APPLE’S IPOD: MARTKETING MIX
The iPod is a well-known product line of Apple, which target the market of portable digital music. Everybody knows how success the iPod was, and how it became the golden egg for Apple. The iPod has revolutionized the music industry and the way we enjoy our favorite music. In addition, Steve Jobs’ iPod saved the entire Apple Computer from collapsing and helped Apple (after the name changed in 2007) reborn with high influence on the digital device markets. One by one, the iPod product line, which includes the Mini, Photo, Classic, Nano, Touch, etc., captured the hearts of consumers with high-end hardware, iconic design, and top-notch packaging. The iPod has indeed become a wildly successful product, even at the international scale. Even in 2012, eleven years after its first debut, “the iPod still has over 70% of the MP3 player market share, according to data from the NPD research group. And it's still the best-selling MP3 player in most countries” (MacTech). Beside the huge success of the iPod in term of technical innovation and profits, marketing plays a major role in contributing to the overall triumph of the iPod product line. Apple’s iPod Marketing Strategy helped the iPod stays ahead of the game, raised annual sale, and completely annihilated any efforts of competitive product. This paper is an examination of Apple’s iPod Marketing Strategy through the study of its marketing mix: product, place, price, and promotion.
The iPod is a product that revolutionized the music industry with top of the line technology and iconic design. The iPod is the prime example of how excellent Apple’s service is; they listen to the needs and wants of customers in designing this product. If we go back to before 2001, the term MP3 player was used to refer to bulky machines that play MP3 music with poor design, sluggish performance, and unsatisfied customer experience. On the core level, customers who were looking for good MP3 players needed a product that is portable, fast, and with high storage capacity. Apple successfully captured these needs and turned these ideas into making its original iPod: small, fast, and affordable. Furthermore, Apple was also able to design the iPod in a way that satisfy customers’ wants. According to David Taber, “Apple was making electronic jewelry that also played MP3’s. Never focusing on price, they brought to market more value, more style, and new ways of interacting with digital media” (Weisbein). Apple did not stop there; it makes sure that the iPod stays ahead of the game by keep pushing hardware standard and supporting service. In the hardware department, Apple constantly makes innovative improvements, such as the introduction of the control wheel, the touching screen, etc., and upgrade with more durable components across the product line. In term of supporting service, Apple introduces the iTunes as a support software that distributes content for the iPods (and later with the iPhones and iPads), which includes songs, movies, and apps. Another thing that Apple did so well was to give the iPod a stylistic and iconic look. For a long time, the iPods have become a fashion accessories and a must have for people who looking for that “cool” status. The high market share of iPod has proved that the world fancies its sleek design. Apple has done a right thing to keep its exterior design almost identical for many years. Not only has this made the iPod instantly recognizable, it has also made iPod a signature design of Apple. The minimalist layouts, the screen with playlist, and easy access buttons of the iPod have won the world over. With such advantages in functionality and artistic appeal, iPod successfully brought forward very high brand equity in the mind of its customers. In term of product knowledge, Apple iPod is the de facto standard in the digital music player market. Whenever someone mentions about the MP3 players, the iPod is the first product to appear in mind; therefore, iPod is usually the first choice for consumers who seek a new music listening device. In term of product preference, iPod’s easy to use interface allows its consumers to have great familiarity over the entire product line. For this reason, customer loyalty is boosted; existing users do not with to part with their iPods. “They made people feel as if the iPod was a perfect piece of machinery through how much time they spent on it and through the customer service they provided for it” (Weisbein). 2/ Places:
As mentioned before, the iPod is a digital music player. Apple had been able to differentiate its self from its competitors in the digital music market because of its marketing model. “This model includes legitimate products and services that meet customer demand for digital music often in an online environment” (Barrile). Apple was able to dominate the digital music market because the former “model involved the mass production of physical goods (typically CDs), and their distribution, typically through brick s and mortar stores” (Barrile). They used developing technology and innovative product placement and approaches to streamline the digital music marketing mix. Their commitment to quality and creativity “has resulted in exceptional levels of customer loyalty and a reputation for functionality, design and innovation”(Barrile). Outside connections and brand associations are being made to sell the iPod. By 2005 “the apple iPod now commanded a more 90% share of all hard-drive sales and the recent addition of the iPod shuffle devices gave Apple a 58% share of the flash-drive market in March, up from 43% in February according to NPD” (Snyder). According to Barrile, “Place” is the system used to distribute the product to the consumer. There used to be a time where it was difficult to attain an iPod, they were sold very exclusively. They may have been wary of damaging their image by being distributed too freely. Presently, “the way apple has opened up to outside retailers and distributors [shows that] with the iPod, Apple is much more willing to expand their distribution and make sure that their products gets into as many hands as possible”(Snyder). Presently, the iPod has large and varied distribution channels. As of 2005, not including apples 105 owned retail stores: “Apple had claimed more than 21000 distribution points for the iPod (it has 4,000-plus for Mac)”(Snyder). Now that Apple had become more inclusive with its distribution of the iPod, they have even been willing to venture of into other quirkier distribution channels. For instance the have test run distributing iPods on Duke’s campus as well as distributing the iPod in vending machines. You pay via credit card and a robotic arm picks up your purchase and delivers it into a tray. “While a vending machine- or rather an automated retail machine may seem an unlikely [place], it is an extension of apples aggressive retail distribution of the iPod”(Snyder). “Apple views the vending machines the same way they would view any third party retail agreement such as Best Buy or Circuit City”. In term of positioning, Apple’s model has led to success includes not only their physical locations but also their digital ones. Focus and investment in their online presence, especially their digital store, iTunes, has proved to be a formidable business model. “Interestingly [the iTunes] model has grown out of the activities of the digital music pioneer Napster and more recently Kaza”(Barrile). The iPod would not nearly be as accessible without the development of iTunes. As well as physical store up-keep the placement of their web advertisements, the iTunes database must stay current in order for Apple to continue to profit from the iPod. In an attempt to capitalize on current trends, “Apple and Starbucks announced a partnership so iPodders can wirelessly purchase the trendy tunes that play on the sound system in Starbucks” (Levy). Apple works with its intermediaries for the best profit and brand experience. Select retailers “mainly sell the range of Apple hardware products (iMacs, iPods, and so on) other peripheral, complimentary products and software. These include such businesses as AppleCentres and FirstByte stores in Australia”(Barrile). However, a lot of retails stores such as Sports Authority, Wal-Mart, and Bed Bath and beyond and Five Below may only stock iPod accessories. The saturation and availability of iPod accessories has increased the demand for the somewhat elusive iPods. It is unknown how Apple chooses their stores but there is a guess. Apple may choose its retail stores by zeroing in on metropolitan areas especially high end malls. They then narrow the new stores location down by choosing the area with the highest amount of registered Mac/iPod users. According to Beth Snyder in her Marketer of the Decade, “apple retail stores have come to define the high-end, low-key, over-the-top customer-service shopping experience of the later part of this decade.” The stores are an active part of Apple’s marketing campaign as well. “Eleven of the stores in particular are meant to act as brand ambassadors” (Snyder). Like Netflix, Apple crushed many of its competitors by outmoding them. Its new competition is fierce and comes from an internal source. The placement of iPhones greatly threatens the success of the iPod which is sometimes seen as an iPhone with no service. “Apple would soon sell iPhone ring tones for 99 cents. This was supposed to be an appetizer for a main course of iPods”(Levy). In an effort to improve iPhone sales they put the iPods sales at risk. It is interesting to note that Apple sells more iPods during the back-to-school and/or pre-holiday season” (Snyder). 3/ Pricing strategy:
While every company is trying to lower price to attract customers, Apple, however, still maintains its market-skimming pricing strategy. The market-skimming pricing strategy means that Apple is willing to make the iPod more expensive than the market price to get more 65 percent margin profit and accept the risk in depressed sale volume. Apple uses high price on its products as a marketing strategy to attract an image of high quality. As people think that expensive products must be have something special to offset that cost. Usually, it is the high quality. Apple understands this psychology and applies it into an effective psychological pricing strategy. To make the strategy even more successful, Apple designs IPod with elegant but fashionable appearance with many choices of colors. The refined and distinctive looks help create the image of a high class and fashionable product. Apple continually upgrades its products, from iPod Nano to iPod touch, to prove that its superior technology and design are leading the technology world. With the image “cool”, Apple maximizes customers’ loyalty. Having an Apple product is considered as being cool and high class because not everyone can afford such expensive products. Today, Apple is nearly oligopolistic on the mp3 market. Amazingly, Apple products’ prices are consistent across every retailer, and rarely discount. This makes Apple’s market-skimming pricing work efficiently: customers believe more in Apple’s high quality. The price is equal to the quality. How can Apple do this? The company has agreement with resellers that only a small discount is permitted so that the gap between the official price online and the one in store is small. This is Apple retail strategy: retailer price maintenance. Moreover, Apple uses the “minimum advertised price” (MAP), which means giving monetary incentive to resellers only if they advertise Apple product with a certain price. This strategy gives Apple more direct sale without having to compete with a discount price from its resellers. Moreover, the small price gap prevents any eliminate the retailer opportunity to establish a strong enough market position to give it an advantage in future negotiations with Apple (Tabini) Even though keeping products at a high price, Apple uses dynamic pricing strategy to increase the sale: Apple offers a wide price range so that a variety of customers can get access to it. Apple maximizes its profit by charging customers differently depending on their desire and ability to pay. Wealthier customers can pay more to get iPod Touch while less wealthy customers can get iPod nano. Moreover, Apple deliberately uses international pricing: high price in countries not competitive and lower price in countries with high competitiveness. With deep insight in the market, Apple successfully expands the brand name globally and still keeps the image of high quality and high price. Another strategy that helps increases the sale volume is product line pricing. Product line pricing is to introduce a new product with new price to make the other products look better. Apple introduces iPod Touch with the price of $229, $299, and $399 depending on its capacity storage. The $399 iPod touch will make customers think that getting the iPod with $229 is a big deal and “clouds” their judgment. Customers tend to focus on the comparison in the iPod line and forget that they can instead get an iPhone 4 at $199 with more features, which is the reason why Apple offers a pricing series (Kunz). Apple also uses price-skimming strategy to increase the sale of iPod over time. Steve Jobs smartly used this strategy to make iPod attractive though expensive. The price of the iPod Classic diminishes over time, especially when Apple issues a new version iPod. The price of the next generation is cheaper than the predecessor. The iPod mini costs $249 when first launched in 2004, but the version in 2005 costs only $199. The graph below demonstrates iPod Classic price and sale from 2002 to 2006 (Sliwinska, Ranansinghe, and Kardava), which shows Apple price-skimming strategy.
The price of iPod Classic decreases from $400 in 2002 to $249 in 2006. However, its sale increases significant from 2002 to 2006. 4/ Promotion:
Apple’s promotion strategy also contributed the high market share and revenue of the iPod. In fact, Apple cleverly advertizes the iPod in a way that makes customers think that they are buying a necessity, when in reality they are buying a luxury good. In order to achieve this goal, Apple has teamed up with many companies, ranging from cell phone vendor, radio broadcaster, to various well known websites, in order to promote the iPod. In this paper, we will analyze the best three promotions that Apple made for the iPod: the iPod people, artists’ iPod, and Nike + iPod.
Apple has produced no less than fifty commercial ads for their iPod product line. The most successful of all these ads was the “iPod people” campaign. These ads generally run for about thirty seconds and feature silhouetted people against colorful background dancing and singing while holding the iPods with the iconic white earbuds tucked in their ears. When compared to alcohol and automobile commercials, iPod commercials are obviously more artistic. Why did Apple choose silhouetted people idea? Apple aims to make their advertising personal and targets as many individuals as possible. By showing all these silhouetted people, we cannot identify who are these individuals and their whereabouts. Furthermore, we cannot see their races, social statuses, and living standard. Apple’s genius idea casts aside all the differences between us; these silhouetted people can be anyone. The only thing in common of all these people is their love for music. All we know is that these people are enjoying and rocking out to their favorite music.
One of the most important promotion moves that Apple made for the iPod was to set up connections with superstars in the music industry and use their images to boost the sale of the iPod, such as Bob Dylan, Paul McCartney, U2, etc. In addition, Apple also encourages the growth of independent artists through its wonderful music distribution service: the iTunes. Some of these bands even make it to the top list of Billboard and get attentions from music fans all over the world. “Apple's promotional influence has grown so great that music industry insiders now compare it with Oprah Winfrey's ability to create best-sellers through her book club” (Cadelago). The best move of this campaign was Apple’s connection with U2; U2 made this contract in the belief of the iPod and its potential in the music industry. For this partner relationship, Apple created a U2-branded version and “Vertigo,” a hit by U2 that was only available through iTunes. This “Bono’s iPod” and campaign increase Apple’s iPod sale dramatically.
Another successful campaign is Apple’s partnership with Nike; it was called the Nike + iPod campaign. Nike + iPod sport kit is a device that measured that records the distance and pace of a walk or run. This campaign helps Apple expanded its targeted consumers and developed revenue generating customers’ relationship. In addition, it shows how Apple takes great consideration of the customer product experience with the iPod, especially in term of healthcare. “The executives called upon their respective tech and branding teams to provide an integrated lifestyle management solution. They would develop a package of shoes, data, music, and apparel designed for a core audience dedicated to an active workout regimen” (Kraft). The brand fusion brings both companies long-term profit and increases customer product experience, both in term of healthcare and entertainment on-the-go.
In conclusion, the success of the iPod is a combination of Apple’s in-house product manufacturing and marketing strategy. Not only the iconic design and high performance of the iPod product line has captured the heart of music fans all over the world, but also Apple’s marketing strategy for the iPod is worth studying.
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