College of Technology London

Marketing Project
Lecturer: Richard Small MBA 2510-L MBA TERM-2

Technological influence on customer retention and brand loyalty Apple iPod in a Relationship marketing perspective

SEBY JOHN UWL ID: 29001763 CTL ID: 086537-84

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CONTENTS

1. TITLE 2. ABSTRACT 3. INTRODUCTION 4. RESEARCH QUESTIONS 5. AIMS AND OBJECTIVES 6. SCOPE OF RESEARCH 7. METHODOLOGY 8. LITERATURE REVIEW 9. APPLE ORGANISATION BACKGROUND 10. ANALYSIS 11. CONCLUSION 12. REFERENCES

PG: 1 PG: 3 PG: 4 PG: 5 PG: 5 PG: 5 PG: 6 PG: 7 PG: 9 PG:11 PG:14 PG:15

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Abstract In recent years digital consumer markets have witnessed a technological boom with innovative products and services. Managing customer relations in a highly competitive market is becoming very difficult. Technology plays a crucial role in marketing activities by identifying the customers¶ needs and developing innovative products to satisfy customer needs. This secondary research helps to analyse the impact of technologies over marketing practices. To reveal the technological influence on marketing success of Apple iPods has been taken as example. Analysis of secondary data¶ has done in the research and limitations of the study has also mentioned in the research conclusions

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INTRODUCTION In the modern marketing environment technology plays a crucial role of catalyst that is responsible for the changing marketing trends and practices globally. Augmented influence of advanced technologies on marketing has led to easy access of information for customers and help to communicate each other through networks resulted in great consumer control power. Digital market is based on the innovative products and ideas which can recognize and satisfy changing needs of customer. Customer retention and the loyalty of customers towards the brand keep the brands alive in competitive digital market. Innovations like e-commerce, online advertising campaigns, and social media marketing and traditional media channels are different forms of technological influences in marketing. Efficient customer retention is essential for every organisation to achieve success. Effective customer relationship management are the base of every organisation for retaining customer and to build loyalty. Technology helps to enhance customer relationship management to a great extent. Electronic kiosks, incoming toll free numbers, fax on demand, promotional emails, automated telephone are examples of technology that assist in customer retention techniques. Technology helps to identify changing taste and preferences of consumers and to develop products according to customer needs. Internet cookies, website logs, bar code scanners and some other tools are used to record data about genuine customers and their behaviour patterns. Databases and data warehouses store and distribute these data¶s from online and offline touch points and help marketers to develop marketing mixes for individual needs. The highest level of CRM involves creating structural bonds between customer and company and raising switching costs and build loyalty. Offering innovative technology to the existing customers help to retain the customers. Relationship marketing contributes a lot when it comes to retain the customer and building brand loyalty. Apple computers are renowned for their innovative products and loyal customers. In the world of digital consumer electronics Apple brand is not shortly recognized by the customers but has created a community of apple products lovers and fans. Founded in California 1976 Apple has witnessed multiple up and downs in the past regardless their advanced innovative technologies. Apple started their innovative expedition by introducing their highly successful personal computer produced vastly in USA. Their customer retention

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strategy is mainly based on offering innovative technology to their customers. http://www.apple.com/ Accessed on [05 Aug 2010] Research questions y y To what extent technology can influence on customer retention? How Apple has effectively incorporated technology with iPod marketing techniques?

Aims and objectives Primary objective of research helps to reveal the impact of technology on customer retention and brand loyalty both concepts relationship marketing and how it helps the brand to dominate in the consumer electronics market. In long run competitive market how brands maintain competitive advantage over competitors consistently. To find out how customer retention strategies can be effectively developed by identifying the needs of customer. To identify how Apple utilised technology integrated marketing strategy to retain the customers and to regain the loyalty for the brand with innovative products. Research also aims in identifying the applications of relationship marketing by apple to retain the customer. Scope of research Digital consumer markets have experienced a swing from traditional marketing practices to technological marketing in recent days. Impact of technologies has led to emerge of new breed of marketing techniques based on technologies. In future customers are more involved with self managed technology based marketing. Research helps to analyse the implementation of technologies by organisations in their products and points out the importance of investing millions in research and development. Growth of e commerce and other innovative technologies have great influence in future marketing techniques. Research recognizes out the importance of technology like e marketing to retain customers.

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Methodology For this research Secondary data collection methods are used to gathering data. Qualitative techniques are most suitable for these types of research for analysing data. Since the nature of research is based on consumer electronics marketing, data¶s and information¶s are easily available on online Medias and books of trusted authors. Company¶s online website is great source of resource for the data like published journals and new products information¶s and customer review. Technological data has been collected from genuine gadgets magazines and online resources which posses¶ great source of information about the latest product and features. Resource sources  Books: College Library books from genuine author listed in references.  Gadget magazines,  T3  HI-FI CHOICES  THE GADGETS,  COMPUTER MUSIC  Online reviews of customers: http://www.ipodreview.co.uk/,  Company websites: http://www.apple.com/  Reference journals from online resources: http://www.emeraldinsight.com/  News papers,  The Sun,  Sunday Telegraph,  Financial Times

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Literature review According to Shantanu dutta ³Marketing capability has its greatest impact on the (quality adjusted) innovative output for firms that have a strong technological base. In other words, firms with a strong R&D base are the ones with the most to gain from a strong marketing capability´. Multinational companies are investing huge amounts for their research and development department to develop innovative products with superior quality. The innovative features of these products provide competitive advantage for the brand in a highly competitive market. Advanced technologies provide strong platform for marketing by developing innovative products which can satisfy customer needs. Customers once experienced with user friendly products from a particular brand with innovative features tend to await for new product form the same brand which creates customer retention. Matzler in 1996 argues ³Customer satisfaction creates loyalty for the company and can make continuous business transactions by retention of existing customers´. Satisfied customers are assets for the company by providing the company a strong support to survive in the highly fluctuating market. Customer satisfaction plays a crucial role in determining the success and failure of new products. Customer who is uses a brand regularly and identify its benefits will always buy and support the brand by suggesting them to their friends resulting in retention of customer towards a particular brand. Satisfied customers always support their brands in many ways like creating awareness about the new product by mouth to mouth canvassing, compelling to buy their favourite brand and sometimes they use to wear their brand names on their clothes like apple Mac lovers. Leonard L berry (1991) stress ³Relationship marketing is an old idea but a new focus now at the forefront of services marketing practice and academic research. The impetus for its development has come from the maturing of services marketing with the emphasis on quality, increased recognition of potential benefits for the firm and the customer, and technological advance.´ Relationship marketing is old concept compare to new developments in marketing. Modern business considers managing customer relations as crucial element in marketing process. Relationship marketing is the base of managing customer relations by applying its principles to create customer retention and customer loyalty. Companies use relationship marketing to maintain highly professional customer relations with its genuine customers and to deliver quality services to them. It¶s also effective in identifying potential

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benefits for the organisations and customer by recognizing the taste and preferences of the customers and developing innovative products to satisfy customer needs. Woodcock and Wilson (1997) suggest that ³In future customers will increasingly seek to manage relationships themselves, using new technologies, companies need to prepare themselves for the contemporary world´. Customers in the modern era are far advanced in knowledge and skill than olden days. Advance marketing technologies e commerce has enabled customers to buy products directly from manufactures. Automation assists the organisation to fix this. Reichheld (1996) view ³Customized attention encourages stronger customer loyalty, which leads to greater income from existing customers than from the new customers´. Data base marketing is a popular marketing techniques prevailing in modern era of marketing. Advanced technology enables companies to collect data of genuine customers and track their buying behaviour to provide them customized attention. It involves customised mails, mobile alerts regarding sales promotions and special discounts for genuine customers in their database. This marketing technique helps to build customer loyalty and draw existing customer to purchase more resulting increased income for companies. Peppers and Rogers (1995) points out that ³mass marketing might be less expensive per person reached; it is almost always cheaper per sale completed to communicate individually with a valued customer and solve a problem for him or her´. Technology influences marketing communication to a great extent with the help of technology marketing communication can be done to a large volume of people by reducing the expenses incurred from advertising. But as a result of advanced technology companies can communicate with their customer individually and offer after sale services for their genuine customers by solving their complaints. Effective customer relations management is necessary for organisations to create brand loyalty.

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Apple Company Background Apple computer are one of the celebrated brand in the world of consumer electronics. Originated in California 1976 apple was founded by Steven jobs and his partner Stephen Wozniak. Apple started the business by launching their first product named APPLE 1 computer consisting of a solo board and inbuilt ROM with no keyboards or monitor. Soon realised scope of their technology and introduced APPLE 2 with all computer peripherals like keyboard, colour monitor and other devices. With a short span of time apple achieved a title of premium brand in America. In 1984 apple launched their unique and innovative operating system called Macintosh which was a great success all over USA. Apart from their technology in later stages their marketing efforts were lacking a streamline to reach the customers. After multiple up and downs Steven Jobs came back to the company in 1996 and started his new marketing and licensing deals with Microsoft. Steven Jobs innovative strategy was based on direct sales through apple stores which customers can come and enjoy Apples latest technologies and gadgets personally in stores. As a result in 2000 Apple report a profit $170 million. http://www.bnet.com/blog/technology-business/apple-8217s-big-marketingdanger-losing-its-identity/3753 Accessed on [03 Aug 2010] Apple products & services Apple products: Apple Mac Book IPod IPhone Mac OS IPad Apple outlets Apple services Stores and resellers Retail, online, Application downloads, ITunes and ibooks Series Pro, Mini, iMac, Mac book, Air, Pro, Xserve Shuffle, Nano, Classic, Touch Original, 3G, 3GS, 4GS Server, iLife, iWork, iOs

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Apples marketing strategies for iPod Apples have adapted a technology driven marketing strategy to retain the customers and to build customer loyalty. The unique features of the apples products make them exclusive among the other consumer electronic products. One of the successful products from apple was iPod which launched in 2001; it became the major turning point in Apples augmented growth. IPod is a greatest technological invention which can store up to thousands of songs and hundreds of cassette disks in a tiny portable handle held device with touch sensitive interface. ITunes are the software platform for iPod which can compress large volume of data into iPod with digital music organiser. To enable this process requires three principal technologies compressed music, high speed music transfer and tiny storage devices. Apple introduced ITunes downloads as a part of their marketing strategies. Online sites are introduced to download ITunes for fixed price. Tiny hard drives having a capacity of 4 to 40 giga bytes were introduced to download the unlimited songs. http://www.vertygoteam.com/ipod_marketing_strategy.php Accessed on [01 Aug 2010] Technological base for iPod marketing  (ACC) Apple Audio Coding: unique technological base for iTunes to compress data  Unique Data base marketing software¶s to track genuine customers.  Common compatibility of iTunes for all Apple products  Apple iPods patents for touch sensitive interface  Related accessories and devices customized only for iPod

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Analysis Market review of iPod In 2003 march Apple iPod market value was $7 and has achieved a tremendous success by reaching the market value $180 in 2008. The percentage of increase between Apple iPods market value in 2003 - 2008 was stunning 2500%. IPod vs. Zune In the digital consumer market Apples major competitor Microsoft has launched a substitute for iPod known as Microsoft Zune. Which was not at all a match for iPods innovative features and was a huge failure by attaining only 2% of the market whilst 75% by iPod. Between 2008-2009 Apples iPod sales volume was 200 million units. In 2008 Microsoft smugly declared their sale of 2 million units. IPod vs. Zen In 2003 Sim Wong Hoo CEO of creative labs another major competitor for iPod made a public statement ³I intend to out-market the iPod and everyone else in the music player market. The mp3 war has started and I am the one who has declared war´. Due to increase competition in 2005 Creative labs formed an alliance with Apple for $100 million for the patent to make accessories for Apple iPod.

iPod vs Zune
250 Units in Millions 200 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 Years Zune iPod

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ITunes to retain customer IPods for music storage and iTunes for digital music downloads apple has created technology enabled marketing by innovating AAC (apple audio coding) software which compress music without losing its quality. Customers who bought iPod can only download music form ITunes or can convert ordinary Mp3 file to ITunes using their Mac operating system popular in Mac books. ITunes are also available in their recent development in the sector of telecommunications named as I phones. A customer who buys I Phones also can enjoy ITunes which they can download from Apple websites through internet networks. Apple also use data base marketing to track their genuine customers who make purchases regularly and offer them tickets to participate in ITunes party and to create their own iTunes playlist for international events and celebrations. Customised messages and mails are delivered to them about new releases of the iTunes and apple products. Growth rate of iTunes downloading are immensely high from 2003-2010 and still growing. Incorporation of technology with marketing activities facilitate apple to reap success and the products and services they offer to customers made them one of the most successful customer loyal brands in the history of consumer electronics market. http://www.marketingminds.com.au/branding/apple_branding_strategy.html [Accessed on 07 Aug 2010]

Diagram showing number of iTunes downloads in billions in respective years http://routenote.com/blog/itunes-growth-is-still-on-the-rise-are-you-part-of-the-movement/ Accessed on [06 Aug 2010]

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Arguments In digital world of consumer electronics technology is crucial element which determines the success and failure of products. Advanced and unique technologies offer competitive advantage for products in digital markets. Products with innovative features can draw attention and satisfy customer needs. Brands use technological innovation as a strategy to create customer loyalty and retention by recognizing the customer needs and producing innovative products to satisfy customer needs.  Research helps in revealing the influence of technology on marketing activities and it also helps in identifying the marketing strategy of apple to retain the customer with brand loyalty.  Literature review clearly explains how technology influences the ³retention and loyalty´ concepts of relationship marketing and why organisations invest millions on research and development to market new techniques and products.  Technology enabled marketing helps in customized attention for genuine customers¶ results in customer retention and brand loyalty.  Business organisation must develop innovative technology for maintain customer relations because in future customers can manage relationships within themselves with advanced technology.  Apple has been highly successful in incorporating technology with iPods marketing activities. Apple uses its advance data base software¶s to track the genuine customers and to communicate with them with customized emails and offers.  Apples unique technology AAC (Apple Audio Coding) software is the source that enables customers to download music for iPod.  Evidences from the secondary researches and diagrams in the market review shows that the downloads rates of iTunes are still increasing form 2003- 2010  With the quality of music and unique innovative features iPod still dominate portable Mp3 player markets by clearing all its major competitors like Microsoft Zune and Creative Zen

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Conclusion Advanced technology can be used as a marketing strategy to reap success in the highly competitive market. Companies use to spend large investment on research and development to develop new technologies and use to this technologies to create products with innovative features. Marketers use these innovative features of the products as warhead to fight in global competitive market. Products with advanced technological features will survive in the market and reap success. Research revealed how apple successfully incorporated technologies like AAC and Micro mini hard drives with their marketing techniques to retain the customer. Combined effort of marketing and R&D will give birth to innovative products with attractive features which can satisfy customer needs and promote customer retention and loyalty towards the brand. Customer taste and preferences keeps on changing with their changing life styles and trends. Technologies keep on changing for developing innovative products. Success and failure of brands depends on acceptance of products by customers in market. To survive and accomplish success marketers have observe changing technologies and identify customers taste and preferences to develop innovative products that can satisfy customer needs. Al though research reveals the influence of technology on customer retention and brand loyalty more researches have be conducted on particular area with primary data analysis for a strong base.

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References 1. Strauss, J., Ansary, A. E. L. & Frost, R., (2006) ³E Marketing´ Fourth edition, published by Prentice Hall, India 2. Seth, J.N. & Parvatiyar, A., (2000) ³Relationship marketing´ Sage Publications Delhi 3. Dutta, S. Narasimhan, O.M. & Rajiv, S., (1999) ³Success in High Technology

Marketing: is marketing capability critical´ INFORMS Mary Land USA. 4. Leonard, B. L. Parasuraman, A., (1991) Marketing Services-Competing Through Quality, Free Press, New York. 5. Parkinson, S.T., (1985) ³Factors influencing buyer-seller relationships in the market for high technology products´ Journal of Business Research, No. 13, pp. 49-60 6. O¶Malley, L. & Mitussis, D., (2002) ³Relationships and technology: strategic implications´ Journal of Strategic Marketing, Vol. 10, pp. 225-38 7. Hamann, D. Williams, R.L. & Maktoba, O., (2007) ³Branding strategy and

consumer High-technology product´ Journal of Product & Brand Management Vol. 16 No. 2, pp. 98-111. 8. Barnes, J., (2002) ³The impact of technology on customer relationships´ Australian Marketing Journal Vol. 9 No. 1, pp. 21-31. 9. Reicheld, F., (1996) ³The loyalty effect´ Published by Harvard business school. 10. Pepper, D. & Rogers, M., (1997) ³The one to one future: building relationships one customer at a time´ Currency Doubleday. 11. <http://www.vertygoteam.com/ipod_marketing_strategy.php> Accessed on 01/08/10 12. <http://www.bnet.com/blog/technology-business/apple-8217s-big-marketing-dangerlosing-its-identity/3753> Accessed on 03/08/10 13. <http://www.apple.com/ >Accessed on 05/08/10 14. <http://www.marketingminds.com.au/branding/apple_branding_strategy.html> Accessed on 07/08/10 15. <http://www.ipodreview.co.uk/> Accessed on 05/07/10

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