Small product changes, but a big strategy shift for Apple’s new iPhone 4S

Apple announced its new iPhone 4S on Oct. 4 and many industry watchers expressed disappointment that it was not the much–anticipated iPhone 5. These people are missing a critical marketing point: Great marketing does not require every product to consist solely of “knock-it-out-of-the-park” innovation. Great marketing also uses more modest product changes to build a company’s advantage, especially when it provides opportunities to tap into a new market segment. In the iPhone 4S, Apple now has a broader product offering, with pricing and partnering variations that allow them to access a new market segment.

Think about it. Smart phones are a still a fast-growing, critical market, but not every consumer has $300+ to spend on a phone. Many consumers do not have the cash, and may want to buy a lower-cost phone. Apple now has a product for that segment. With a two-year contract for services, customers can get the iPhone 3GS for free! Or, they can buy the iPhone 4 for only $99! Suddenly, the iPhone is an alternative to price-conscious consumers, and it gives Apple access to a new segment.

And, as all good marketers know, once you gain a customer’s loyalty, they are more than likely to stay with the company over time, eventually moving to that newer, higher-priced model.

Group Activities and Discussion Questions:

1. Show any video which details the new iPhone 4S. (There are videos available on several Web sites, including Apple.com, brandchannel.com, and wallstreetjournal.com.)
2. Market segmentation exercise – Divide students into groups:
   1. Have students identify a different market segment that would be good candidates for the iPhone 3G, iPhone 4G, iPhone 4S.
   2. Have students identify competing smart phones for each of those segments.
   3. What marketing strategy and tactics can be used for each segment?
   4. Buying behavior exercise – Divide students into groups:
      1. Have students build the consumer buying model for purchasing an iPhone: problem recognition, information search, alternative evaluation, post-purchase behavior. Discuss.
      2. Similar to consumer purchasing, have the groups next construct the model for organizational buying: they are the buying team for Medtronic and need to purchase a new phone for 1,000 sales professionals. Discuss.
      3. What marketing strategy and tactics can be used?

(Sources: Wall Street Journal, Advertising Age, Brandchannel.com, Business Week, New York Times)