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iPod the Marketing of an Idea

iPod the Marketing of an Idea

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Published by: fundmarketing on Jan 20, 2010
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01/19/2010

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iPod: The Marketing of an IdeaProject Team: Michael Shur, Tyler ReedApple’s iPod has taken the world by storm. Nearly ubiquitous, it has changed not only the way people listen tomusic, but it has transformed its parent company Apple into an entertainment giant. In order to understand how thischange came about, we’ll take a look at Apple’s ongoing efforts to make iPod synonymous with hip. We’ll alsodiscuss exactly what customers are buying when they buy an iPod, and we will take a deep look at several aspects of Apple’s marketing of this exciting new product, from the iPod itself, Apple’s strategic planning, possible researchfindings that supported their approach, segmentation strategies that may have been employed and why, as well as pricing strategy across these segments. Last we’ll discuss communications, promotion and advertising, as well as aninteresting shift in retailing that the iPod has enabled.Throughout, we’ll tie back to the Apple brand to dig deep into the notion that iPod’s stunning success stems from it being specifically
not 
an MP3 player. Like Magritte’s surrealist painting of a pipe with the caption
Ceci n’est pasune pipe
(This is not a pipe), the iPod is not merely an MP3 player. It is a symbol which encompasses many grandideas; ideas that involve world change, and how cool we all can be if we are part of that change. Apple’s careful anddeliberate exploitation of this concept, comprising an entire marketing ecosystem which nurtures that idea will bethe subject of this paper.On January 9
th
,2007, Steve Jobs, renowned CEO of Apple, announced that the company which he founded wouldno longer be known as Apple Computer, Inc. Its new name would just be Apple, Inc.
1
This seemingly trivial changerepresents a fundamental shift with deep implications that were the result of many changes Apple had engineeredover the past six or seven years; transitioning itself from a computer company slugging it out for a meager share of an increasingly competitive hardware and software market, to a business that promoted an entirely new concept:
thedigital lifestyle
. Before we dig down into what this radical shift entailed, both for the company and the world, let’stake a quick look at the history of Apple, a company already firmly rooted in several notions that allowed thistransition to make sense.Apple made a name for itself by being instrumental in ushering in the home PC revolution. For millions of itsaficionados, Apple was single-handedly responsible for this revolution by virtue of the fact that it created radicalnew features such as windows-type graphical user interfaces, pull-down menus and simplified computer control viathe mouse. The history of the PC revolution is a history of war between Apple, a number of losers that no oneremembers any more, and archrival Microsoft with its dubious counterclaims of having pioneered the concept of Windows.Frustrating to anyone who owned a Mac back in the 1980’s is the knowledge that Apple did indeed pioneer thewindows metaphor as a distinct feature of its operating system. This was at a time when Microsoft users were stillstruggling with text-based DOS commands, and yet the commercial success of Microsoft has served to rewritehistory to some degree. Battles ensued over the years, but no matter whose side you were on, by the late 90’s it wasclear that Apple was not gaining any ground whatsoever as a computer and software manufacturer. In fact due tomany external events, Apple’s position was in clear threat.
 
First, huge numbers of consumers, particularly the business community, clearly preferred Microsoft. Apple’s marketshare was tiny compared to the Redmond behemoth
2
, however Apple users were an ardent group of graphicdesigners, college students, and members of the urban hip known as The Digerati. This was a group of consumerswho saw themselves as different from the mainstream; definitely cooler, and part of a community of like-minded people. They knew they paid more for to breathe this rarified air, but they didn’t seem to mind. In these segments,Apple’s market share was relatively solid, even if it was comparatively small. Even so, by the end of 2000, with adownturn in the worldwide demand for PCs, Apple posted a $200 million loss
3
, and analysts were not optimisticabout Apple’s future.Undeterred, in January 2001, Jobs opened the annual Macworld conference in New York City with his usual brandof enthusiastic vision. He announced that personal computing, far from tailing off into irrelevance, was about to leapahead into a new Golden Age. To support his vision he introduced several new Apple products that were intended toalign the Mac with this new “digital lifestyle”
4
. Though the conference attendees may have nodded knowingly, fewunderstood what he was talking about, for at this point habits which would later be hallmarks of the digitallifestyle—listening to music online, creating digital movies and sharing photos through networks of computers—were not widely practiced, except perhaps by the most innovative of consumers. Any such habits werestill in their domain, as MP3 technology, and MP3 players specifically, were still quite new, and no one yet knewexactly what to do with them.Launched in 1998, MP3 players were initially seen as an alternative to portable CD players. They only held a couplehours worth of music, and there were still technical glitches such as transfer times and clumsy user interfaces thatcast these new gadgets firmly into the realm of the geek. Interestingly this is not too different from the situation thatexisted when Apple first entered the PC market; the concepts and technology existed, but they weren’t popular.Apple’s stroke of strategic genius was to create a way to simplify and popularize them through cool and innovativedesign. This approach became foundational to their business strategy as well as their corporate culture, and it canstill be seen today, irrespective of the fact that so much has changed. In this regard, this company’s guiding principles have remained remarkably consistent.In 1998 as today, Apple’s strategy has been to release cool new products frequently
5
, accepting and capitalizing onthe fact that computer products enjoy a short product life cycle. Apple popularizes difficult technology by making itfun and intuitive, and characteristically they wrap it all up in a super-hip package that makes consumers of their  products feel as if they belong to an exclusive community. The company’s commitment in 2006 differs from their commitment in 2000 only insofar as the addition of the words “portable digital music”:
The Company is committed to bringing the best personal computing and portable digital music experience to students, educators, creative professionals, businesses, government agencies, and consumers through its innovativehardware, software, peripherals, services, and Internet offerings.
6
Many have criticized this approach, particularly the more conservative elements within the business communitywhose view is summed up by Business Week who wrote when iPod was first introduced that “a few might pay a premium for good design, but it isn’t a good business strategy.”
7
Those same people may today wish they had atleast bought a few shares of stock as a hedge against possible shortsightedness, but more to the point, this type of thinking seems to miss exactly what it is that Apple has always sold.
 
An analysis such as Business Week’s, with it’s inability to plug the value of Apple’s business theatre into thespreadsheet, is based on a fallacy that Apple’s customers are merely paying for good design. This is every bit asun-nuanced a conclusion as thinking that iPod consumers are merely buying an MP3 player. They’re not buyingeither per se, though these things certainly are bundled up in the augmented product. What’s important to understandwhen trying to dissect the phenomenon that iPod has become is that consumers are paying to be part of somethingthat is cool. In a very calculated fashion, Apple has leveraged its traditional designer, digerati, and educationalsegments against the world market at large in the hopes that the emulation of their cool factor could be successfully packaged and sold.That it has worked so far would be difficult to call into question. Whether this success will play out into the futurewill be one of the questions we hope to answer here. We do believe that this mapping of the consumer psyche wasand is an important part of Apple’s corporate strategy that, at the very least, laid the groundwork that makes thedevelopment of a superstar possible. Jobs sums this up with a value proposition that sounds characteristicallygrandiose, but actually is just a hard boiled statement of fact.
The Mac changed the whole computer industry and it really made computers easy to use for the first time. And it brought graphics into the personal computer for the first time. The iPod changed the way we listen to music and changed the whole music industry.
8
Apple’s strengths were well understood thanks to their history of revolutionizing, and they practiced what they preached; using style to change the habits of vast markets of people. Rather than trying to compete with rivalMicrosoft on their turf, Apple keeps their message consistent with Jobs’ statement about changing the world. Theremay be a weakness in this type of thinking, hinted at by the same critics who felt that getting consumers to pay morefor style was not a good business strategy, but we believe any weakness might better be understood in light of its presupposition that there are hordes of people out there who actually
want 
to change. The old adage comes to mind:If a man comes in who wants to buy a car and you sell him a car, you haven’t sold him anything.True, one of the great opportunities of the late 1990’s was that consumers were signaling changes in the way theylistened to music. They wanted to be able to listen to a lot of songs on the go, and they wanted to be able to listen tosong lists of their own making, and they were more and more invested in delivery technologies such as broadbandand services like Kazaa and Napster that would make it all possible.This sea change, combined with the impressive new MPEG-1 Audio Layer 3 compression format—MP3—createdthe opportunity to develop new products, but technical advances don’t answer whether a new product should becreated by a particular company. It was entirely possible that Apple vastly overestimated the level of desire out therein the greater market place.Additionally, there was the issue of educating consumers to what this technical advance meant to them. So if thatdesire was to be kindled, and the market educated, those two objectives would have to be clearly stated and any planwould have to emanate from them. After all, it’s one thing to appeal to innovators and early adopters, but quiteanother to make the leap in to the huge numbers represented by the early and late majority. In this sense, Apple waslike The Fonz; the cool guy in the leather jacket who for some reason doesn’t mind hanging out with the guys thataren’t cool. Only difference was that Apple would charge for the privilege.

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