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The Marketing Mix in Global Market and Proposed Strategy to Succeed in India Ankit Gupta, 2003CS10153 Vidya Bhat, 2004BB50025 Indian Institute of Technology, Delhi May 1, 2007
Abstract iPod is the mp3 player marketed by Apple Inc. Since it was released in the USA market in 2001, it has been the market leader enjoying the share of about 70 percent. iPod has also been the virtual refuge for the other fading Apple products like the Mac which are now banking on the humongous sales of the iPod. In this paper, we ﬁrst study the existing marketing mix of iPod where we analyse mainly the Product, Promotion and the Price. Developing economies like India which present a huge potential for sales of mp3 players are still devoid of this product which is currently established only in the developed countries. We look at possible changes in the marketing mix of the iPod to market it successfully in India as well. These changes include major changes in the technology and promotion campaign to adapt it to the Indian market. We also propose a possible pricing strategy to penetrate the market as well as to generate good proﬁts.
1 Introduction 2 Marketing Mix in the current Global market 2.1 Product . . . . . . . . . . . . . . . . . . . . . . 2.1.1 Looks and User Interface . . . . . . . . 2.1.2 iTunes - An easy way to get songs . . . 2.1.3 Accessories - A Complete integration . . 2.1.4 Enough Choice in Product Line . . . . . 2.2 Promotion . . . . . . . . . . . . . . . . . . . . . 2.2.1 Focusing on the cognitive touch point of 2.2.2 Advertising . . . . . . . . . . . . . . . . 2.2.3 Retailing . . . . . . . . . . . . . . . . . 2.2.4 Tie-ups with Companies . . . . . . . . . 2.2.5 Promotional Oﬀers . . . . . . . . . . . . 2.2.6 Tie-ups with Educational Institutions . 2.2.7 Word of mouth Marketing . . . . . . . . 2.3 Price . . . . . . . . . . . . . . . . . . . . . . . . 2.3.1 Apple’s Pricing Policy . . . . . . . . . . 2.3.2 International Pricing . . . . . . . . . . . . . . . . . . . . . . . the . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . user . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 2 2 3 3 4 6 6 6 8 8 9 10 10 10 11 12 12 12 13 15 15 15 15 15 17 17 18 19 19 19 20 21
3 Potential and Challenges in the Indian Market 3.1 Potential . . . . . . . . . . . . . . . . . . . . . . . 3.2 Technological Challenge . . . . . . . . . . . . . . 3.3 Pricing Challenge . . . . . . . . . . . . . . . . . . 3.3.1 Upsurge of Cheap mp3 Players . . . . . . 3.3.2 Existence of big Gray Market for iPods .
4 Proposed Marketing Mix in Indian Market 4.1 Product . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 Price and Place . . . . . . . . . . . . . . . . . . . . . . . 4.3 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3.1 Advertising . . . . . . . . . . . . . . . . . . . . . 4.3.2 Promotional Oﬀers and Tie-ups with Companies 4.3.3 Retailing . . . . . . . . . . . . . . . . . . . . . . 5 Conclusion A iPod Currency Index B Major mp3 Market Players
Apple’s Song Network . . . . . . . . . . . . . . .Costs and Pricing (source . . . . . . . . . . . . . . . . . . . . iPod . . . . . An ad for the iPod designed by us for Promotion in India . 1 2 2 3 4 5 7 11 13 14 14 16 18 . . . . .Color variation . . . . . . . . . . . . Music Players . . . . . . . . . . . . . . . . . iPod Variants . . . . . . . . . . . . . . . . . Sales of Songs through iTunes and iPods over the years (source: ) .List of Figures 1 2 3 4 5 6 7 8 9 10 11 12 13 Impact of the iPod . . . . .) . . . . . . . iPod . . . . . . . . . . . Pricewaterhouse Coopers. . India . . . .Evolution (source: ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFPI ) Internet Users and Penetration (source: ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Internet Usage Patterns (source: Internet and Mobile Association of India ) . . . Growth of Digital Music in India (source: Soundbuzz. . . . . . . . . . . . . . . . . . . . . . . .Comparative Features (source: ) . . . . . . . . . iPod Nano . . .Then and Now . . . The Basic Image of an iPod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A whopping 48 percent came from the iPods. Thus iPod has clearly had a huge impact both on the market as well on the company itself. 2007. But their products like iMac and MacOS were completely overshadowed by the brilliant marketing and technology of companies like HP. Till about 2000. Canada and other European countries. Hence Apple started to follow a digital hub strategy. This clearly demonstrates the invincibility of the iPod in the market. Not only this. The iPod is still to be oﬃcially marketed and launched in huge economies like India. Figure 1(b) shows the shares of various Apple’s products in the company’s revenue for the ﬁrst quarter. whereby the company began creating software for the growing market of digital devices being purchased by consumers. This growth has been enhanced by the human desires to pass their idle time with music. Apple Inc. used to deal only with computer hardware and software stuﬀ. 2007 (source: ) Figure 1: Impact of the iPod 1 Introduction Digital music has penetrated the human life to a large extent today. we study any changes that are required 1 . iPod’s market share rose from 33 percent in 2002 to 82 percent in 2004. And this desire is being fulﬁlled by an upsurge of portable devices which can play music. This is discussed in Section 2 of this paper. Digital cameras. but the company found existing digital music players “big and clunky or small and useless” with user interfaces that were “unbelievably awful”. These include mainly the mp3 players and the cellular phones. Among the hard drive based players in US market. so Apple decided to develop its own. In Section 3. The sales have been rising continuously. Figure 1(a) shows the volume of the iPod sales over the time 2001-2006. Audio CDs and DVDs have taken over the areas where the audio casettes and gramophones once held their forte. Also. Dell and Microsoft.(a) iPod sales per quarter (source: ) (b) Apple’s revenue breakup for Quarter 1. This motivated us to study the marketing mix of the product and understand the reasons behind its tremendous success. camcorders and organizers had wellestablished mainstream markets. then Apple Computers Inc. The product was developed in less than a year and unveiled on 23 October 2001. It was just recently that Apple Computers Inc changed its name to Apple Inc clearly declaring that no longer was the company relying solely on the personal computers. this product is currently only established in the developed economies like USA. companies like Sony were producing their Walkmans and were the market leaders but only till Apple intervened. the impact can also be seen on the dipping fortunes of Apple.
Figure 2 shows the diﬀerence in the design of then popular Sony’s Walkman and Apple’s iPod. looks and user interface compelling people buy it not just for listening music but to keep up with the fashion. 2. 2 . It’s clearly evident that iPod with its slim and sleek looks is deﬁnitely an attraction puller. Figure 2(c) shows the size of the iPod nano. Though almost all the internal system components come from other companies.” Along with this Apple has also released the product in various colors (Figure 3) which indicates that Apple wants to make iPod the new fashion in this generation. And with its sales soaring high. 2 2. The size has been reduced so that it can easily ﬁt into our pockets and this has come without any considerable decrease in the number of songs that can be stored.1. they have been put together with an amazing ﬁrmware.1 Looks and User Interface mp3 players existed before iPod came.Color variation in the marketing mix of iPod to compete successfully in India. We conclude the paper in Section 4.“A thousand songs in your pocket.(a) Then (b) Now (c) ipod dimensions Figure 2: Music Players .1 Marketing Mix in the current Global market Product iPod relies on its design and technology very heavily. Now we look at some major aspects of the Product which essentially made an iPod the iPod. it has deﬁnitely been able to do so. Quoting from Apple’s ﬁrst marketing campaign for the iPod .Then and Now Figure 3: iPod Nano .
the iTunes Store features more than 5 million 99 songs. First.1.”  (April 26. 100.the iTunes. of iTunes sold per iPod increasing over the years (indicated by slight divergence of the two curves towards the end).Figure 4: Sales of Songs through iTunes and iPods over the years (source: ) Compared to the push buttons interface in the Walkmans. it gives more options to the user to enhance their music listening domain. 2. it was never easier for the common man to operate a device.000 free podcasts. with the no. no changes in the technology are required in the product itself. Besides Apple. As seen in Figure 4. This has two main advantages. 27. 2007). Apple came up with a revolutionary user interface in the iPod. Quoting from the oﬃcial iTunes store website. This supported by a cool operating system and sound quality gave music listeners an unprecedented experience. The mastermind behind the success of the product has been an excellent complementary ans compatible online music store . many other companies have also started to come up with accessories for the iPod so as to move with the tide. movies and iPod games. With a touch sensitive scroll wheel and 4 touch buttons accompanying it (Figure 3).2 iTunes . And second.A Complete integration Apple also augments the regular features of the iPod through various accessories. Some most popular of these accessories are: 3 . “Open 24/7. 350 TV shows.000 audiobooks.An easy way to get songs Apple does not look at iPod as a product of its own. 2. The sales trends for the iPod and song downloads from iTunes are similar.3 Accessories . It excels in giving the consumers the dual advantage of combining the easily available cheap downloadable music along with the highly fashionable iPod MP3 player.1. and now.
It eliminates the needs of having an extra music player along with the big speakers. but it deﬁnitely gives an additional reasons to the consumers to buy the iPod. Radio in itself provides users much more than music .1. 4 . Figure 5 shows the diﬀerent variants that have been launched by Apple.news. The list of features of each iPod variant can be found in Figure 6.Figure 5: iPod . the aim of the accessories is not just to satisfy the customer by the iPod experience but to delight him by providing more options and ﬂexibilities in the ways of entertainment. • Radio Addon This is one of the most popular accessories and caters mainly to the markets where radio channels have their dominance. • Camera connector It provides an extra attraction to the user enabling him/her to transfer the digital photographs on the iPod.Evolution (source: ) • Sound system for rooms This accessory (named iPod HiFi) aims at broadening the usage of the iPods to the complete home music systems. chat sessions etc. it has come up with diﬀerent choices based on the constraints on size. Though it doesn’t necessarily broadens the market niche. The iPod can just be plugged in and the users can listen to their favourite compiled songs on the iPod relaxing in their rooms. Going by its motto of “Having an iPod for everyone”. Thus it gives an extra option to the users in terms what they want to listen. This can in turn be used as a photograph sharing device too. The basic functionality also varies from iPod Shuﬄe to Nano to Video. memory and price.4 Enough Choice in Product Line The iPod has evolved since its ﬁrst release in 2001. The list of accessories is growing endless today and it’s not possible to list them all down here. 2. Basically this strategy to diversify the product line within a product has led to better catering of a larger consumer base and market segments. But in essence.
Comparative Features (source: ) 5 .Figure 6: iPod Variants .
serves to rule out technology as a competitive advantage. posters in public places. the very ﬁrst tagline for the ﬁrst iPod was “1000 songs in your pocket”. emphasized on three aspects of the iPod and built all its promotion around them: Cool Factor. Apple’s various modes of promotion are now identiﬁed and explained under the following headings. Apple realized that it had a great looking product with an interface that was simple and easy to use and hence it leveraged its marketing campaign on these points so as to build a competitive advantage centered on them. so that they stand out against 6 . These distinctively appear in white. • Ad Campaigns The more famous commercials and print advertising featured dark silhouetted characters against bright-coloured backgrounds  . This is especially true in the case of the iPod. the company has created a strong. In the process. and in television commercials are backed by up-beat music. This. If we examine the design evolution of the iPod over time.2 Advertising Apple has used a variety of distinctive advertising campaigns to promote its iPod portable digital music player. transferable brand identity throughout the iPod product life cycle that it can leverage upon in future oﬀerings. The various forms of the iPod (over time) can be abstracted out and represented by the 2-dimensional rendering as seen in Figure 7. The cool factor being that such a small gadget can take care of all your music needs. we ﬁnd that the design features common to all of these embodiments are the round Click Wheel and the square display screen. The silhouettes are usually dancing. Functional diﬀerentiation generally fades as technology evolves. The silhouettes are also usually holding iPods and listening to them with Apple’s supplied earphones. Apple has. According to US magazine Advertising Age. 2. Kelloggs School of Management Center for Research on Technology & Innovation has found that design decisions cast a big shadow on the commercial success of any product over its life cycle. Design and Simplicity. Apple has. hence.2. IMC essentially means that all the communications and marketing associated with the product have a common consistent message. right from Day 1. in fact. the Apple publicity machine has secured 6.2. The campaigns include television commercials.000 iPod and iTunes stories in major publications worldwide in a short span of 6 years.1 Focusing on the cognitive touch point of the user experience Contemporary ﬁrms use innovation and design to build and sustain competitive advantage.2 Promotion The iPod has become the phenomenon that it is today because of intelligent marketing.2. In the case of the iPod. 2. This rendering can be identiﬁed as the major cognitive touch point for the users. Apple follows the Integrated Marketing Communications (IMC) approach for promoting the iPod. and wrap advertising campaigns. coupled with the fact that most of the technology involved in the iPod is outsourced to big names in the high tech hardware industry. and this is especially true in the technology market . print ads. and our research for the term paper has shown that Apple has been very smart in leveraging on it for all its advertising. built brand identity through great design and has leveraged and secured critical design elements and cognitive touch points of the user experience through trademarks.
Stairways leading out of the station have also been converted into colored iPod murals. on major roadways. trains 7 . the London Underground et al . the Leidsestraat station in Amsterdam. the waiting platforms. with entire buses. the television campaigns have evolved and the newer advertisements emphasize on the latest features added to the new models introduced. music stores and just about anywhere where there is a crowd. It has also launched elaborate rail station iPod campaigns at the Mc Gill subway terminal in Montreal. the iPod appears as its 2-D rendering shown above. the second-generation version of shuﬄe emphasized on the reduced size and variation in colours. Apple has also undertaken massive wrap advertising campaigns in the past.Figure 7: The Basic Image of an iPod the colored background and black silhouettes. Here. (For instance. Again. colored iPod silhouettes ads consume the ticket stands. the video iPod ad showed its additional capability of video output. with the front of each step making up the canvas.) • Music featured in the ads The tunes chosen for the ads are not necessarily the biggest-sellers. which is what matters. • Signage Apple follows a marked Guerilla marketing policy when it comes to signage. posters and billboards which are extremely hard to miss. but they are recognizable to the cognoscenti. and even appear to be painted onto the turnstiles.hip-hop. Since then. Buzz marketing rules the day. meaning employment of huge banners. techno and garage rock . as mentioned earlier. in the right hands. iPod advertisements spring up at street corners. credible genres of the day (in the US) . meaning that the product is seen at the right places. in addition to its eternal underlying message of being the coolest music player. The three biggest-selling.are all represented in the television ads .
the 174 stores earn an average of $4.its the beginning. It has been an educated move on Apples part to relinquish some control in order to gain access or control of a market that could be orders of magnitude larger than their old (PC) one. The sales staﬀ is enthusiastic and helpful . By acknowledging this context in the design of the store. it leverages on the attractive looks of the iPod and hence the pages are uncluttered with high-resolution images of the product in diﬀerent orientations and minimal text on a bright background. The stores are organized by the context in which people use the products. Its ﬁrst priority has been to make the customers want the products. It is not surprising. and allow customers to check out the features of the iPod on a digital screen and buy them using credit cards. Here too. are consistent with Apples personality. Apple creates an experience in the customers mind. As a result. each one of them being a visual treat in itself.4 Tie-ups with Companies Apples approach towards promoting the iPod has been signiﬁcantly diﬀerent from its corporate culture and practice . Product-speciﬁc messages are placed and sized such that they are noticeable only after youve already narrowed your focus to a particular product. But it is developing and marketing the iPod with uncharacteristic openness to work with Microsoft’s Windows software and other technologies. The company has long held the philosophy that its software and hardware should be tied almost exclusively to the Macintosh computer for both quality and proﬁt. indicating to the customer that they themselves live the lifestyle that theyre trying to sell. • The Apple. This approach is visually appealing to the customer.and trams being used as 3-D billboards to promote the iPod. Cashiers put time and care into the transaction. Today. 8 . and they carry iPods on their belts. Another factor that may have triggered this approach is the fact that in the rapidly expanding domain of consumer electronics. Then it built entire mock-ups in a warehouse near its headquarters. it serves as an immensely viable option of advertising.”  The ﬁgures speak for themselves. raises his/her interest about the product and leads him/her to click on the appropriate links to learn more about it. Apples latest venture for iPod retailing has been iPod vending machines with digital signage. The messages are prioritized. customers may not like products that attempt to lock them in one single brand. called the Apple Stores. which makes clear Apples philosophy that the purchase is not the end of the customers relationship with them .3 Retailing “Apple’s investment in its retail operations is paying oﬀ. Through its retail outlets. 1 percent of the population using the Internet. They have cropped up at major departmental stores and railway stations. Before opening its ﬁrst store ﬁve years ago. 2. hence. 2. And that desire it implants with the experience of the products in the store. Apple encourages its customers to dream about possibilities. Apple has revolutionised the retail market with its attractive and inviting retail stores.2. Apple stores have now become the benchmark for quality in the retail sector. The design of all its ﬂagship retails outlets. the company sought out experienced retailers from Target and the Gap. that these stores account for a major chunk of its iPod sales.2.032 per square foot.com Product Page With the Apple home page being visited by approx.
FM radio attachments. Additionally. Continental. it launched the Summer of Music in Japan in 2006 where it gave 9 . allowing them to keep a track of their exercise routines and in essence. • The iPod ecosystem The success of the iPod has spawned a whole range of iPod accessories. In return. With the addition of these models. making it easy for iPod users to enjoy and control their iPods high-quality sound through their cars stereo system.5 Promotional Oﬀers Apple regularly brings forth promotional oﬀers on iPods and iTunes which focus on making the iPod synonymous with music. Docking systems. speakers and car charging units have been designed to allow seamless integration of the iPod into any situation of the consumers lives. General Motors and Mazda to deliver seamless iPod integration across the majority of their brands and models. HP consumer PCs and notebooks came preinstalled with Apples iTunes jukebox software and an easy-reference desktop icon to point consumers directly to the iTunes Music Store. Delta. The latest addition to the sprawling ecosystem has been the Nike+iPod Sports Kit which consists of an accelerometer embedded in the shoe which connects wirelessly to the iPod (nano version only) and stores the users daily workout statistics. produced by other companies as well as Apple.Some major partnerships: • Collaboration with Hewlett Packard (2004) This deal involved HP (which has been a longtime Microsoft partner) selling HP branded iPods as a part of its broader expansion into consumer electronics. and this network has been termed as the iPod ecosystem. it also consists of Nike apparel that holds the iPod nano and allows the user to listen to the song and playlist of their choice during the workout. For example. 2. Hence. In addition.2. seamless music experience. more than 70 percent of 2007-model US automobiles oﬀer iPod integration. Apple is working with Panasonic Avionics Corporation to bring even more leading airlines in-ﬂight iPod connectivity in the future. KLM and United to deliver the ﬁrst seamless integration between iPod and in-ﬂight entertainment systems. ensuring a simple. it has teamed up with Levis and some jacket companies that have attached iPod controls which eliminate the need of taking your iPod out of your pocket to change the song. Apple has collaborated with many such accessory-makers with an aim of increasing the uses of the iPod and making it more adaptable to everyday situations. acting as a personal ﬁtness trainer. Emirates. These six airlines will begin oﬀering their passengers iPod seat connections which power and charge their iPods during ﬂight and allow the video content on their iPods to be viewed on the seat back displays from mid-2007. • Integration with Airlines (2006) Apple has teamed up with Air France. This deal ensured that HP could share a piece of the pie in the phenomenal iPod sales whilst allowing Apple to showcase its iTunes + iPod combo to the broad consumer base of HP. • Integration with automobiles (2006) Apple has teamed up with Ford Motor Company.
weekly events that allow patrons to become DJs for 15 minutes by creating their own iPod play lists .7 Word of mouth Marketing Word of mouth marketing campaigns hinge upon loyal customers spreading word about the product in a favourable tone. Special edition U2 iPods were released with a unique red click wheel and band members autographs engraved into its back casing. Sales are highly sensitive to the prices. That is. U2 have never licensed their music for commercial use or even accepted tour sponsorship. Even enthusiasts in the past who have built April Fools campaigns around the iPod have garnered great publicity for the product on the net . Though the iPod marketing does not include this. Apple has developed software support for the colleges called iTunesU which allows easy uploads. to honour this association that Apple came out with iPod (PRODUCT) RED Special edition. wherein for two weeks before MTV debuted U2’s video for the new single “Vertigo”. fans had a chance to see the band perform the song on TV . The list of major players in the mp3 player market in Appendix B gives an idea of the competition.away free iPods and iTunes vouchers redeemable for free songs from its online store. 2. for example. 10 . downloads and dissemination of iPod compatible academic material amongst the students and faculty. perhaps.in an iPod commercial.2. Apple has also tied up with major record companies and bands to promote their iPod. These include Sony. live performances were held at the Apple Stores by local popular bands to attract crowds . course content dissemination and study support tool in major academic institutions such as Stanford and Georgia College and State University.6 Tie-ups with Educational Institutions Realizing the existence of a huge untapped potential customer base amongst the teens and the youth. the buzz that this product has created has led to an ever-increasing base of loyal customers who swear by it and popularize it in their own ways. Apple and the latest entry being Microsoft in Nov 2006. Apple has tied up with major academic universities to promote iPod as an educational tool.e. in which $10 from the sale of each unit was donated to the RED foundation (set up by U2 lead vocalist Bono) directed towards treating AIDS victims in Africa. An experiment was ﬁrst conducted in Duke University to ﬁnd newer ways of integrating iPod into the academic scenario and gauging their popularity amongst the faculty and students . Its most notable collaboration has been with U2.2. The experiment was a grand success and the iPod is now used as a recording. In such a market. there are millions of consumers and few major players. Sandisk. Entire themes in bars and restaurants have been built around the iPod. In addition. This deal was remarkable because in their twenty-ﬁve-year history. 2.3 Price mp3 Player market in the US market is oligopolistic. Creative. It was. the prices are very competitive with most companies’ product within breathing space of each other. 2. At present. one of the most iconic bands of this century. Apple stores have been started on campus and special student discounts are given on the iPod to popularize it further. Toshiba. any changes in the price by one company will aﬀect the sales drastically i.
Costs and Pricing (source . • Belief in Superior Technology Apple believes that it has the superior technology and design. up 9 percent from the prior year. And note that it still is not hurting them as the prices are still alongside the competitors. This money mainly goes in the digital right 11 . Also. But still iPod variants are marked at the same level as their competitors. The company said it plans to spend $390 million in capital spending this year.1 Apple’s Pricing Policy A market like above gives very incentive for Apple to reduce its prices to the lowest extent and gain the maximum market share. Even if we assume that 20% of the price of each unit is for its marketing and overheads. much of which went to Apple’s retail store eﬀort. even then each unit of iPod sold is making about 66% proﬁt.Figure 8: iPod . 2001. if given a choice at the same price. Research and development costs for last year were $534 million. up 50 percent from the $260 million spent last year. Apple is investing more in research and upping its capital spending. Figure 8 shows that in fact Apple have the potential to reduce the prices. • Skimming R&D costs “In addition to boosting its ad budget. Hence a consumer. Since then a lot has gone into the research to come up with new innovations to enhance the user experience. will deﬁnitely buy an iPod. Apple released the ﬁrst iPod in Oct. This is an interesting aspect of the policy and we attempt to reason it out here. • Make up for iTunes iTunes is the biggest online music store today and plays a perfect complement to iPod. since Apple is aiming at making iPod a fashion statement rather than just an mp3 player. it’s aiming at giving the consumers which they can proudly show oﬀ. it aims at overcoming a psychological mindset of the users that the cheapest things are not always the best. Apple only charges about a dollar for the song download.3.) 2. More so.” (quoted from  which has compiled data from Apple’s press releases) iPod project was started in 2000 and in about 2 years of rigorous investment. Thus Apple may have decided to skim oﬀ these investments through a higher pricing of the iPods.
Combine this growth with the huge customer base here and we have one of the biggest potential economy for the iPod. This source is iPod. Currently. the survey prices the 2GB Nano in US dollars and found Brazilians pay the most for an iPod.1 Potential and Challenges in the Indian Market Potential India is growing up to digital music. For it. “trustworthy” store and at a high price.2 International Pricing One of Australias biggest banks. Apple needs to ﬁnd a source of investment for iTunes also. 3 3. 2. • Deliberate Pricing policy It may be a policy of Apple to price it more in countries where the competitors are not established and otherwise. Along the lines of the Big Mac index launched 20 years ago by The Economist .management. this digital music in India is mainly associated with the mobile phones in form of ring tones and caller tunes provided by services like Hutch and Airtel. Appendix A shows the complete table of the iPod pricing index and it’s interesting to note the huge variation in the prices. But the case of India rules out that fact. This could be a major factor behind the observations. For example. Even when there are cheap mp3 players available. Apple does not see iPod solely as a product. In such kind of a situation. • Economic Factors An important reason for diﬀerent prices could be the diﬀerent import and custom duties in diﬀerent countries. iPod is very expensive in India. has used the latest version of Apples music player . India will become only the second country after South Korea in the world where the sales of the digital music will exceed the sales of the physical music. (iPod + iTunes) is a single product. 12 . the Commonwealth Bank. one thing about China is the “quality signal” sent by high prices: clones and knock-oﬀs are so widespread that people who want “real” stuﬀ won’t buy it unless they buy it from an expensive.71.3. And hence the charge for the iPod also includes the charges for development and maintenance of iTunes in addition to iPod.27. Figure 9 shows that by the end of the year 2007. • Consumers’ Buying Behavior This is a factor which sometimes forces the company to increase or decrease the prices. Purchasing power parity surveys compare the prices of goods in diﬀerent countries and at their simplest level can help show whether one currency is undervalued against another. shelling out $327. Apple is forced to price the iPod a bit on the higher side which is why costs in China are comparable (Appendix A) to other countries when there are no custom duties (iPods are manufactured in China by the company Foxconn).the slimline Nano to compare global currencies and purchasing power in 26 countries. Thus. These diﬀerences in the international prices could mainly be due to three reasons. well above second-placed India at $222.
Songs through radios In countries. But the current problem is that you cannot actually download and save these songs from the radio on your device.2 Technological Challenge When we talk about an mp3 player. specially like India. Figure 11 shows the main activities where most of the internet users actually spend their 13 . Rainbow FM etc. Currently. Red FM. Pricewaterhouse Coopers. IFPI ) 3. But this could actually be the limitation of the product when we talk about the Indian market. In India. The songs can be put on the computer through CDs etc. but still internet penetration is very low. we must look at means at getting the songs into the player. Apple relies on the ﬁrst two means of getting the songs on your iPod. though the number of internet users is rising. This option is today seriously threatened by the growing piracy world wide and eﬀorts are being made on digital right management front to tackle it. Figure 10 shows the number of internet users as well as the internet penetration in various countries. This means that having an iPod leads to a lot of dependence on the personal computer as well as on the internet. From the Personal computer This is most common way where the songs can transferred from a computer through USB ports. Zooming into this picture.Figure 9: Growth of Digital Music in India (source: Soundbuzz. radios have become very popular. more so with introduction of many new channels like Radio Mirchi. It’s only around 5 % compared to around 60 % in countries like USA where iPod has clearly established its market lead. 3. Broadly there are four means of stuﬀ to your player: 1. Buy from an Online store The songs can also be bought online through online stores. 4. Sharing of Songs This is another mode where songs could actually be shared between mp3 players through wireless. 2.
Internet Usage Patterns (source: Internet and Mobile Association of India ) 14 .Figure 10: Internet Users and Penetration (source: ) Figure 11: India .
Apple doesn’t have much incentive to push retailers to stay legit. 4 4. Besides counterfeit parts and rough handling by smugglers. it may well be in Apple’s best interest to look the other way and let smugglers drive up the company’s sales numbers. they pick up several cost-inﬂating customs stamps. Since added costs go to the government. not Apple. one can pick up a 30-GB video iPod for $280. They come with lesser warranty and very cheap prices ranging from Rs 1800 to Rs 5000. They only accept cash. Apple seems to have cold feet about expanding its presence in the country.1 Pricing Challenge Upsurge of Cheap mp3 Players The surge of Chinese brands in the market is a common feat nowadays and it’s the same with the mp3 player market. In another perspective. After a good deal of haggling. But without a doubt. The shops don’t pay taxes. or the will.1 Proposed Marketing Mix in Indian Market Product The iPod has a cool design and user interface to sell it itself to the customer. Apple closed down its only call center in Bangalore and halted plans to hire 3. but a whopping $160 cheaper than the $440 that authorized dealers sell iPods for in India.3. The term “gray market” is really just another word for seedy and illegal black-market goods that the police don’t have the resources. The Indian market is very sensitive in terms of price given so many small players and the relatively lower per capita income. It’s mainly email. Even though demand for iPods is as great in India as anywhere else in the world. We cannot bank on the piracy to make songs available for the iPods. Shopkeepers have responded by smuggling huge loads of illegal iPods from Singapore. internet chatting and education purposes that internet is mainly used for. But as seen above. In comparison to this. Many new brands with the names Sonny.3.time on internet. we cannot actually expect iPod to do well in the whole of the Indian music lovers market. There is a need to come up with something new on the technology front which can provide a smooth channel for song distribution within the present constraints. In May.000 new employees by 2007. they’re the best places to buy electronic goods anywhere in south Asia. Dubai and Malaysia. Inferring from above. But buying on the gray market has its dangers. customers also do not receive warranties and may not be otherwise supported by the manufacturer. (Source: Price comparisons at online buying sites like eBay and Amazon) 3. Along the way. the iPod shuﬄe in India costs Rs 5600.2 Existence of big Gray Market for iPods Apple Computer products have to make their way from production facilities in China. We somehow need to come up with the idea which 15 . Using the network for eCommerce and entertainment is still in an embryonic stage. Tony etc have hit the market trying to imitate the bigger players.3 3. which is only $20 cheaper than you can get one at Best Buy in the United States. that in Indian markets it’s not only the fashion that matters. to stop from being sold. It appears that high taxes and a strong gray market have given the company pause. 3.
In this whole scheme. Thus increasing sales of iPods will itself mean a better connected ad hoc network where stuﬀ can be shared readily. Using these chips in the iPod we will also be able to keep record of what downloads and uploads have occurred which will help in the digital rights management also. This would require every iPod to have wireless networking functionality where it can identify the iPods within a certain radius around itself and then the user can download the songs which have been shared by other users on their iPods. Currently. there is a possibility that we unknowingly might be promoting piracy. Consider I have access to a huge set of pirated songs.iTunes as central server (b) Proposed . But now since we are removing the internet from the pipeline. Apple must provide a more comprehensive set of softwares 16 . In essence. This situation can be averted if we restrict the sharing to only those songs which have been oﬃcially bought from Apple stores (online or oﬄine). We propose a technology change in the iPod itself to overcome this barrier . Thus this model has the potential to break the internet barrier but a lot of security issues need to be handled with new protocols which will then be embedded into the iPod. there is one more limitation. Also. The recharging process will require a big infrastructure to be setup. every iPod in operation becomes a music store. what we are proposing. Then if I put all of them on my iPod then I can earn lots and lots of money with people downloading the stuﬀ from me. Also. Thus what we now have is a rechargeable chip inside our iPod.every iPod a server Figure 12: Apple’s Song Network removes the dependence of the iPod on the computer and internet to get songs.allow sharing of songs among iPods. only the basic software are provided on the CD that’s distributed in the product package. These amounts will have to be ﬁxed very carefully after performing a full ﬁnancial analysis of the model.(a) Current . (Figure 12). to encourage users to start sharing stuﬀ on their iPods. each upload from an iPod will fetch a balance increase of certain amount. We cannot have totally free unlimited sharing of songs hence some price has to be paid by somebody somewhere along the pipeline. We propose to follow a cellular phone model where each iPod will have a certain money balance on it which will be charged with every download from a nearby iPod. We also propose that such a scheme be started in collaboration with a mobile phone service provider like Hutch or Airtel. the iPods can be recharged again and again as we recharge our mobile phones today. is that instead of a centralized music store like iTunes. Since Apple assumes the omni presence of internet.
2 Price and Place Price is going to be a big factor in the Indian economy specially when there is an upsurge of cheap mp3 players from China and other local producers. Still. this policy will also help to make up for a very low pricing of the iPod shuﬄe. It’s only the extra import duties etc which make an iPod expensive in so many countries like India. Apple should actually follow Premium Pricing policy and mark prices a bit on the higher side. 4. or passing time while standing in queues. The point to note here is that Apple might not gain as much proﬁts here as it would expect due to the penetrative pricing policy but it can hope to earn them in the longer run or more cleverly by higher pricing of it’s other variants in the next category. With it’s small size.3 Promotion The promotion and publicity for the iPod has been negligible in India. • High income segment or Fashion lovers This group of consumers is the one conscious about what it wears or uses.including all ﬁle converters etc so as to minimise the hassles faced by the users while updating the ﬁrmware on the device. This along with their usual functionality makes them a hot candidate for this market. Thus if Apple sees a huge market here. After studying the consumer segments. Where. we propose a two pronged pricing policy for the iPod variants in India. And we feel that iPod nano and Video ﬁt very well here. Hence. Apple with this policy of marketing the diﬀerent iPod variants for diﬀerent consumers and “made for each other” pricing can be successful on this front. it has the potential to become a hit in this segment. 4. and this has been mainly through word of mouth 17 . and that too in the print media. we see that a signiﬁcant part of the youth and teen population is aware about and use the iPod. With their sleek design and sexy looks. • Low income segment or Casual users This group of consumers consists of the common man who wants to listen to songs mainly while going to work in bus. And since there are a lot of very low priced products already in competition. we propose that here. Everything it uses must make a statement in the society. iPod with its unique design technology has the potential to lure the customers. It is here that iPod shuﬄe ﬁts in. with only two iPod advertisements having appeared till date. they have the potential to woo the customers only on the fashion factor. it may decide to open its manufacturing plants here in India or even outsource it to some company here as it has done to Foxconn in China. Apple has very low manufacturing costs for the iPod. The requirements are only of a small device which can store enough songs and can ﬁt into the pocket. The product must speak of its own luxury. As seen in the Pricing section in US market. Apple is already in collaboration with TransWorks and HCL Infosystems for distribution and after sales support and such team ups will only help considering that Apple is considering to release its iPhone in Asia next year. Apple can actually decide to oﬀer lower prices than others while promising the brand name and quality associated with the name Apple. Thus.
possibly by showcasing the iPod as the ultimate music player. Simultaneously. Since the iPod aims to make itself synonymous with music. Figure 13 shows a potential advertisement developed by us for promoting iPod. young or old. It tries to identify iPod with the Indian culture and festivals. it will be able to make inroads into the huge potential market in India. which can serve the music needs of every single person in the family. devotional.Figure 13: An ad for the iPod designed by us for Promotion in India promotion through friends and relatives abroad. Though wrap advertising is not really seen here. The publicity through print media and signage should be done. Apple needs to develop ads speciﬁcally catering to the Indian market. Hence. Apple could pioneer this form in India. the company should aim to associate the iPod (in its ads) with the most popular form of music in India . it should make all these genres available on iTunes as well. rock etc (in a way similar to the strategy of Worldspace satellite radio ads doing the rounds of TV nowadays). Simultaneously.3. 4. This would also be in sync with the companys image of revolutionizing the ﬁelds it generally enters. Radio commercials will also serve as a viable option. folk. it should also incorporate the other popular genres of music in its ads.1 Advertising The most popular form of advertising in India is through television advertisements.ﬁlm songs. like classical. An Apple India website should be set up as well containing all the details about the product. prices 18 . Punjabi. if Apple promotes the iPod even with a simple promotion strategy. much in the same way as it does elsewhere. keeping in mind the variations in music preferences according to the age of the population. owing to its ease of use.
3 Retailing The number of Apple stores and resellers needs to increase too so that the visibility of the product increases at places where people are inclined to spend their money on consumer electronics. though for it to be taken up by every student in the campus. a simple interface which can be operated by anyone. To dissuade people from taking recourse to other mp3 players. users are still buying iPods like there is no tomorrow. And not only that. it has to make the details of its resellers and customer service centers easily accessible. Thirdly the promotion strategies have to be modiﬁed to adapt to the Indian culture. but it also acts as a locomotive for the entire Apple train and for other companies specialized in iPod accessories which have become millionaires overnight. An attractive design. Additionally. We have proposed few changes in the marketing mix strategy which will help iPod adapt to the Indian market. all these factors have turned iPod into an unstoppable money making machine. In brief one is to add a full ﬂedged song sharing feature to the iPod so as to move from a centralized network model to an ad hoc network one. 4. Despite ﬁerce competition. More stores need to be set up so as to cover all the major metropolitan cities. the company has to make the process of iPod purchase simple and for that. Side by side.com homepage does not display any information about stores in India. so that people who might desist from spending a sizeable amount on money on a device that is simply a music player are enticed as well. Apple could also tie up with countrywide electronic items retail chains such as Subhiksha Mobile. newer functions and uses of iPods must be developed and highlighted. after so many years since its appearance.3. Second is to position the iPod variants correctly so that they cater to the right market segment and also complement each other with their revenues. It should also strive to increase its visibility amongst the youth by bringing major international bands to India and sponsoring the concerts. 5 Conclusion Even now. iPod still manages to rule the MP3 Player world and this is even more remarkable if we think about the technologies short life cycles. The Mobile Store etc. 4. 19 . Apple can tie up with major soft drinks companies for such oﬀers (eg exchanging labels for iPod accessories etc). ﬁnding an iPod reseller in your area is an arduous task. eﬃcient marketing. the promotion strategies should be such that they emphasize on the fact that the iPod can serve to fulﬁll all your music needs. the iPod university programme should be started here too.and resellers in India.3. Presently. Sponsoring major college festivals in the country would also be an eﬀective form of promotion. since even the apple. the prices should be student-friendly (This point becomes especially important in the Indian scenario since teens are still dependent on their parents for ﬁnancial support). vouchers that can be redeemed for free music on iTunes etc. competitive prices. At the end of it all. India has only one Apple store in India and that is in Bangalore. Presently.2 Promotional Oﬀers and Tie-ups with Companies The iPod promotional oﬀers can be dished out in the same ways as in other countries by giving special festival discounts.
17 $175.46 $149.20 20 .S.53 $172.36 $164.86 $192.03 $208.25 $205.04 $192.81 $205.35 $144.86 $192.86 $192.63 $147.A iPod Currency Index More information about the iPod index can be found in .80 $205.00 $147. Japan Hong Kong Canada Cost of iPod Nano (2 GB) in US dollars $327.79 $195.88 $161.71 $222.84 $176. Data Source:  Country Brazil India Sweden Denmark Belgium France Finland Ireland UK Austria Netherlands Spain Italy Germany China South Korea Switzerland New Zealand Australia Taiwan Singapore Mexico U.46 $179.80 $205.27 $213.59 $172.25 $154.86 $192.
5G iPod nano 2G iriver clix Meizu M6 PlayStation Sansa e200R TrekStor vibez Walkman NW-A800 ZEN V Plus ZEN Vision M ZEN Vision W Zune ZVUE 250 Manufacturer Archos Cowon Toshiba Cowon Apple Apple iriver Meizu Sony SanDisk TrekStor Sony Creative Creative Creative Toshiba/Microsoft HandHeld Entertainment Released September 2006 February 2007 April 2006 May 2005 September 2006 September 2006 May 2006 May 2006 December 2004 October 2006 November 2006 March 2007 June 2006 December 2005 September 2006 November 2006 December 2006 21 . More details can be found here . Name Archos 404 Cowon D2 Gigabeat S iAUDIO X5 iPod 5.B Major mp3 Market Players The following are the major mp3 players in the global market.
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