cp454@kent.ac.

uk

CB8031 MARKETING AND

VALUE CHAIN
Apple Watch

Name: Cliffton Pereira

Cource: Msc Value Chain Management
Mail id: cp454@kent.ac.uk

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Executive Summary
The purpose of this report is to conduct a marketing analysis of Apples new product, which is
also a new exploration into its new category line, Apple Smart Watch which is mostly called as
Apple Watch. The concept of smart watches has recently been introduced in the market already
with companies such as LG, Motorola, Samsung and many more and now Apple will also sail in
the same boat. The slightly late entry of Apple smart watch into the market can be a great
challenge to prove itself in the market.

An external environment analysis of UK market in terms of political, economic, socio-cultural

and technology shows us that there is a significant amount of scope with the success of this
product and the consumer analysis with the current competitors in the market gives us an idea of
the challenges the new product may face based on its acceptability within the market segment.
The segment mainly targeting younger to medium age group (16- 40 years) with income groups
of above average to high does limit the product to be the first choice amongst consumers, as
consumers may not be willing to shell out a lot. However the perceptual map shows the ranking
of Apple watch against its competitors ranks higher due to its in detailed personalized setting and
eye catching aesthetic appearances. The marketing mix developed for the product keeping in
mind the consumer segment to target high income consumers and consumers who are willing to
try this product such as achievers and experiencers is well appreciated, however this limits the
scope of the product within the rest 69% of the market who are not currently using apple based
phones, as the compatibility of the product is very limited. The aim here is to analyse the
possible factors that lead to the limitation of the success of the product and make alternative
recommendations.

The product although with it’s in depth personalization features, range of choices with
accessories and product itself and sole determination to bring upon a healthier lifestyle, the
product however fails to attract the masses in the UK market segment. Recommendations on
extending the product downwards by making it more compatible and price reduction in order to
attract the masses by enabling less features within the product are some solutions being made in

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the report. The recommendations for extending the brand downstream so that it is more a choice
within the larger community will bring about diversity in its product users.

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Table of Contents
1. Introduction..............................................................................................................................5
2. External Environment Analysis................................................................................................5
2.1 Political..................................................................................................................................5
2.2 Economic...............................................................................................................................6
2.3 Social-cultural factors............................................................................................................7
2.4 Technology.............................................................................................................................7
3. Consumer Market Analysis......................................................................................................8
3.1 Segmentation.........................................................................................................................8
3.2 Targeting................................................................................................................................9
3.3 Positioning...........................................................................................................................10
4. Marketing Mix........................................................................................................................11
4.1 Product.................................................................................................................................11
4.2 Price.....................................................................................................................................13
4.3 Promotion............................................................................................................................13
4.4 Place.....................................................................................................................................14
5. Extending the brand................................................................................................................15
6. Conclusion..............................................................................................................................16
7. References..............................................................................................................................17

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1. Introduction
The aim of this report is to do a marketing analysis of electronic manufacturer Apple Inc. of its
latest product Apple Watch. Apple watch which is basically a smart watch is being introduced in
the market in 2015 and will be a part of the latest category of Apple Inc. As quoted by Apple as
this is “Our most personal device yet”, the features and applications available in the product does
seem to support this claim as we will examine going further (Apple, 2015).

In this report in order to examine the product, firstly I will be looking at the external
environmental factors for the UK market, the probable potential of the market other factors that
may directly or indirectly affect the product. Secondly, having done the external analysis I will
be placing the product in the market by analysing the potential of market and find out different
market segments related to demographic, psychographic and behavioural variables. These will
provide a baseline for selecting the ideal segment, analysing the competitors within that segment,
placing the product within it and finding our competitive advantage that seeks value for the
customers. Having done that, the right sort of marketing mix can be identified which will be the
competitive advantage for the firm (Solomon et.al, 2012)

The report along the way will also highlight various challenges that the product may face in the
market owing to its late release and low compatibility with other software’s. Lastly
recommendations will be made on extending the product for gaining better market share and
diversifying the product.

2. External Environment Analysis

2.1 Political

The government laws and regulations of the country in which the company plans to manufacture
or trade their product poses a political challenge to them (Friesner, 2014). An important aspect of
this to consider is the government regulations, taxes, political stability and employment policies.

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But as Apple is a US company, this has a huge advantage in terms of setting up trade agreements
with lot countries as well as trade unions (Ukessays.com, 2015).

One challenge that Apple faces in terms of doing business with in the digital age is the
government requests for information. Apples policy is to be transparent that abides with the law,
however Apple claims not to work with government agencies to create a backdoor into its
services and products and that they will never do. (Apple, 2015). The pricing of Apple products
may change in the UK and may tend to go up as the tax policy in UK for VAT would shoot up
from 17.5% to 20%. (Ukessays.com, 2015)

2.2 Economic

The purchasing power of consumers is directly proportional to the economic conditions in the
country. (Jeynes, 2013). The aspects needed to be considered here are the interest rates, inflation
employment level and future Gross Domestic Product (GDP) per capita (Friesner, 2014).

As per the BankofEngland.cp.uk report (2014) for economic conditions in UK, the domestic
demand has increased, however the global growth for the market seems to have weakened. The
inflation rate in UK fell to 1.2% in September 2014 which is all-time low in the previous 5 years
which is offset of keeping the Consumer price index (CPI) at benchmark inflation rate of 2%.
The factors leading to inflation rate fall encountered are cheap transportation cost, low price
range for game consloles, tablet and computers. The reduction in inflation rate may cause the
increase in interest rates by early 2015 (BBC, 2014)

Although the current scenario seems to look good for consumers with lower rate of inflation, the
increase in interest rates can affect the sale of Apple watch with its release to be launched around
the same time frame.

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2.3 Social-cultural factors

The social-cultural factors includes everything to do with the cultural and social influences of
people living in the UK. Although considered subjective in nature in order for collection of data,
some of the influences are of knowledge, memory, perception, lifestyle and culture of consumer
(Friesner, 2014). Some additional behaviour can be of related to religion, population growth rate
and media influence. Apple will have to keep in mind the success of it new product based on all
of these factors. (Ukessay, 2015)

As per the BBC business analysis (2014), the UK economy is growing fastest amongst the
developing nations. This gives us a sense of the purchasing power consumers in UK, which can
be considered good. According to Belfield et.al (2014), although the current economy of people
in UK has stabilized, the poverty line index had dropped down with the reduction in average
income and the younger generation finds it difficult to keep up. This highly impacts the lifestyle
of consumers with their purchasing decision and Apple watch can be thought of targeting
younger generations that are more affluent with technology developments.

In UK, English language is dominated with 90% of population and 59% following Christianity
overall as per 2011 data. The education level in UK is high as well with 74 % of adults achieving
equivalence of high school diploma, which creates better consumer awareness and hence people
will tend to make informed purchasing decisions (businessculture, 2015)

2.4 Technology

Apple due to its innovative and technologically smart driven products, it is important for the firm
to understand the impact of technologically forward products on its consumers (Jeynes, 2013).

According to Ballard (2014), a recent study on wearable technology shows that consumers in UK
are not keeping up with the pace and is behing the curve to adopt wearable technology like Apple
watch.

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The survey also said that only 27% of british people would use wearable technology, which is far
behind as China had a high impact of 73%. Also people in UK would like to use the wearable
technology only if it was provided by the employer.

Another survey conducted (Allan, 2014) suggests that UK would lose around 9 Billion pounds
over the next year due to sluggish way of technology use. As per evidence found, consumers are
more likely to use new technology like Apple watch, it there is appropriate amount of motivation
to use it, hence focus can be made on multinational companies to seek the value of this product

3. Consumer Market Analysis

3.1 Segmentation

In order to select the type of customer, we need to divide the market into small sub sets which is
based on characteristics or attributes of the consumers (Solomon et.al, 2012).

As per Keach (2014), the watch would likely to be compatible with just the recent additions of
iphone 5 & 6, hence this itself has led to narrowing down of apple market share of the new
product. However it can be treated as treat for the more loyal customers of the brand. As per
Solomon et.al (2012), segmentation can be broadly categorized on demographic, psychographic
and behavioural attributes.

Deep diving into the demographic variables, we can see that age and income social groups can
be considered as one of segment variables. The features provided with the iwatch has more
emphasis on healthy lifestyle and reminder of health routines, it also acts as an on the clock heart
monitoring device (Apple, 2015). The features embodied within the product will tend to attract
the younger to medium age range (16-40 years). The price indicated would be expected to be 300
pounds and above (Suleman et.al, 2015). As indicated by macrumors.com (2015), the price of the
product will only increase to more than triple its start rate with taking a more expensive variant.
Indicating a medium to higher income soical groups.

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Also owing to the new category intrusion within the Apple Company, the customers willing to
have an inclination would mostly reside towards the Innovators category with likely hood of
achievers and experiencer’s willing to make purchases and have impact by media
(strategicbusinessinsights.com, 2015).

3.2 Targeting

Based on the potential market segments as discussed in segmentation, we will need to evaluate
the market segment, develop their profiles and finally choose marketing strategy (Solomon et.al,
2012)

The UK market potential is growing with current share being 31% based on October 2014 data
(Page, 2014), however the market share of Android users remains high at 58.2 %. With strong
competitor base already established in the market for smart wearable watches with Samsung,
Motorola, LG and Microsoft, the demand of apple watch will boom in the market (Griffiths,
2014). As per Keach (2014), the estimated sale of Apple watch can be approximated to 40
million units on day one.

Having established the potential of the market segment for UK consumers as per the evidence, it
is safe to say that the demand will be more towards the existing apple users where loyalty of
brand can be expected.

The typical segment profile that is developed from the evidence must be a young to average age
individual between 16 to 40 years, falling in a medium to slighter higher income social group
who is willing to take chances with choices provided i.e. the innovators of segment. This will
also lead us to select the differentiated targeting strategy to have a grasp over different
consumers that can lead to diversify the product profile in market (Solomon et.al , 2012)

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3.3 Positioning

Positioning the Apple iwatch in the market is basically analyzing the competitors in the particular
market segment with respect to its competitors. Developing a market strategy with the right mix
in order to attract these customers must be of the essence (Solomon et.al, 2012)

Analyzing the Competitors

The category of smart watches is fairly new with electronic companies launching devices in 2014
and many devices catering to work with Android software. (Martin, 2015)

Figure 1

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Taking the perceptual map of competitors in the market and their market analysis as seen above,
it can be seen that companies like Motorola and LG have a fairly strong hold on consumers mind
due to its vast extent of features and aesthetic looks that resemble a normal watch. However the
extent of simplicity of use and offering vast variants of Apple accessories and design places it
slightly above the scale in the segment.

Having said that the other tycoons such as Sony and Samsung seem to have not really addressed
the segment in terms of appearances and the functionality lacks value to customers. The highest
advantage of Apple watch is its personalized setting experience that bring customer closer to the
product, however the significant difference in price range (Martin, 2015) between Apple watch
and the others may not compel customers towards them.

The competitive strategy for Apple watch with respect to placing itself in market is to provide a
more personalized experience to the market segment and since Apple is already considered as a
status symbol, the main focus is to market the product to brand loyal customers.

4. Marketing Mix
In terms of providing the product or service to the customer, the marketing team plans out the
best set of characteristics to allure customer and as noted by Solomon et.al (2012), a single
marketing activity does not work to attain the organizations objective. Hence the independent
attributes of product, price, promotion and place sets the target to gain that objective (Solomon
et.al, 2012)

4.1 Product

The Apple Company has designed the watch by keeping in mind the vast extend of consumers
and their options. The 3 variants of main choices as seen in Picture 1 offers a causal, sporty and
elegant look, the 2 different size options provided has been smarty chosen keeping in mind to
attract both sexes rather than making the product a unisex gadget.

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As seen in picture 2, the vast variety of straps provided makes this appeal to a whole lot of
consumers seeking a much more fashionable approach, with the option of interchanging straps.

Picture 1

Picture 2

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The product itself gives a sense of a more personalized touch by providing features such as
sending actual heartbeat signal, sending instant scribbling drawings, a vibration signal with just
taping and most of all senses your response pattern and provides options based on that. The
product gives a sense that it learns from the user as you go.

However one of the main feature of the product is that it aims to keep you healthy and keeps
track of the progress by monitoring your fitness and just like a game provides you with points
and goals you need to attain.(Apple, 2015)

4.2 Price

Although the exact pricing of the Apple watch is not yet been disclosed as on Jan 1st week 2015,
it is estimated to be 300 pounds with the basic edition and spring up to 3000 pounds with its high
end collection that is gold plated according to Allsopp (2015). This being said, the Apple watch
will be the most expensive smart watch compared to any of its competitors.

According to Solomon et.al (2012), the companies would tend to hike the price of a product
when they launch it in market showing that the product is perceived as a cutting edge, high
quality and high valued product. However apart from its high price range, it can be difficult for
new consumers to take hold of the watch as this product is compatible with only the new range
of iphones (iPhone 5, iPhone 5S, iPhone 5C, iPhone 6 and iPhone 6 Plus) (Allsopp, 2015)

4.3 Promotion

Promotion is about letting the potential consumers make aware of the product in order to
motivate them to purchase the product or service (Solomon et.al, 2012)

Promotion of any apple product is a big task and the Apple watch unveiling done at an
international scale by Tim cook CEO of Apple Company in USA earlier in September
2014(Times, 2014). Apple uses social media to gain attention of consumers and their much
detailed video available on youtube shows every minute specification of the watch.

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The key takeaways from their promotion strategy are that the company shows the value added by
product to the lives of individuals by making the product accessible, relevant and personal choice
of consumers. It also focuses in embracing individuality and that main focus of the watch is to
inculcate a much healthier lifestyle with features such as fitness tracker.

4.4 Place

This part of marketing mix focuses on making the product available to customer at desired
location at the right time. It mainly focuses on the supply chain of the product. (Solomon et.al,
2012)

This one area where the company has not been able to abide by its commitment with the delay in
its supply chain due to unexpected material issues as reported by Hamill (2014). The delay in
product launch may create questions in the potential consumer’s minds and can hamper its
success. As seen earlier in the report, the proposed demand expected of 40 million just on day
one would be a tough task to handle with the product hitting market in early 2015 (Goodwin,
2015).

Apart from Apple store and general retailers selling the product, attention must be given to easy
and quick availability of the product with its accessories in the online market for UK consumers.

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5. Extending the brand

The Apple Smart watch is a new category that apple has ventured into in 2014, with its release in
the market in early 2015. The last launch prior to this was into the ipad category (cnet.com,
2014)

Since the product itself is a new category for Apple as an organization and its potential
consumers, the launch of it can pose many challenges to its approval in the market. Although we
have segmented this product within the consumers of medium to high income consumers, the
sheer high price of the product may not attract the choice to be within the medium income group
with many other consumers like LG and Motorola offering similar category product at
competitive price. Also the choice for this product is further minimized within its consumers to
those already using apple phones or consumers who plan to purchase the newest generation
iphones.

The new extension based on the above challenges must be made compatible with most of the
other operating systems as well as we have seen earlier 58.2% of the consumers use Android
based operating system. This will also increase the share of market with segmentation being
increased within the psychographic variables. Apple has designed some applications within the
watch which may not be used with the medium aged generations who are in their 40’s and above.
These applications can be very tedious to be operated within a small screen and can cause fatigue
to the person using it, instead a new addition must be launched, which can be a downward
extension of the product that will cost less with design application team. However the consumers
would be able to purchase the applications that they feel are needed as they go along.

The downward extension of the product with compatibility with other software’s can bring about
diversity amongst the consumers and as well give a taste of the product for new Apple users that
can be potential loyal consumers of other apple category.

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6. Conclusion
In conclusion I would say that having done the marketing analysis of the product, starting from

the external environment analysis, its consumer analysis, the competitors analysis, customers

perception of the product in comparison and having identified the marketing mix of the product,

I have suggested some measures that can be made within the product that will help us enhance

our market share and help diversify the product. The proposition would be to extend the product

line downwards so it is more affordable to the masses. Some of the challenges mentioned in the

report with the product related to late entry in market, high price of product, proportion of market

that can be expected to use the new product and challenges related to compatibility, however the

product might be able to overcome these challenges with its superior functional characteristic

and applications, but effort must be made to make the product to be used by the masses that can

lead people to gain confidence in Apple products and become loyal customers in the future.

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7. References

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at: https://www.apple.com/uk/privacy/government-information-requests/ [Accessed 3 Jan. 2015].

Bankofengland.co.uk, (2014). Bank of England | Publications | Overview of the Inflation Report November
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Barclay Ballard, (2014). UK trailing the rest of the world in wearable tech adoption | ITProPortal.com.
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BBC News, (2014). UK inflation rate at five-year low. [online] Available at:
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Michael Solomon, Greg Marshall, Elnora Stuart, (2012). Marketing 7E real people real choices. Prentice
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Roger Jeynes (2013). The Complete (External and Internal) Analysis of Apple.Inc and its SWOT Analysis.
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Tim Friesner, (2014). PEST Analysis - Marketing Teacher. [online] Available at:
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Apple, (2015). Apple (United Kingdom) - Apple Watch - Technology. [online] Available at:
https://www.apple.com/uk/watch/technology/ [Accessed 4 Jan. 2015].

Suleman, K., Preece, C. and Donnelly, C. (2015). Apple Watch: Release date, price & specs confirmed.
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Sarah Griffiths, (2014). Is Yahoo working on a smartwatch?. [online] Available at:

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Sean Keach, (2014). Apple Watch release date, price, features, and battery life - News - Trusted
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release-date-price-concepts-features-and-rumours [Accessed 8 Jan. 2015].

Chris Martin, (2015). 13 best smartwatches 2015 UK: The best wearable tech you can buy right now.
[online] PC Advisor. Available at: http://www.pcadvisor.co.uk/test-centre/wearable-tech/3497103/12-best-
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Allsopp, A. (2015). What you need to know about the Apple Watch, possibly coming in March. [online]
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Times, L. (2014). Apple Watch unveiling shows CEO Tim Cook's time has come. [online] latimes.com.
Available at: http://www.latimes.com/business/la-fi-apple-cook-20140910-story.html#page=1 [Accessed
12 Jan. 2015].

Jasper Hamill, (2014). Apple's iWatch may be DELAYED over sapphire glass supply problems. [online]
Available at:
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_with_production_of_iwatch_wonder_material/ [Accessed 12 Jan. 2015].

Richard Goodwin, (2015). Forget the iWatch. It's TIME for The Apple Watch. [online] Available at:
http://www.knowyourmobile.com/wearable-technology/apple-iwatch/19775/apple-watch-release-date-
specs-price [Accessed 14 Jan. 2015].

Cnet.com (2015). Apple Watch Preview - CNET. [online] CNET. Available at:
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