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iPod: The Marketing of an Idea

Project Team: Michael Shur, Tyler Reed

Apple’s iPod has taken the world by storm. Nearly ubiquitous, it has changed not only the way people listen to
music, but it has transformed its parent company Apple into an entertainment giant. In order to understand how this
change came about, we’ll take a look at Apple’s ongoing efforts to make iPod synonymous with hip. We’ll also
discuss 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 research
findings 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 an
interesting 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 pas
une pipe (This is not a pipe), the iPod is not merely an MP3 player. It is a symbol which encompasses many grand
ideas; ideas that involve world change, and how cool we all can be if we are part of that change. Apple’s careful and
deliberate exploitation of this concept, comprising an entire marketing ecosystem which nurtures that idea will be
the subject of this paper.

On January 9th, 2007, Steve Jobs, renowned CEO of Apple, announced that the company which he founded would
no longer be known as Apple Computer, Inc. Its new name would just be Apple, Inc.1 This seemingly trivial change
represents a fundamental shift with deep implications that were the result of many changes Apple had engineered
over 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: the
digital lifestyle. Before we dig down into what this radical shift entailed, both for the company and the world, let’s
take a quick look at the history of Apple, a company already firmly rooted in several notions that allowed this
transition to make sense.

Apple made a name for itself by being instrumental in ushering in the home PC revolution. For millions of its
aficionados, Apple was single-handedly responsible for this revolution by virtue of the fact that it created radical
new features such as windows-type graphical user interfaces, pull-down menus and simplified computer control via
the mouse. The history of the PC revolution is a history of war between Apple, a number of losers that no one
remembers 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 the
windows metaphor as a distinct feature of its operating system. This was at a time when Microsoft users were still
struggling with text-based DOS commands, and yet the commercial success of Microsoft has served to rewrite
history to some degree. Battles ensued over the years, but no matter whose side you were on, by the late 90’s it was
clear that Apple was not gaining any ground whatsoever as a computer and software manufacturer. In fact due to
many external events, Apple’s position was in clear threat.
First, huge numbers of consumers, particularly the business community, clearly preferred Microsoft. Apple’s market
share was tiny compared to the Redmond behemoth2, however Apple users were an ardent group of graphic
designers, college students, and members of the urban hip known as The Digerati. This was a group of consumers
who 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 a
downturn in the worldwide demand for PCs, Apple posted a $200 million loss3, and analysts were not optimistic
about Apple’s future.

Undeterred, in January 2001, Jobs opened the annual Macworld conference in New York City with his usual brand
of enthusiastic vision. He announced that personal computing, far from tailing off into irrelevance, was about to leap
ahead into a new Golden Age. To support his vision he introduced several new Apple products that were intended to
align the Mac with this new “digital lifestyle”4. Though the conference attendees may have nodded knowingly, few
understood what he was talking about, for at this point habits which would later be hallmarks of the digital
lifestyle—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 were
still in their domain, as MP3 technology, and MP3 players specifically, were still quite new, and no one yet knew
exactly what to do with them.

Launched in 1998, MP3 players were initially seen as an alternative to portable CD players. They only held a couple
hours worth of music, and there were still technical glitches such as transfer times and clumsy user interfaces that
cast these new gadgets firmly into the realm of the geek. Interestingly this is not too different from the situation that
existed 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 innovative
design. This approach became foundational to their business strategy as well as their corporate culture, and it can
still 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 frequently5, accepting and capitalizing on
the fact that computer products enjoy a short product life cycle. Apple popularizes difficult technology by making it
fun 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 innovative
hardware, software, peripherals, services, and Internet offerings.6

Many have criticized this approach, particularly the more conservative elements within the business community
whose 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 at
least 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 the
spreadsheet, is based on a fallacy that Apple’s customers are merely paying for good design. This is every bit as
un-nuanced a conclusion as thinking that iPod consumers are merely buying an MP3 player. They’re not buying
either per se, though these things certainly are bundled up in the augmented product. What’s important to understand
when trying to dissect the phenomenon that iPod has become is that consumers are paying to be part of something
that is cool. In a very calculated fashion, Apple has leveraged its traditional designer, digerati, and educational
segments 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 future
will be one of the questions we hope to answer here. We do believe that this mapping of the consumer psyche was
and is an important part of Apple’s corporate strategy that, at the very least, laid the groundwork that makes the
development of a superstar possible. Jobs sums this up with a value proposition that sounds characteristically
grandiose, 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 rival
Microsoft on their turf, Apple keeps their message consistent with Jobs’ statement about changing the world. There
may be a weakness in this type of thinking, hinted at by the same critics who felt that getting consumers to pay more
for 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 they
listened 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 to
song lists of their own making, and they were more and more invested in delivery technologies such as broadband
and 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—created
the opportunity to develop new products, but technical advances don’t answer whether a new product should be
created by a particular company. It was entirely possible that Apple vastly overestimated the level of desire out there
in the greater market place.

Additionally, there was the issue of educating consumers to what this technical advance meant to them. So if that
desire was to be kindled, and the market educated, those two objectives would have to be clearly stated and any plan
would have to emanate from them. After all, it’s one thing to appeal to innovators and early adopters, but quite
another to make the leap in to the huge numbers represented by the early and late majority. In this sense, Apple was
like The Fonz; the cool guy in the leather jacket who for some reason doesn’t mind hanging out with the guys that
aren’t cool. Only difference was that Apple would charge for the privilege.
Nonetheless, from the company’s point of view in the late 90’s, something had to be done. MP3 represented a
significant opportunity that may have happened in the nick of time, for the company was indeed faced with a dire
situation. Computers were becoming commoditized, prices and profits were in free fall, and the entire industry saw
consumers becoming more and more price sensitive. As part of this shift, substitution was getting easier due to a glut
of choices and not much difference between the options.

Keep in mind that the tech bubble had burst in October 2000, taking Apple’s stock from over $30 per share to less
than $10 almost overnight9. Less than a year later the World Trade Center was attacked. The combination of these
two events had a massively negative impact on the world economy at large and PC market specifically. To make
matters worse, Apple was facing competitive threats in its historically solid educational segment due to Microsoft’s
antitrust settlement stipulating that Microsoft donate over a billion dollars worth of hardware and software to
schools across the United States. This in effect handed over the keys to the kingdom, for indeed all this Microsoft
equipment in the hands of millions of impressionable young minds would certainly have a promotional effect that
would be difficult to undo. Cue Bill Gates rubbing hands together.

So Apple looked to its hugely popular iMac, which was nearing the end of its product life-cycle, to fund a
development that would reposition the company. At about the same time, iTunes 1.0 was released to very tepid
reviews. At the time, all iTunes could do was rip CDs for playback on a Mac, so it looked like a blundering misstep.
What went largely unnoticed was that both of these moves represented a fundamental shift within the company.
Keep in mind that even given a major shift whose effects were yet to be seen, the guiding principles of Apple did not
change. They still sought to lead the industry in innovation by reinventing existing technology; it was simply where
that innovation was to be focused that was to change.

It is evident in retrospect that Apple had assessed this situation and concluded that a repositioning was vital and that
it could be accomplished using tried and true strategies that had served the company well for twenty odd years. Jobs
had been talking about his digital lifestyle vision long before any products were actually introduced. Obviously the
conceptual card up his sleeve was a suite of easy to use and stylish software and hardware gadgets that would
personalize consumers’ digital lives.

In this sense, the iPod marketing strategy made sense because it consistently advanced Apple’s emerging goal of
making the Mac the hub of a digital lifestyle. It also aligned with the company’s strategic goal of frequently
releasing innovative new products in an effort to stay ahead of a curve of consumers who quickly get tired of old
gadgets. As usual, it was a strategy that leveraged the benefits of existing technology, and it made sense from the
point of view that it was consistent with what historically drove the company, that is bringing products to people that
were stylish and easy to use.

In October 2001 Apple introduced the iPod, touting its main differentiators which were a quicker transfer time, and
a easy-to-use interface. When it was first introduced, Newsweek cited its limitations as being a high price tag, and
its proprietary audience of 7.5 million Mac users11. However from the start, the look of iPod was central to its
product differentiation in the marketplace, and around this unique look would be built an entire marketing strategy
that would make iPod the must-have fashion accessory of the decade.

Even Bill Gates failed to see (or admit to) the significance of the iPod at first. He thought that it would follow in the
tradition of other Apple products which had a sort of cult following, which if anything, he would be able to
popularize. Yet just weeks after its release, Newsweek did an about face and deemed the iPod the best MP3 player
yet, just in time for the upcoming Christmas retail season12. The rising star had received lift-off, though it was still
limited by the fact that it was a Mac-only toy. Just a few months later, in July 2002, with a definite star on its hands,
Apple announced at Macworld (probably to Mr. Gates’ chagrin) that it would be releasing iPod for the PC. The
entertainment landscape was about to be forever altered.

At the time, MP3 players were still mostly used by early adopters of technology, and they were hawked based on
their technical capabilities, such as transfer speed and how many songs they held. In about 2002, the picture started
to change a bit, with promotions that didn’t focus on technology. Apple offered signature versions of the iPod for the
first time in a month long promo where for an extra $49 customers could get versions with laser inscribed signatures
from Madonna and skateboard god Tony Hawk13. iPods began showing up in the club scene as an alternative to a
DJ spinning albums, and within a year iPod was on hundreds of lists of must-have gadgets. Interior Design
Magazine featured a year-end list in 2001 of designers “never enough” list, which had iPod on the list of Roberto
Guzman & David Khouri of the ultra cool design firm Comma, New York. At this point, note that the focus was still
fairly elite.

By fall of 2002, Apple started to broadened its iPod retail strategy when they inked a deal which would put iPods in
all 1150 Target stores across the U.S. By the Christmas retail season of that year, sales numbers were looking
impressive and Apple offered a pink iPod that came loaded with Madonna’s playlist. Apple reprised this concept
two years later with its U2 signature version. Apple also educated the public, but did it within the context it had
created, showing consumers by example how to emulate artists like Beck who crowed that he had had over 8000
songs on his hard drive and rotated hundreds per day onto his iPod. iPods were handed out with great fanfare at the
2002 Grammys to performers, showing that Apple was starting to drive iPod promotion firmly in the opposite
direction of technical, directly to style.

At about the same time, articles started appearing that detailed the playlists of hot artists of the day such as Seal and
Moby, whose cutting edge credentials were furthered in kind when the New York times divulged their ordering of
iPods. This is the very kind of publicity Apple thrives on: leveraging the opinions of artsy cultural influencers to
push its brand forward, while controlling the actual conversation, so in this case, instead of MP3 players being
compared on their technical merits or price, all of a sudden, they were being compared based on a cool factor
which—by virtue of the fact that iPod epitomized—other products would have a hard time competing with.

By October 2004, iPod was in its growth stage. It hadn’t yet arrived at cash cow, but a new advertising campaign
was kicked off that featured U2. The company began running TV spots featuring U2 singing their new song,
Vertigo, which could only be obtained through iTunes. They followed this closely with a U2 signature iPod, and yet
the choice of artists bears examination for these certainly weren’t the types of artists early adopters were listening to.
We believe these changes signaled a broadening of focus to begin the journey across the gap to the early majority,
where the big money lay.

Apple maintains its competitive advantage when it comes to potential entrants to the MP3 player market who are at
a disadvantage for several reasons. First, iPod has become the standard against which everything else is measured,
and this dominance plays out both in the technology of the core product and stylishness of the augmented product.
Also, they have managed potential risk associated with buyers by making it difficult to have backwards integration
since song downloaded to iTunes do not play on other MP3 players. This key attribute, which clearly represents an
aggressive maneuver by Apple, has been the source of much controversy and contention. It may even be the source
of an eventual reversal of Apple’s fortunes.
Consider that last year, Norway, Denmark and Sweden challenged Apple in court over this limitation of their
product, a case which Apple’s competitors are following with great interest14. Whole industries want a piece of
Apple’s pie, most notably mobile phone manufacturers. Nokia has announced that it is setting up a rival to iTunes in
its purchase of the American digital music service Loudeye. Songs downloaded from the new Nokia subscription
service will play on any digital music player, including iPod. Not coincidentally, handsets are one of the explosive
new growth areas for portable digital music.

Apple continues to mitigate these risks by keeping it hard to substitute, and this gets to the heart of the matter, that
iPod symbolizes more than just another MP3 player. If Apple wins all the chips, then iPod’s halo effect will help
Apple outmaneuver such threats, and future product offerings such as iPhone, which are being developed now in
response to the competitive onslaught, will gain a critical head start. As it stands there is simply no substitute for an
iPod. This is reinforced consistently across the technology, advertising, promotion, and accessory ecosystem. In this
sense, buyers have strengthened Apple’s competitive position because at sales of over 100 million units, and 70% of
the market15, iPod is the industry standard for MP3 players.

In a mesmerizing feat of mental acuity, Apple helps consumers judge the efforts of its competition against a standard
they themselves invented. In order to be part of the phenomena, buyers have shown that they will pay a premium,
and that for the most part, there are no ready substitutes. This causes a significant problem for competitors when the
global conversation about MP3 players invariably leads to all things iPod. Any competing product will certainly be
judged against the gold standard of iPod, and because of Apple’s early entry and subsequent early lead, MP3 players
from today through forever won’t be strictly judged by their technical merits, but rather on their value as a style
accessory. Thanks to iPod, any potential entrant has to now offer an augmented product that delivers an entire
package of benefits far and above the simple core attributes most tech companies specialize in.

We can reasonably infer that Apple did plenty of primary and secondary research about the types of people who
would be interested in iPod, and crafted their message accordingly. Undoubtedly they owned mountains of data
from their over twenty years being at the epicenter of the PC revolution as well as their relevance birthing its child,
the Web revolution. Using laddering in interviews perhaps revealed that this new breed of high tech consumer had
desires far and above the technical. Accordingly, they positioned the product’s physical attributes in a way that was
secondary to its contribution toward bettering the consumer’s world. A tool for building high self-esteem,
impressing your friends, and being part of a semi-exclusive club, that by the way happens to be beautifully designed
and technically superior to the competition. What’s not to love?

Of course, they charge for this love, but they knew from the beginning where they were going, and they didn’t get
there by accident. Looking at the Christmas retail season of 2001, three months after iPod's release, we see a story
that practically draws for us a perceptual map whose axes are price and technical capability. From that we can
backwards-engineer possible research findings, conclusions, and recommendations.

The leading device at the time was Sonicblue RioVolt MP3 CD Player, which retailed for less than $100. Creative's
Nomad Jukebox was selling its recently introduced 6GB hard drive for about $250, and e.Digital Corp. was touting
its walloping 10GB palm-size Treo 10 for $ 249 Treo. Against these contenders, iPod’s $399 price tag for a mere 5
GB of storage doesn’t seem to make sense16. Also, at this time, iPod was only compatible with Macs, which amused
Bill Gates, and continued to do so even as late as 2005 when USA today quoted him as saying:
I think you can draw parallels here with the computer — here, too, Apple was once extremely strong with its
Macintosh and graphic user interface, like with the iPod today, and then lost its position.17

It is our contention that the initial release of iTunes 1.0, which as noted was practically laughed at, was a Trojan
Horse that delivered quite a bit of business intelligence to Apple. We know that they released it about one year
before iPod was released, so there’s no doubt that the entire iPod strategy and product development were well into
their final phases. To go back to that time is to recall that Apple faced numerous legal issues relating to copyright
infringement.

Releasing iTunes before there was a correlating MP3 player gave Apple a window to negotiate Digital rights
Management agreements without the success of iPod hanging over their head. In other words, the lack of a product
didn’t cause the alarm bells to go off among key stakeholders in the distribution chain, whose future position was in
grave threat, and who would have certainly put the brakes on if they had seen what was coming down the tracks.
Finally, iTunes usage in that first year may have served as the final checkpoint, validating Apple’s contention that a
successful MP3 player—one that would truly leverage the potential of the technology—would need to find a way
around the clunky process of buying and ripping CDs.

Building these findings into a psychographic profile and consistently speaking to that profile as an individual would
comprise the remainder of the marketing effort, in all its facets, but how many psychographics were there? What
factors did Apple take into account when deciding whether there were viable segments out there?

It is clear today that Apple is marketing different products to different groups of people: the flagship iPod video
which is expensive, the Nano which is midrange and a shuffle which is inexpensive and small. This segmentation
strategy appears to make sense, since the market is heterogeneous, the segments are identifiable and they are
divisible. But, did releasing different products risk dividing the total market, or did it create new opportunities for
sales?

Greg Joswiak, Apple’s VP of hardware marketing in 2005 noted in reference to the Nano that "This is a different
product and it will take the iPod to a different market, one which couldn't afford the price of the normal iPod 18."
That it was a good move was lauded by Merrill Lynch’s analysts at the time when they concluded, “The iPod shuffle
is likely to outsell all Apple's other iPod models combined, and may be in short supply until next quarter” 19.

Extreme iPod published a report at about the same time that suggested that the strongest demand for the iPod shuffle
was likely to come from new users. "Existing iPod owners may prefer the larger capacity and display of existing
iPods, which makes for good market segmentation on Apple's part. New-to-iPod users tell us the price points and
ease of use are attractive."20 By the following year, iPod had moved into its sixth generation, with a line that
featured the iPod video player, an iPod Nano with a color screen, and the iPod shuffle. Also being upgraded right
alongside the product was its life-giving infrastructure iTunes, now able to offer and organize different types of
media.

We believe that in the beginning Apple’s segmentation strategy focused on narrow markets and a unique niche
because in 2001 it was early adopters who might be interested in MP3 players. However iPod also created a whole
industry, which must now be characterized as having a broad scope, simply because of its ubiquitous presence. It
may be a unique niche—it certainly was at the time—because they intentionally did not go for cost leadership. In
fact, high price was and is a feature of the product; that it remains more expensive than the rest hammers home the
message that it contains some magic the others lack

One nice change from the PC battles is that with iPod, Apple would not be going after a corporate segment. This
meant from the beginning that they were not as vulnerable to the reality that plagued the Macintosh for so many
years, which was that even though the Mac OS was probably a better system, businesses which were more oriented
toward the bottom line, and not apt to buy based on fashion must-haves, were not willing to shell out the extra
money it cost to purchase a Mac. Happily for Apple this time it was not to be a repeat of the same old battle.

Looking at the market structure, we see a clustered market. There are consumers who want technical features and
there are people who want to be part of the iPod scene and there are people who don’t want to spend a lot of money,
but still want an iPod. There’s an entire market of athletes and runners who want a lightweight player that hold just
enough songs and battery power to get them through their workout.

Overlaying this segmentation strategy is an interesting phenomenon. Even though Apple is pursuing a segmentation
strategy with iPod, they nonetheless strictly limit the choice of iPod products available, generally to three. This lack
of choice is somewhat counterintuitive to the generally accepted notion that American consumers desire a lot of
choice, usually a vertical attribute, the more choice the better.

Yet when viewed from the customer-centric observation that too much choice is actually stressful—which speaks to
cognitive psychology’s long held principle that humans can only process a few bits of information—offering three
products, no more no less, is a shrewd move that undercuts the competition, which typically offer 10-15 variations
on each theme. Apple’s extremely high customer satisfaction rating20 leads to the conclusion that when it comes
customers, Apple knows how to treat them right, and they know how to communicate this customer-centric
approach in a way that carries maximum value.

We believe that Apple understood from the beginning the powerful new communication channels that were
available to them pursuant to their primary segment’s online habits, because they made sure that everything they
needed to do to fully experience iPod, could be done online. Few would have predicted just a few years ago, that the
traditional modes of music delivery such as CDs, albums, and tapes, would soon be quaint anachronisms, and there
are still some today—probably the owners of such retail stores—who don’t want to believe it, and yet we have
undeniably entered a new era, and done so very quickly. For one thing, the legal barriers to such a shift were always
viewed as insurmountable, and equally intimidating, significant technical and cultural barriers existed. Apple
systematically addressed and removed each of these barriers as they proceeded.

So, if the iPod is much more than a digital music player, what are the terminal benefits, how does Apple manipulate
them, and what are the longer term implications of such a strategy? Simply stated, iPod provides a measure of cool,
but looking deeper at this, there’s a bit of a paradox. If Apple has just posted its 100 millionth sale, and they
dominate over 70% of the online music market, then how can it still be a cool product? Isn’t exclusivity the very
essence of coolness?

It all looks so easy in retrospect, and yet one huge question looms: How did they make the jump from their initial
positioning to today, when one can buy an iPod Nano for Mother’s Day and have it inscribed for Mom, who will
wear it like a broche while she listens to arguably very unhip music?
We believe that the answer to this is that Apple used the influence of one group to influence the next, in a linear
fashion. In other words when the product was being targeted toward innovators, the goal was for the innovators
(with a little help from Apple’s advertising, communications, and promotions) to influence the early adopters.
Similarly, the popularity among early adopters was leveraged toward the early and late majorities, until we arrive at
today, when nearly everyone either has one, wants one, or knows someone who has one.

Beginning in Fall, 2003, Apple rolled out the archetypal ad campaign that the world grew to associate with iPod.
Beginning with billboards and large posters in flagship cool cities like San Francisco, Paris, and New York, the ads
replaced the award-winning “Think Different’ ads, and visually comprised a polar opposite effect that emphasized
the sweeping changes.

Where Think Different featured grainy black and white photos of famous iconic figures such as Einstein, Picasso,
and Gandhi—ads in which any mention of the actual Apple product was verboten—the new iPod blitz debuted with
a stylish dark silhouette of a model dancing against a vivid purple background. Of highest contrast and standing our
most prominently in the ad are the white earbuds that came to epitomize the iPod, and became almost as important
as the brand itself. More than merely epitomizing iPod, those earbuds relentlessly drive home the realization that
everyone else is not iPod. Apple rolled out a product that, down to its most fundament attribute—its color—created
a reference that was hard to dislodge from the mass psyche, and left competitors looking like the fat kid at the dance.

Predictably, the earbuds became a critical communications touchpoint for iPod, and the elegance of focusing the
message down into this product attribute is worth noting. Not only did the iPod itself look and act different, but
addressing a level of detail such as the earphones, an accessory that other manufacturers had always dealt with as an
afterthought, made a lot of sense. Consider that most iPods, when in use are nested inside a pocket or a holder of
some sort. The white wires leading up to the ears however are not hidden, so in a final withering blow to late-comers
like Creative’s MuVo who have tried to capitalize on the white earbud design, the problem becomes that anyone
who sees them in someone’s ears will automatically presume that they are connected on the other end to an iPod.

Over time though, the iPod ads begin to formulate a theme which provides insight into Apple’s psychographic
profile of a typical consumer. The dancing loner, stylish, lost in her own world, white earbuds tucked safely in,
grooving against bursts of vivid color. These ads transmit a definite sense that there is a personality being promoted,
a way of being as much as a thing to buy; a renegade, leading the charge, marching to the beat of her own
drummer—which by the way is mixed to a completely unique soundtrack. Further, the soundtrack on your own iPod
will be better than anyone else’s (certainly better than non-iPod users), and besides, whether it is or not, you are in
control of your own destiny; no one else is telling you what to do. These ads have the effect of creating desire,
awareness, brand loyalty, and oddly, satisfaction.

There has always been a sense of bigger than life to this ad campaign which was heightened by the fact that huge
buildings in urban centers of cool such as New York, Tokyo, and Amsterdam were covered by giant ads, several
stories tall and sometimes half a block wide. The ads didn’t have any copy, presumably because if you weren’t cool
enough to know what the ad was about, you weren’t cool enough to be in the club. This decision reinforced the need
for exclusivity exposed in the means-end chain and emanated from everything to do with the augmented product.
The ads also paid out a gratifying premium for those that had purchased their iPod; walking by one of these ads with
your own white earbuds in place surely you, the post-purchase consumer, felt elevated into a league of giants.
Apple’s tightly coordinated iPod ad blitz undoubtedly helped to create an identity which spoke to the terminal values
for sale in their augmented product, but it also reveals other possibly troubling implications that could cause Apple
some problems at some point in the future. Specifically, there is a sense that these lone figures are isolated, and due
to the visual continuity the campaign seeks, one begins to sense that the figures are clones of each other. This could
theoretically spell danger, specifically for those early innovators and early adopters who pride themselves on not
being like anyone else. Then again, maybe Apple is counting on the fact that they have moved on, and the next
product, such as the Apple iPhone will appeal to them.

More ominously, there is another implication to consider: The rising popularity of peer-to-peer music sharing
systems, which by definition happen among groups of people, not lone individuals grooving in their iPod
audioscapes. Competitors like Microsoft and even MTV are trying hard to get a toehold by exploiting this
disconnect, but luckily for Apple, the response has been tepid so far. Even so, their effort serves to illustrate that the
iPod brand image has moved beyond its initial cool phase, and may be inching toward the same uncool territory
inhabited by Apple’s Redmond nemesis.

Consider the huge numbers of iPod parody ads such as iFamine21, which shows a starving African child in the
renowned pose against a background of vivid color. It’s an image that serves up a devastating message equating the
iPod with the decadence of the Western World, and there are countless other parody ads that can be found on sites
like YouTube. If Apple rounds this corner, it will be very difficult for them to convince the next generation of
innovators that they are truly cool. Then again, they may not need to do so. In other words, there is the possibility
that the cool factor was a sort of bait and switch for the majority of people who like the idea of being cool, but at
heart are very comfortable under the big bell, and know they are not innovators.

If Apple is this far inside the heads of their target segments, then they have executed their plan flawlessly. If they are
not, they stand the risk that all cool things do: as soon as the zeitgeist decides something is no longer cool, it goes
down quickly in flames. The correlating implication is that the innovators and early adopters—the so-called cool
among us—are just as much in need of their peer group’s approval, and at the end of the day, they are every bit as
unwilling as the rest of us to be all alone out on a limb.

Maybe this possibility has begun to dawn on Apple. One can’t help but note that the new iPod TV spots suddenly
show the stylish loners dancing together in what looks to be a community. We’re all alone together, is that the
message? If so, that introduces a sort of nihilistic undertone which ads a creepiness to iPod not previously seen. It’s
one thing to be your own rebel dancing away to a soundtrack nobody else knows, but doing it in groups harkens
uncomfortably back to Apple’s Big Brother or Lemming ads, where groups of slack jawed clones sit mindlessly
taking in whatever comes their way.

Ironically it was that very juxtaposition that powerfully launched Apple onto its current trajectory, so it would be
poetic somehow if that were to be the company’s ultimate undoing. Granted that’s not likely. However a quick look
at the numbers should make clear to Apple that true communities represented by peer-to-peer music sharing
constitute a threat that goes way beyond the actual monetary loss of not selling an iTune. After all, songs sold
through iTunes don’t pull down much of a margin, and while profitable, they are not the source of the skyrocketing
profit Apple has generated of late; these profits of course come through sale of the actual hardware. What may spell
trouble on the wind is a quick comparison of numbers and value delivered by iTunes and peer-to-peer (P2P)
networking.
iTunes claims that over 10 Billion songs have been downloaded, which admittedly sounds like a massive amount.
However to put it into context, consider that there are 10 million users connected to P2P networks at any given
time22. True most P2P downloads are illegal, but that hasn’t stemmed the tide. Besides, as Jobs proved through his
aggressive lobbying and ultimate effect on copyright laws, what is illegal today has small bearing on what will be
tomorrow’s megatrend.

On the plus side, P2P offers far more choice, and the songs are free. Less cost and more choice is a clear and present
danger, exacerbated perhaps by the knowledge that Microsoft’s recently released Zune features P2P capabilities that
are only the tip of a product iceberg that includes integration across a huge Microsoft market completely saturated
with products like window XP, Vista, and Xbox.

What’s relevant here is that iPod was developed and marketed during a time when social networking had not taken
on its current significance. Sites like YouTube and MySpace either didn’t exist, or hadn’t become such an important
part of the lives of up and coming teens, tweens, and college students. Zune may be able to pull off something
Microsoft has done since the early days when the archrival battled it out with Apple in epics reminiscent of a Stan
Lee Marvel comic; wait, copy, and profit.

Apple has rolled out countless promotions to support iPod, and while there is a great variety to these promotions, we
nonetheless discern a common thread, which creates a consistency both in reference to the product itself and to the
company as it exists in its Platonic state. The two main strategies for promotion are to team up with other icons of
the day, and to use Steve Jobs—the altruistic P.T. Barnum of our age—as a mouthpiece. Let’s first take a look at
some significant teaming up.

From a high level there is an entire industry built around iPod promotion, from accessories designed by the hippest
designers in the industry, to carefully orchestrated appearances by rock stars and other celebrities, to product
integrations with other high-end brands like BMW, to well-placed articles detailing what the coolest of the cool have
on their iPod playlists. Indeed it could be argued that everything Apple does is a promotion of its core ideals, which
goes some way toward explaining why the company engenders such strong reaction. To use a well-worn cliché,
either you love them or you hate them, and they revel in this extremism. A stanza from Think Different comes to
mind:

You can praise them, disagree with them, quote them, disbelieve them, glorify or vilify them.
About the only thing you can't do is ignore them.

The retail strategy adopted by Apple goes to great lengths to promote the value of the overall product, and works
well with the segmentation strategy too. At the high end, the flagship iPod is usually purchased online or at the
Apple store. Moving down the food chain to the less expensive models, we see iPods prominently displayed at
discount stores such as Target, indicating equal time for the segment that may not be able or willing to pay for the
top of the line model.

However a much more interesting discussion of any distribution chain may not even look at iPod’s retail placement,
for in a fundamental way the iPod represents a new twist in distribution. The fact is that the iPod itself constitutes
the end of an entertainment supply chain that begins with the artist, moves through a tangled web of artist
management, record and entertainment companies, and finally, thanks to the Web, is delivered directly to the
consumer’s ears via iPod.
What this actually says is quite amazing. Consumers have haplessly agreed to purchase their own supply chain
terminal, and not according to a razor and blade model either, in fact quite the contrary. One wonders why
consumers would have bought into this model, and the answer is that it wasn’t the model that was marketed to them,
rather it was the model that was shielded from them.

Here we return once again to the terminal values for sale with the iPod: coolness, individuality, a sense of belonging
to something that is changing the world, a statement that you as a person matter. It would be easy to be cynical about
a corporation marketing and selling this value to consumers, but in looking at the entire Apple story, we have to
conclude that it is successful because Apple itself, as well as the people who work there, have a sort of evangelical
belief in the social benefit of what they are doing. There is a consistency in their vision, evident in throughout the
company’s life. It can be seen in every single annual report. It is woven deeply into their product offerings, into their
promotions and into the messages they deliver through every gesture.

Consider that iPods are found in every corner of the globe and are used by every kind of person listening to every
genre of song, podcast and video there is. Then consider that accessories for the iPod can be found across the whole
range of product types, from cheap Target backpacks to haute couture Fendi Jukepurses designed by Karl Lagerfeld;
consider that skins are available from all the way from Sam Wall’s WalMart to Simone Legno’s tokidoki.

Either this extremely heterogeneous ecosystem represents the wide penetration of iPod into our collective
consciousness, or it belies an impending dilution of the brand. After all, to return to our original thesis, if it’s
everywhere, then can it still by definition be cool? On the other hand, it could be argued that the very range of
presence indicates a nod in the direction of individuality, and thus is deeply, deeply cool. To be precise: iPod may
grant you a degree of cool so very complete, that with it comes the permission to be what you really are, which may
not be cool at all, and at the end of the day it doesn’t really matter, because we’re all into our own thing anyway.

There’s a haiku of acceptance lurking in there somewhere that in some parallel universe threatens to transform our
own altruistic P.T. Barnum into tomorrow’s St. Jobs. We probably won’t be around when that happens.

_____________________________________________________________________________________
University of St. Thomas - Marketing 300
Dr. James Heyman, Instructor
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