets free advertising as a result. Magazine advertisements on the back covers (cover 4) of magazines that are preferred by the target market will also be used in this advertising campaign. Magazine advertisements allow for high quality, full color images of the MacBook Pro. This advertising campaign will only place advertisements on the back cover of magazines because the glossy back covers provide the highest quality images of the MacBook Pro. Advertising on only the back covers of magazines is also used for exclusivity. Apple prefers to pay a premium price for premium advertising placement so that it is not ignored along with the rest of the clutter. Magazines are often passed along or reread, so magazines can often provide increased exposure to advertisements and reach a greater frequency of the target market. Online advertisements on websites that are preferred by the target market, which will be geo- targeted in New York City and Los Angeles, will also be used in this advertising campaign. Online advertisements allow for high quality images and video of the MacBook Pro. This advertising campaign ! Walter 12 will utilize interactive ‘home page takeovers.’ Home page takeovers rearrange a website’s homepage so as to incorporate an interactive advertisement into the website, with no competing advertisements on the page. Advertising through home page takeovers is used for impact and exclusivity. Apple prefers to pay a premium price for premium advertising placement. Radio, newspaper, and out-of-home advertisements will not be used in this advertising campaign. This campaign is a highly visual one, so the use of radio would not be appropriate. Nor would low-quality images in newspapers be appropriate. Also, Apple prefers not to use low-cost media because Apple’s competitors frequently place their ads in these media outlets and Apple does not want to be part of the clutter of competitors’ advertising messages. ! Walter 13 Media Mix • Television - Approximately 75% of the media mix for this advertising campaign is allocated to television advertising. This campaign relies heavily on television advertising for several reasons. Television advertisements allow for high quality video and audio of the MacBook Pro. Also, Apple’s television commercials have proven to be their most effective means of advertising. Apple’s commercials are consistently received well by the target market and can be highly effective. • Magazine - Approximately 15% of the media mix for this advertising campaign is allocated to magazine advertising. This ! Walter 14 campaign utilizes magazine advertisements for several reasons. Magazine advertisements allow for high quality, full color images of the MacBook Pro. Also, magazines are often passed along or reread, so magazines can often provide increased exposure to advertisements and reach a greater frequency of the target market. • Online - Approximately 10% of the media mix for this advertising campaign is allocated to online advertising. This campaign utilizes online advertisements for several reasons. Online advertisements allow for high quality images and video of the MacBook Pro. Also, ‘home page takeovers’ are interactive advertisements that encourage consumers to click through to the Apple website. In addition, online advertising can be geo-targeted to the two test markets. ! Walter 15 Media Vehicles Television • House - House runs on FOX and averages 16,107,000 viewers. House’s audience tends to be affluent, educated, and technologically savvy, which coincides with the target market for this campaign. • Grey’s Anatomy - Grey’s Anatomy runs on ABC and averages 17,324,000 viewers. Grey’s Anatomy’s audience tends to be affluent, educated, and technologically savvy, which coincides with the target market for this campaign. • The Office - The Office runs on NBC and averages 17,380,000 viewers. The Office’s audience tends to be affluent, educated, and technologically savvy, which coincides with the target market for this campaign. • Lie to Me - Lie to Me runs on FOX and averages 13,188,000 viewers. Lie to Me’s audience tends to be affluent, educated, and technologically savvy, which ! Walter 16 coincides with the target market for this campaign. • CSI - CSI runs on CBS and averages 16,552,000 viewers. CSI’s audience tends to be affluent, educated, and technologically savvy, which coincides with the target market for this campaign.4 Magazine • The New Yorker - The New Yorker combines a signature mix of culture and art, business and politics, fashion and design, science and technology attract an audience who come to The New Yorker to be informed, to be surprised, to laugh, and to be moved. The New Yorker attracts a quality audience of highly educated, successful and affluent individuals. These readers shape public opinion and turn to The New Yorker to learn and be inspired. A significant portion of The New Yorker’s audience coincides with the target market for this campaign.5 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! #!Nielsen <http://www.zap2it.com/tv/ratings/zap-nielsen- season,0,7096762,results.formprofile?SortBy=cdb_01_num+%2Ccdb_05_txt+&PageSiz e=50&Page=1&Query=*>! 5 The New Yorker <http://www.condenastmediakit.com/nyr/circulation.cfm> ! Walter 17 • Rolling Stone - Rolling Stone magazine is a cultural icon. It's the original, and remains the number one pop culture reference point for young adults. Its authoritative voice reaches beyond music, with influential perspectives on entertainment, technology, fashion, national affairs, and current events - everything that's important, relevant, and newsworthy to trendsetting young adults today. A significant portion of the Rolling Stone’s audience coincides with the target market for this campaign.6 • The Economist - The Economist offers in-depth independent analysis, comment and a uniquely global perspective on current events and trends that affect the senior business decision-maker. The Economist's readers are affluent, well-educated and influential. They are also united by the way they think about things, their hunger for knowledge and their desire to be stretched and challenged. A significant portion of The !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 6 Rolling Stone <http://www.srds.com/mediakits/rollingstone/index.html> ! Walter 18 Economist’s audience coincides with the target market for this campaign.7 • Wired - WIRED covers the people, companies, technologies, and ideas that are transforming our world. WIRED's future-focused editorial identifies trends within business, culture, and technology via authoritative reporting, incisive analysis, and award winning design. WIRED attracts an unduplicated readership of the most important people shaping our future— educated, affluent leaders with a passion for business, technology, design and the latest trends. A significant portion of WIRED’s audience coincides with the target market for this campaign.8 • Newsweek - Newsweek aims to be provocative, but not partisan, through insight, opinion and original reporting. Newsweek's audience, the ‘Thinking Person,’ consists of professional, well-educated, affluent consumers. A significant portion of !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 7 The Economist <http://ads.economist.com/the-economist/introduction/> 8 Wired <http://www.condenastmediakit.com/wir/index.cfm> ! Walter 19 Newsweek’s audience coincides with the target market for this campaign.9 Online • NYTimes.com - NYTimes.com readers are educated, affluent and influential. NYTimes.com has a highly qualified audience that has a spiral of influence - they get and spread ideas. A significant portion of NYTimes.com’s audience coincides with the target market for this campaign.10 • YouTube.com - YouTube.com users are young and influential. Because YouTube’s audience is so vast, they utilize demographic targeting, interest-based targeting, content targeting, and buzz targeting to reach specific target markets. Using YouTube’s targeting methods, it will be possible to reach this campaign’s specific target market.11 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9 Newsweek <http://www.newsweekmediakit.com/index.html> "$!The New York Times <http://www.nytimes.whsites.net/mediakit/index.php>! ""!YouTube <http://www.youtube.com/t/advertising_targeting>! ! Walter 20 • Slate.com - Slate.com’s audience is educated, affluent, and influential. Slate.com’s audience tends to be early adopters. A significant portion of Slate.com’s audience coincides with the target market for this campaign.12 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! "%!Slate <http://www.slate.com/id/2078020/>! ! Walter 21 Media Schedule The media schedule for this advertising campaign for the MacBook Pro will consist of a twelve week period in which advertising will be steady throughout, with two peaks in the eighth and twelfth weeks. This advertising campaign will take place during the twelve week period starting on October 1st and ending on December 24th. This period of time is ideal for taking advantage of the holiday sales season and the increased consumer spending that accompanies this time period. Several television and magazine advertisements will introduce the campaign in the first week of October. Television and magazine ads will run consistently throughout the remainder of the campaign up until Christmas. In November, on the week leading up to Black Friday, online advertisements will run for one week in order to create a sales push for Black Friday. In December, on the week leading up to Christmas day, online advertisements will run for one week in order to create a final sales push. Television advertising in this campaign will begin in the first week of October with commercials on House, Grey’s Anatomy, The Office, Lie to Me, ! Walter 22 and CSI. One 30 second television commercial will run during each episode of each of these television shows that airs from the first week of October through the last week of December. Magazine advertising in this campaign will begin in the first week of October with an ad on the back cover of The New Yorker. Ads on The New Yorker will run once a month in October and November, with two, one after another, in the first two weeks of December. Ads on the back cover of Rolling Stone will run once a month in October, November, and December. One ad will run on the back cover of The Economist in mid-October, one ad will run on the back cover of Wired in November, and one ad will run on the back cover of Newsweek in mid-December. Online advertising in this campaign will run only in the weeks leading up to Black Friday and Christmas day. Interactive home page takeovers will run every day on NYTimes.com, YouTube.com, and Slate.com in both New York City and Los Angeles during the week leading up to Black Friday and the week leading up to Christmas day. ! Walter 23 Creative Strategy/Brief This advertising campaign for the MacBook Pro will convince the affluent, highly educated, and technologically savvy target market that the MacBook Pro is the most advanced notebook on the market, that all of the consumer’s needs and wants in a computer can be satisfied by the MacBook Pro, and that the MacBook Pro is not only a higher quality notebook, but it is also a better value than Windows based PCs. The support for this advertising campaign will be the MacBook Pro itself. Consumers are encouraged to go to an Apple store and try a MacBook Pro so as to confirm the claims made in the advertisements themselves. The tone of this advertising campaign will be sophisticated and at times humorous. ! Walter 24 Budget Total Advertising Budget Media Vehicle Amount Percent of Budget Television $8,475,732 75% Magazine $1,754,498 15% Online $1,200,000 10% Total $11,430,230 100% Television Advertising Budget13 Show Period Frequency Rate Total House October- 9x $183,298 $1,649,682 December Grey’s Anatomy October- 9x $240,462 $2,164,158 December The Office October- 9x $191,236 $1,721,124 December Lie to Me October- 9x $128,105 $1,152,945 December CSI October- 9x $198,647 $1,787,823 December Total $8,475,732 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 13 AdAge <http://adage.com/article?article_id=139923#sun> ! Walter 25 Magazine Advertising Budget14 Publication Edition Type Rate The New Yorker October 5 Cover 4 (Color) $139,137 The New Yorker November 2 Cover 4 (Color) $139,137 The New Yorker December 7 Cover 4 (Color) $139,137 The New Yorker December 14 Cover 4 (Color) $139,137 Rolling Stone October 15 Cover 4 (Color) $217,580 Rolling Stone November 12 Cover 4 (Color) $217,580 Rolling Stone December 10 Cover 4 (Color) $217,580 The Economist October 19 Cover 4 (Color) $190,250 Wired November Cover 4 (Color) $98,460 Newsweek December 14 Cover 4 (Color) $256,500 Total $1,754,498 Online Advertising Budget Website Period Location Type Rate Total NYTimes.com November N.Y.C. Home $50,000/day $250,000 23-27 Page Takeover NYTimes.com December L.A. Home $50,000/day $250,000 20-24 Page Takeover YouTube.com November N.Y.C. Home $40,000/day $200,000 23-27 Page Takeover YouTube.com December L.A. Home $40,000/day $200,000 20-24 Page Takeover Slate.com November N.Y.C. Home $30,000/day $150,000 23-27 Page Takeover Slate.com December L.A. Home $30,000/day $150,000 20-24 Page Takeover Total $1,200,000 !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! "#!SRDS <http://www.srds.com/cmas/main> !