Apple Ipod Case

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Marketing Management
2007

Apple iPod
Case Study

Table of contents
1ANSWER TO QUESTION 11
1.1HOW WOULD YOU DEFINE THE MARKET FOR THE APPLE IPOD? WHICH ARE THE RELEVANT EXISTING AND FUTURE COMPETITORS?1 2ANSWER TO QUESTION 21
2.1HOW WOULD YOU DEFINE APPLE’S COMPETITIVE ADVANTAGE?1
3ANSWER TO QUESTION 32
3.1HOW IMPORTANT IS CUSTOMER LOYALTY FOR APPLE?2
3.2WOULD YOU RECOMMEND A STRICT EXIT STRATEGY FOR ITUNES, IF THE PROFIT PER TRACK OF 10 CENTS WILL GO DOWN TO ZERO EVEN NEGATIVE? JUSTIFY.2 4ANSWER TO QUESTION 43
4.1DEVELOPMENT OF A PERCEPTUAL MAP3
4.2WOULD YOU LIKE ADDITIONAL DATA?4
5APPENDIX6
6REFERENCES9

Table of Tables
Table 1 Marketing questionaire of portable Mp3 players ranked for importance3 Table 2 Score table for iPod according to ‚Importance’6

Table of Figures
Figure 1 Perceptual map 1 : Price vs. Portability7
Figure 2 Perceptual map 2: Price vs. battery endurance7
Figure 3 Perceptual map 3: Price vs. Special file formats8 Figure 4 Price determination according to Van Westendorp8

1Answer to Question 1
1.1How would you define the market for the Apple iPod? Which are the relevant existing and future competitors? The market for MP3 players was relatively young in 2004. The first iPod was launched by Apple in 2001, but there were several competitors in the market. Apple holds a market share in selling MP3 players by August 2004 of 66%, totaling 10 million MP3 players. Therefore Apple holds the lion’s share of the market for MP3 players. With the highest quarterly revenue in a decade as well as large profits Apple is on the roll. The relevant existing competitors in 2004 are:

- Dell,
- Sony,
- Virgin Electronics and
- Samsung.
Because of growing market expectations, many additional imitators will enter the market within the next time with over 100 iPod substitutes. In addition Microsoft is also aggressive promoting an alternative song format to Apple’s AAC. At first sight:

The first impression of this case study shows that the iPod story seems to be a great success for the Apple Company.

2Answer to Question 2
2.1How would you define Apple’s competitive advantage?
Apples’ competitive advantage could be summarized into an extraordinary marketing expertise, that make possible to offer an unique experience to a community of enthusiastic customers. We can divide the sources of Apple’s competitive advantage in two groups: Company-related

Highly known brand associated with a trendy and inventive image •High customer loyalty
Innovation and very high quality of products
Good distribution channels (Internet, own retail stores in different countries, distribution partner) iPod-related
Product features (outstanding quality and ease of use, low weight, cutting-edge design, compatibility with Windows format) •Iconic status
Accepted Pricing (Premium) by loyal customers
iTunes on-line music exchange website
3Answer to Question 3
3.1How important is customer loyalty for Apple?
Customer loyalty is indispensable for any company, but it is a particularly sensitive issue for Apple. Apple’s early evangelistic marketing path created much more than a product, it formed a lifestyle approach to innovation and technology. This product lifestyle approach delivers not only user friendly and physically attractive products, but targets persons who identify themselves as individual thinkers or revolutionaries. This image created an exceptionally strong Apple brand and community, leading many journalists to dub Apple product users as “fanatics” . The fanatical involvement of even non-traditional Apple users in the context of customer loyalty can be well illustrated in the battle with Real Networks online store for an open market. Real Networks, a competitor to Apple’s online iTunes store, cracked the fair play code that prevents iPod users from downloading at competing online music stores. The reaction from iPod users...
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