Contents:                                                                                    page

• 2.0: Executive summary……………………………………………..2

• Contextual analysis:………………………………………………….2

• Introduction to Industry……………………………………...2
• Product definition and specification……………………..2
• Market Analysis……………………………………………….3

• SWOT ………………………………………………………………......4

• Target Market………………………………………………………...5
• Objectives: …………………………………………………………...6
  • Corporate
  • Marketing
  • Marketing communications
• Marketing communication strategy ……………………………7.

• Promotional & Communications method …………………….8

• Scheduling……………………………………………………….…..8

• Limitations…………………………………………………………..10
• Assessment and Evaluation……………………………………..11
• Appendix…………………………………………………………...11
• References………………………………………………………...15

1.0: Executive Summary:

iPlay, a new design for a handheld gaming cosole created by Apple after it has revealed its wishes of expanding into the game industry. This report shall attempt to develop a launch promotional campaign in the United Kingdom focusing on marketing communication tools and plans with a budget of £350,000 over a period of six weeks.

Contextual Analysis:

Industry:

From the early 1980’s the video game phenomenon began with a huge increase in demand and has since then continued with steady increases. Consumers have grown away from “passive” entertainment products characteristic of television broadcast and CD audio entertainment.  The ability to interact with a device capable of responding to real-time inputs from the user is a technology that consumers now demand.  The gaming industry today supports a worldwide market of almost $24.5 billion and a US market of nearly $13 billion. (Rocsearch, 2007)

Product definition and specifications:

iPlay, a new handheld game console by Apple, embraces the physical characteristics and standards of Apple products. A basic model has been constructed and is shown in appendix A.  iPlay revolutionizes the way games are played with  ultra-bright touch-screen technology. In addition, it has wireless connection capabilities, enabling players to put their skills to the test against players across the room and across the world.

Apple’s iPlay sound capabilities allow for greatly expanded use of voices and music, and a richer more immersive game experience. Stereo speakers allow for virtual surround sound, with a plug for headphones.

As to the competitive advantage of iPlay that separates it from other portable games, iPlay offers itunes compatibility; being the first portable video game that plays music as well as videos. This is due to the large memory space that incapables such a small device to encompass so much.

Moreover, iPlay has the ability and technology to update itself with the latest games upon request. When an Internet connection has been established, wirelessly or not, iPlay can provide it’s user with a wide range of programs and applications such as news broadcasts and weather reports.

Market analysis:

Once a niche market, the computer and avideo game industry took in about USD$7 billion in the US in 2005 (ESAannual report, 2006) Overall though, the gaming industry is worth $24.5 billion dollars .

Over the last thirty years the gaming insdustry has become one of the most competitive and rapidly growing markets around. At the present time, the battle for market share in this field has been a three way fight between the billion dollar worth companies; Microsoft, Sony, and Nintendo.  The most recent consoles are the X-Box 360, PlayStation 3, and the Wii by Microsoft, Sony and Nintendo respectively.

While all three companies have established a well known reputation for themselves in the market and offer different video game consoles, it is necessary here to distinguish video game consoles from handheld game consoles; the market Apple intends to target with iPlay..

At the moment, the existing competition in the handheld gaming console market is the PlayStation Portable (PSP) developed by Sony and the Nintendo DS, both released in 2004. These games are only a few years old and are still in the mature phase of their product life cycle. This is evident through the current sales of both PSP and Nintendo DS where Nintendo has claimed to have shipped well over 5 million DS handheld consoles around the globe. On the other hand Sony is believed to have shipped over 4.4 million PlayStation Portables so far, 2.46 million in Q1 2005 alone, and are expecting to ship 12 million by March of 2006.

Introduction to Apple:

The 30 year old company is an American consumer electronics corporation with worldwide annual sales in its fiscal year 2006 (ending September 30, 2006) of US$19.3 billion.

Apple Inc. designs, manufactures and markets personal computers and related solutions for sale primarily to education, creative, business, and consumer customers. The company markets a wide rage of computers, related software, and peripherals.

Their generated sales in 2003 were $6.207 million, an increase of approximately 8% compared to those in 2002. And while 56% of that revenue was mostly due to their sales of Powerbook in 2003, most of its revenues are nowadays generated from the sales of the iPod, which according to some recent figures, have been 5.3 million units in the last three months of the current year.

The rest of their revenues are made through selling other products such as the iPod nano, iPod Shuffle, and soon, the iPhone.

Promotional objectives:

Apple’s objectives:

To give the end-user consumer the best gaming experience through an innovative product adhering to corporate objectives.

Marketing and communications objective:

The marketing aim is to reach the largest number of gamers possible through effective and interactive ads, starting mid-November; four weeks prior to the launch in December and ending two weeks post-launch.

Regarding sales volume, it is estimated that Apple would sell approximately 200,000 units from December to January.

SWOT:

Strengths:

Apple’s strength comes from its sales of professional notebooks, which have been strong in recent years.

A strength of Apple is its current financial position, where the company is known to have cash revenues of approximately $4.5 billion. Apple’s strong financial position will enable the company to operate with a great deal of financial flexibility; the company could use its cash revenues to expand its business and the development of new products such as iPlay, since entry to the video game market will prove to be costly and expensive, involving great deal of resources and commitment.

Another strength of Apple is its brand image which is well regarded amongst consumers, as Apple enjoys a high level of brand awareness and recognition for its products. This proves to be beneficial as it helps to drive sales of the company’s products. It’s strong brand helps in creating barriers to entry within the market and differentiates the company from its competitors. This is an advantage regarding iPlay as Apple’s brand and reputation will be a crucial aspect in guarantying future sales of the product.

Weaknesses:

The success of a company in one market does not necessarily guarantee its success in another. No matter how successful Apple has proved its self to be, entering a new market such as the video game industry may prove to be challenging. With iPlay, Apple would be invading a strong competitive market with no previous experience assuring its critics that this is a bold and risky move into unknown territory.

Opportunity:

iPlay is offering a competitive advantage, a unique selling point, that combines characteristics from both of its competitor’s products including itunes compatibility.

Threats:

Apple is expanding into a high competitive market to compete with brands that have been in the market for more than 30 years. Also, these companies have a loyal customer base that Apple might find difficult to switch. Apple’s entry into the video game industry is a risky move that involves high resource commitment; If not studied and approached carefully, catastrophic consequences might be expected on both the financial aspect as well as the image of the company.

Target Market:

As to the target market, there are 21 million people gamers who are considered to be possible targets. However, iPlay is purposed to target those 11 million who according to the ACORN classification otherwise known as ‘a classification of residential neighbourhoods’ are of the segment ABC1. And since iPlay is a relatively expensive game, the segment chosen implies that the 11 million customers  the wealthy, well-off, and prosperous professional customers with disposable incomes who can afford such a luxury product.

And while both Nintendo DS and the PSP are priced at £100- £150, iPlay as suggested later- earlier will be priced at an approximate of £200.

As to the age groups targeted, iPlay’s initial goal was to focus on 6+ year olds. However, after further analysis, it was evident that the target market aged 6-10 year olds was dominated by Nintendo DS who’s strong collaboration with Nickelodeon has given it the chance to be the product that dominates the handheld gaming market for kids. Hence, Apple saw it appropriate to target 11-50 year olds, through dividing the market further into five age groups starting with 11- 15 year olds, 16-24, 25-35, and finally 36-50 year olds.

Before moving on it is necessary to mention that the following information and statistics has been taken from a search conducted by the BBC in 2005.

As to the 11- 15 year old ‘gamers’:

97%of this age group are game players, with approximately an equal split between the male to female ratio where 53% are males and 47% females.
As this age group of teenagers are in school, one would assume that the increased levels of homework would affect time spent on video games and entertainment. However in reality, schoolwork and competition from other forms of entertainment only seem to slightly dent this group’s available play time where 97% play at least once a week and 55% still find time to play every day. Statistics also show that 57% of the time spent on game playing is usually on a handheld game and not a console.

As it was mentioned earlier, iPlay desires to target the ABC1 segment from the ACORN classification; data show that from this age group 46% are considered ABC1.

Moving on to the 16-24 age group:

At 82%, gamers still form a clear majority of 16-24 year olds.

81% are “heavy” gamers playing at least once a week.

There are also more “medium” gamers (14%) playing

only a few times a month, than the previous group. This

age group is also the one with the lowest proportion of female gamers at 44%, which arose the question of whether this might prove to be an indication that the choice of games

targeted at this group is less appealing to females.

Apple may use this to its own advantage by targeting a niche, which has been untapped. And while PSP has tried to fill this gap by producing a pink PSP, it has failed considerably.

As to the percentage of those in the ABC1 group, they represent 43% of the whole group.

25-35 year olds:

The results of both gender of players and the frequency of play in this age group are similar to those of 16-24 year olds.

The gamers in this group seem to be looking for something a bit more cerebral in what they play – or, more “pick up, put down”.

However, this group ranks video gaming fairly low on their entertainment preference list when compared to the previous groups. Gaming came in at 5th place with TV, Internet, and books.
ABC1 here represent 57%.

36-50 year olds:

Although the split between male and female gamers seemed to be widening slightly in the previous group, this age

group shows the gender split edging towards being more even again, with 55% male and 45% female coverage.

That’s just 1% difference from the 16-24 year olds.

As to the percentage of ABC1’s in this group, they represent 56%.

Understanding UK Gamers:

• 59% of 6-65 year olds in the UK are gamers: this is equivalent to 26.5 million people

• 48% of the UK aged 6-65 plays games at least once a week (21.6 million people)

• 100% of 6-10s consider themselves to be gamers

• A quarter of UK game players are aged 36-50

• 18% (or 1.7 million gamers) are aged between 51-65

• The average age of UK gamer is approximately 28

• 45% of all gamers  are female

• 52% are ABC1 social grade, 48% are C2De social grade

Marketing communication strategies:

Positioning:

Regarding iPlay’s positioning in the market, its primary competition as mentioned before are Nintendo DS and the PSP by Sony. iPlay will have unique capabilities combining functions and characteristics that it’s competition lack. While the PSP is known for its high graphics, Nintendo is known for its touch screen that gives the user the opportunity to input data through the screen rather than a joystick like the PSP. iPlay’s competitive advantage is the combination of both as well as it’s itunes compatibility.

It is necessary understand the marketing mix in order to fully comprehend the magnitude of the market that Apple is entering with iPlay. This is where the 4P’s of (McCarthy,1960) play a significant role. “The basic task of marketing is combining these 4P’s into a marketing programme to facilitate the exchange process” (Fill, 2006). The 4P’s are listed and explained below.

Promotion:

Promotion is crucial in the marketing mix in that it is responsible for the communication of the marketing offer to the target market. It involves the range of activities used to attract customers to buy the product. There are three aspects of the promotion regarding iPlay; personal selling, advertising, and cross- promotion.

Personal selling is a form of promotion in the Apple exclusive and authorised retailers where staff are trained to have a high level of product knowledge and are focused on the sale of Apple’s range. These sales people are positioned to provide the best immediate and hands on promotion of a product that they clearly support. Successful personal selling can result in immediate sales.

A cross promotion is relatively a new and clever promotion strategy which involves the use of one product to support another and visa versa. A clear example of where Apple used this promotional strategy was provided by the iPod cross promotion of the rock group U2. Apple designed a special black ‘U2’ iPod for the launch U2’s album, a strategy that effectively cross promotes Apple’s and U2’s products.

Another example where apple used this strategy is the new red nano iPod known as (PRODUCT) RED. This company was created to raise awareness and financially support and aid women and children who are affected with HIV in Africa.

This drove many customers who are supporting (PRODUCT)RED to buy the iPod nano, not only did Apple support a human organisation giving a good image of their brand but by doing that they also boosted up sales of the nano and made profits.

Apple can attempt such an approach later on in its iPlay promotional strategy.

The last and most relevant form of promotion is advertising. However, this is discussed in more detail later on in the report.

Place:

Place refers to the system used to distribute the product to the consumer. As with many other Apple products, iPlay should have varied distribution channels. The first is direct distribution through Apple stores located throughout the UK and accessed on line. One the other hand, the second is an intermediary channel of distribution where a retailer exists between the manufacturer, Apple, and the consumer. Two different models can be used in this situation. The first involves a number of largely Apple exclusive authorised retailers. The aim of these retailers would mainly be selling the range of Apple hardware products such as iMacs, iPods, and of course iPlay. Software and some other peripheral products may be sold in these stores as well. The second model involves mainstream, general retailers. Alternatively, the one intermediary channel may also apply to the new business model through on line retailers such as Amazon.co.uk.

Price:

Pricing is a crucial element of the marketing mix in that it influences the choice of target market. For instance, iPlay is a manufactured product and there are some direct costs involved in producing it such as R&D, and component parts related to its production. Before setting the price Apple must insure that the set price is sufficient to cover the costs and then build in a profit margin. Thus, in an indirect way, the price determines the type of customers who are to purchase the product, and hence the target market.

A factor that might influence Apple’s pricing decisions is their competitor’s prices. Nintendo DS is currently priced at £100 while the PSP is being sold for £150 in the UK. However, Apple products have always had higher price points due to the brand’s reputation for high end quality.

Regarding the ‘product’ aspect of the marketing spectrum, it has already been discussed separately earlier on in the report.

Branding and Packaging:

“It's a really powerful brand," says Robin Rusch, editor of the Brandchannel.com, which awarded Apple "Brand of theYear" in 2001. "The overwhelming presence of Apple comes through in everything they do." He announced. (www.wired.com)

The company has established a "heartfelt connection" with its customers. This takes several forms, from building trust to establishing a community around their products. Their products are designed around people; "Apple's designs are people-driven”. With no doubt, selling of the iPlay will depend largely on Apple’s branding image; and as Marketer Marc Gobe, author of Emotional Branding and principal of d/g worldwide, said: “Apple's brand is the key to its survival. It's got nothing to do with innovative products like the iMac or the iPod. "Without the brand, Apple would be dead," he said. "Absolutely. Completely. The brand is all they've got. The power of their branding is all that keeps them alive. It's got nothing to do with products."” (www.wired.com)

As to the origins of the name ‘iPlay’, it was created similar to iPod and iPhone to resemble Apple’s product names; in which the purpose of the letter ‘i’ at the beginning of the name differentiates and distinguishes iPlay as an Apple product.

Promotional and communications method:

Advertising:

The role of advertising is crucial in the promotional plan as it influences audiences by informing, reminding, and persuading them in a brand.

Regarding the three main marketing communications strategy known as the 3P’s. Our main concern in this campaign is the consumer otherwise known as the end-user customer. Hence, the purpose of the advertising strategy here is to generate increased level of awareness of the product, and provoke the motivation to inquire, experiment and purchase within the ‘target group’.

In order to accomplish and deliver a ‘pull’ strategy, Apple should deliver mass media advertising supported by sales promotion. Direct marketing as well as online marketing are used to maximise and increase the number audience reached and thus possible future customers. The method of marketing used is interlinked to the target segment, in this case the age groups that Apple is trying to reach. Thus it can be concluded from this that the advertising method used on each group might differ form one group to another. This is highlighted upon and explained further more below.

Online advertising:

It’s a known fact that the younger groups are more computer literate and technology friendly, accordingly, advertising to these groups will mainly be online with a significant focus on TV ads. Recent statistics carried in 2006 show that 85% of 16-24 year olds are frequent Internet users compared to 79% of 25-35 year olds. This percentage decreases further more with older customers. This is further more elaborated in a bar chart done over 3 months (Exhibit B), which compares age groups to the percentage of Internet users from 2003-2006. (www.citizensonline.org.uk).

TV advertising:

Since the introduction of the Macintosh in 1984 with the1984 Super Bowl commercial, Apple has been continuously recognized for its efforts towards effective advertising and marketing for its innovative products. "The quality of Apple's advertising is consistently above average," said Allen Adamson, managing director of the New York offices of brand consultancy Landor associates. "And more often than not, it's world class."”(forbes.com)

Apple's ads are powerful and influential in part because they all reinforce the same branding message. Apple prides itself on appealing to the discerning customer, the person who, as one slogan famously had it, ‘thought differently’. And that message of creativity, counterculture and good taste is one that Apple has portrayed constantly in its advertising for the past 30 years. As in regards to iPlay, it is suggested that Apple uses a catchy slogan that would appeal to the target market and grabbing the customer’s attention; a suggested example is ‘iPlay… putting the fun back into the game’.

Theater Advertising:

Another tool for reaching the target is through the movie theatre pre-shows. Apple ran ads by cinema advertising in November and December on more than 6000 screens nationwide in 2002 (www.mediafamily.org).  One way to advertise in theatres is called rolling stock where sight, sound and motion are used. Researchers have found this to have an 80% recall. Accordingly, Apple is advised to run these ads one-week pre-launch and one week after launching the product. This is further elaborated and stressed upon in

‘scheduling’.

Outdoor Advertising:

After taking into consideration the costs of both TV and theatre advertising, it is necessary to mention that outdoor advertising is a low cost method and is suggested if the resources allow. Some of these advertisements would include billboards, buses, taxis, and trains, and reach a large number of people. However, with this method, there is no guarantee that the audience seeing the adverts are ‘gamers’ and thus its effectiveness is hard to evaluate or calculate. Not to mention the risk of the adverts being vulnerable to vandalism, which would be a total waste of the company’s resources.

According to the Foote, Cone & Belding Communications, otherwise known as the FCB Planning model (Exhibit D), Apple is classified as a high involvement thinking product (informative).  Specific information and demonstrations are needed on a continuous basis to provide knowledge to those interested in entering the handheld gaming market. Products in the informative category are purchased on the learn-feel-do hierarchy where rational thinking and economic considerations are important as well as necessary. Considering the previous, a continuous pattern of advertising would have been suggested as the most appropriate for iPlay throughout the six months prior to launch with occasional pulsing promotions. However, due to budget constraints, the main focus in advertising will only be on the four weeks prior to launch and the two weeks post launch, where the advertising campaign is expected to be heavy and intensive 

Budgeting:

The most effective budgeting strategy for iPlay would be the use of an objective and task method. It has already been established that the key aspect that Apple wishes to communicate to consumers is that Play is a premier handheld gaming system that is acceptable for everyone to use.  As mentioned earlier, the three tools that would reach the target consumer most effectively would be TV, movie theatre pre-show trailers, and online advertising.

Furthering this, when looking at the costs associated with an ad on T.V. Apple has to consider both costs of producing as well as airing the commercial especially since high concept advertising, TV ads in specific, doesn't come cheap.

Moreover, as quality and complexity increase, the price will typically follow suit.  For Apple, the quality will be top notch, so an average between £51,000 to £178,000 pounds would be needed to produce a thirty second national T.V. commercial (www.gaebler.com).  When considering that the average teenager aged 12-17 watches 4.5 hours of television a day, the costs of a television commercial are outweighed greatly by the benefit of the number of people reached. (www.geabler.com)

Theatre advertising:

Slides start as low as £70 to £1000 for four weeks and go up from there. But since rolling stock ads are more effective than just plain slides and catch the attention of the audience members, these are more expensive and tend to be shown just before the actual previews start.

Scheduling:

Due to budget constraints the main focus of the advertising campaign shall only be on the four weeks prior to launch, starting in November of 2010 and ending 2 weeks post launch; by mid December.

To further elaborate on the reason behind launching the product in three years time, it was realised after some primary and secondary research that at that time iPlay’s competitor’s products would be in the death phase of their life cycle, where their sales would be sharply decreasing and their prices slashed. Hence, it is suggested that iPlay is launched in that period.

A time line is provided in Exhibit E that shows the launch date more clearly.

Limitations:

The main limitations here were mainly budget constraints; advertising for a product such as iPlay has to be heavy in order to be effective, especially since it’s Apple first product in the game industry.

Evaluation & Assessment:

Sales are often used to measure the success of a product, but that does not necessarily describe what demographics are buying the product. One way to benchmark the iPlay would be to offer rebates or warranty cards included in the package. The rebates would have to offer something of value, such as a free game or an extended warranty, to entice redemption.  On the rebate or warranty form there would be three to four simple questions including age and gender.  This will prove to be useful information for Apple in the long run. Additionally there would be questions pertaining to where the purchaser learned about the product, which would give Apple feedback measuring the effectiveness of the ads.  When redeemed, the rebates would show which games were desired by the varying demographics of gamers.

Another method of measurement would be monitoring website activity.

Appendix:

Exhibit A:

(Should have been a picture of iPlay)

Exhibit B:

Exhibit C:

Exhibit D: (lecture number 2)